The Build-to-Rent Sector Sends Rental Markets Soaring

In an article published last week, we touched upon the Build-to-Rent (BTR) sector and how rental markets have stayed resilient in the face of the global pandemic. This week, it is back in the spotlight once again following research conducted by Ascend Properties.

The data shows a whole host of major cities have benefitted from rising BTL rental prices between 2019 and 2020. The top five include Newcastle, Leeds, Birmingham, Manchester and Liverpool. Newcastle saw a percentage increase of 17% while Leeds had a 6% rise. Both Birmingham and Manchester had a 3% increase while Liverpool rose by 2% respectively.

To round out the top ten, the top five are joined by Sheffield, Sunderland, Plymouth, Leicester and Southampton. Sheffield had a 2% rise similar to Liverpool while both Sunderland and Plymouth had an increase of 1%. Interestingly, Leicester and Southampton saw a rise of less than 1% between them at 0.2% for the former and 0.1% for the latter.

The North of England has seen the strongest rates of  increases overall, controlling six of the top ten spots while the South controls two – matching that of the Midlands with two. The South’s two spots are 8th and 10th in the list, while the Midlands are 3rd and 9th. In terms of looking at capital growth, the North of England should be catching property investors’ attentions.

The following table shows all the increases in the order of largest to smallest and the average BTR rent for each location in 2020. 

Location Region Average BTR Rent (2020) Change (%)
Newcastle North East £858 17%
Leeds Yorkshire £892 6%
Birmingham West Midlands £810 3%
Manchester North West £923 3%
Liverpool North West £594 2%
Sheffield Yorkshire £699 2%
Sunderland North East £571 1%
Plymouth South West £661 1%
Leicester East Midlands £682 0.2%
Southampton South East £868 0.1%

As for rental premiums, London remains the go-to destination for BTR investors. The capital commands an average of £1,785 per month, a £146 increase on the wider average rent of £1,639 per month. That is also a £917 difference between 10th placed Southampton. The port city demands £868 – only a £68 increase on the wider average rent of £800 per month.

Other cities in the top five include Oxford, Cambridge, Bristol and Manchester. The average BTR rent for Oxford is £1,611, a £126 rental premium. Cambridge sits at £1,322 and has a £104 rental premium. Bristol has a £1,196 rental premium that holds a £94 rental premium, with Manchester having a £923 asking price which comes in at a £77 rental premium.

As for the other half, Leeds, Bournemouth, Newcastle, Portsmouth, and the already mentioned Southampton make up the bottom half of the top ten. The average BTR rent for Leeds is £892 – a £74 rental premium – with Bournemouth coming in at £922 – a £72 rental premium. Similarly, Newcastle also has a £72 rental premium at £858, and Portsmouth is just below with a £71 rental premium at £909. Southampton has been discussed previously.

The South of England unsurprisingly takes up the most spots with six overall. The North has three spots, and the East only one. The South may not be better for BTR investors looking for strong capital growth. But it may be a better option than traditional rental properties, if only slightly.

See the below table depicting the above results in comparison to the average rental income last year. They descend from the most significant rental premium to the smallest rental premium.

Location Region Average BTR Rent (2020) Wider Average Rent (2020) BTR Rental Premium
London London £1,785 £1,639 £146
Oxford South East £1,611 £1,485 £126
Cambridge East of England £1,322 £1,218 £104
Bristol South West £1,196 £1,102 £94
Manchester North West £923 £846 £77
Leeds Yorkshire £892 £818 £74
Bournemouth South West £922 £850 £72
Newcastle North East £858 £786 £72
Portsmouth South East £909 £838 £71
Southampton South East £868 £800 £68

As can be seen, the extra qualities of life that BTR properties offer often command higher fees as a result. In some instances, we can see that this is not too tall of an ask on average. Tenants and landlords have taken note throughout lockdown, hence the sector’s steady growth despite economic decline elsewhere due to COVID-19. As things stand, it is looking somewhat promising for the BTR sector’s future.

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