Why 20% Is BTR's Magic Number

Newly published data suggests the UK build-to-rent multifamily residential sector is stabilising after four years of growth.

Whether it is luck, coincidence or a trend, the magic number seems to be 20% growth.

Data from CBRE shows that £2.1B has been invested into the UK’s multifamily housing, or BTR, sector in the first three quarters of 2019. This compares with £2.3B in the full four quarters of 2018, and considerably up on the £1.7B recorded in 2017.

With around £650M worth of deals due to complete in the fourth quarter (roughly half in the regions), the 2019 total will be north of £2.7.B, 20% up on 2018. The full report is available here.

Research published by the British Property Federation showed that there are now 148,046 build-to-rent homes complete, under construction or in planning across the UK, a jump of some 20% against the same period last year.

The number of completed units rose by 31% over the same period, to 34,840.

Both data sets show a sector which seems to be hitting its stride.

There were notable firsts in Q3. Mitsubishi Estate London made its debut multifamily acquisition in the UK, agreeing the £150M forward funding of a Galliard Group development in Nine Elms.

Outside London, Invesco made its first investment in Birmingham, exchanging contacts with High Street Group to provide £98M to fund 484 apartments in the city centre.

Investment into the UK’s BTR sector picked up in the third quarter of 2019. There was £743M of investment, more than double the unusually poor performance in the Brexit-blighted second quarter of 2019. CBRE recorded a Q2 figure of £359M: only two quarters have been lower over the last three years.

Forward funding transactions accounted for the bulk of activity by transaction type in Q3 (£630M). These were split between London and regional cities. The multifamily market remains stable, reflecting no marked yield shifts between Q2 and Q3 2019. Prime net yields continue to range from 3.25% to 4.25%.

According to British Property Federation figures, there were 1,967 new construction starts in Q3. This is up from the 727 recorded in the last quarter. Two thousand six hundred seventeen homes completed in Q3, which was an increase of 32% year on year.

BPF figures showed the pipeline is evenly distributed between London and the regions, with Manchester and Birmingham to the fore. However, the regions are delivering far more rapidly with a 41% increase in completed units over the course of 2019.

Roughly 17,000 units are under construction in London, with another 17,000 in the regions. The London pipeline is 49,000 units, and 37,000 in the regions.

“With both Labour and the Conservatives prioritising house building during their recent party conferences, our data shows build-to-rent is making an important contribution to housing delivery and often on difficult to develop and large urban sites,” BPF Director of Real Estate Policy Ian Fletcher said.