Build-to-rent starts slump 60% in covid crisis

The number of housing starts for build-to-rent properties collapsed by almost 60% in the second quarter of the year in the wake of the coronavirus crisis, according to research from the British Property Federation.

The trade body’s quarterly report into the build to rent sector, compiled by consultant Savills, found that the number of housing starts plummeted 57% from 4,297 to 1,827 in the second quarter. The drop-off in construction was most acute in London, where the number of starts fell 61% to 805.

At the same time, completions of new homes for private rent dropped by just over half, with 1,640 completed in the quarter.

However, the figures showed that, prior to the crisis, the sector was still experiencing the rapid growth seen in recent years, with 47,754 build-to-rent properties now completed in the UK, a 37% rise on the number completed at this point a year ago. 

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In addition, the number of homes for private rent in the planning pipeline increased to 80,730 – a 27% increase on the number a year ago – with nearly all of the increase occurring outside the M25.

The report also revealed that around a quarter of all build-to-rent properties are delivered by UK housebuilders, despite the stereotype of a sector  dominated by bespoke developers backed by institutional funding. Local builders deliver 28% of schemes, and major UK developers just 14%.

Jacqui Daly, director at Savills residential research, said the UK build-to-rent sector was set for a “convincing rebound” in the second half of 2020, given that existing affordability issues, stricter mortgage lending criteria, and the end of the furlough scheme were all likely to force would-be first- time buyers to delay purchases. She said these factors would “underpin demand for secure, well-managed private rented accommodation”.

She added: “Investors should take encouragement from the fact that US multifamily was one of the fastest real estate sectors to recover after the global financial crisis. Investment volumes here fell to just £96m in the second quarter, but July saw a number of major funding deals.”

However, Ian Fletcher, director of policy at the British Property Federation, said the research showed that investor confidence in build-to-rent housing remained, but that continued growth required momentum to convert planning applications to construction starts.

He said: “These decisions will be on a knife-edge for the next year, as risks rise and productivity remains low as a result of covid-19, and so the government must ensure it does not take this much-needed new investment for granted.”