2020 saw a record high of £3.5 billion investment in the UK Build-To-Rent (BTR) sector, with a total of £955.7 million of investment in the last quarter alone. The latest Marketview report also found that operational performance strengthened, with average rent collection rates in Q4 estimated to be 97% and occupancy levels increased to 88%.
This positive report comes despite the issues posed by COVID-19 and the effects of lockdowns and a seven-week shutdown of the housing market in Spring 2020. The report even shows an increase of 30% in 2019 in investment levels, up 15% from the previous year. And the findings for 2020 continue to show the housing market’s strong resilience to the pandemic’s effects.
Some of the high-profile deals completed in Q4 included the sale of Realstar’s £579 million portfolios of BTR (Build-To-Rent) and student housing and Long Harbour’s sale of Skyline II scheme in Manchester to L1 Capital for £27.3 million. CBRE predicted this record-breaking investment to continue in 2021, with £1.6 billion of deals under offer at the end of 2020. London accounts for 51% of these deals, with the remainder attributed to fast-growing regional markets such as Bristol, Glasgow, Leeds, Manchester, Sheffield and Newcastle. Peter Burns, managing director of UK development and residential capital markets at CBRE, even expects demand in overseas investors to increase as UK borders reopen, allowing them to travel.
He continues: “This demand, coupled with more developers shifting their focus to BTR product lines, and high-quality investment-grade stock becoming available to purchase, [means] we expect to see a significant increase in deal-flow with approximately £7 billion of trades per annum by the end of 2025.”
So why are we seeing an increase in BTR investment?
One Salford BTR development claims that the trend in people moving to the North of England for rented accommodation is due to a need for comfortable and affordable living. They also suggest this shows no signs of slowing down. With remote working becoming the norm for many, there’s no longer a need to suffer London’s high rents, so many people are opting to move North instead.
With predictions for Manchester’s City centre’s population to double in the next five years, there is an increasing demand for rental housing. Traffic to the Manchester-based lettings website of the latest BTR development in MediaCityUK, ”Direct Salford Quays” has risen considerably since the start of the pandemic. London-based web users’ rate increased by 189% in October 2020 alone, compared the same month the previous year.
Studies from 2020 suggest that consumer prices in Manchester are now 15% cheaper than in London. While the average rent of a two-bedroom flat in London’s Canary Wharf is £2,300 pcm, rent at Duet Salford Quays costs only £1080 pcm for the same number of bedrooms.
The favourable living costs, transport links to other major cities like Liverpool, Leeds, London and Birmingham, and the recent boom in investment and businesses make Manchester a popular place to invest in BTR. Students at Universities like Manchester Metropolitan, Salford University and the University of Manchester need places to live throughout their educational career, while recent graduates and young professionals are looking for affordable living with easy commuting. And with figures showing such a high amount of London dwellers seeking to live further up north, considering property investment in this area of the UK would be a smart choice.