Growth in the build-to-rent (BTR) sector has slowed due to economic uncertainty, according to analysis by the British Property Federation and Savills.
The number of BTR homes in planning, under construction or completed last year rose 14% to 242,528. However this is slower than the average annual growth of 28% seen since 2017, said the BPF.
Ian Fletcher, director of policy at the British Property Federation explained that the slowdown was because “inflation and an uncertain economic backdrop makes it more difficult to deliver”.
The analysis also showed BTR construction starts dropped by 24% in the last four months of the year to 15,600 compared to 20,400 in the same period in 2021.
Guy Whittaker, associate at Savills, added: “Investment appetite for Build-to-Rent was resilient in 2022 and resulted in £4.3 billion of investment, a fourth consecutive record-breaking year.
”That said, it is clear that the sector is not immune to headwinds facing the construction industry, as shown by the fourth quarter slowdown in starts and completions.”
Knight Frank estimated towards the end of last year that the value of the BTR market had grown to £56bn – up 60% from £35m in 2019. Housing Today recently looked at whether the sector could become the “darling of housing delivery”.
Fletcher anticipated: “In the long-term, we expect the sector to continue to expand as a vital component of overall housing delivery”. However, he warned: “Government must be careful not to stymie its progress. The watering down of national housebuilding targets may mean there is less urgency around allocating land for residential development. The BtR sector has a major role to play in urban regeneration and levelling up and we cannot take its success for granted.”
Industry figures have criticised the lack of mention of built-to-rent in the recent consultation for the revised National Planning Policy Framework (NPPF).
Whittaker also said: “With weaker home buyer demand, residential development activity is likely to be subdued in 2023. Build-to-rent can offer an alternative exit strategy for developers looking to maintain sales rates and de-risk their pipelines. The BTR sector can therefore play a key role in maintaining construction output and support housing delivery nationwide.”
The BPF/ Savills figures showed there was a 14% increase in BTR units in planning last year (113,379) and a rise of 22% units under construction (2,587).
They also indicated that 180 local authorities had BTR units in the pipeline or had completed BTR homes in the fourth quarter of last year, which was a rise of 29% on the same period in 2021. The BPF said this was “further evidence” of the “expansion of BTR”.