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Build-to-rent sector up 20% in Q3

The build-to-rent sector grew by 20% year-on-year to 148,000 homes in Q3, research from the British Property Federation (BPF) has revealed.

This includes all build-to-rent homes completed, under construction or in planning across the UK.

The number of units in planning has increased by 23% alone to 77,446.

The average size of build-to-rent developments is also growing.

In Q3 2019, the average size of each completed build-to-rent scheme was 133 units, this increases to 245 units for the schemes under construction, while the average size of schemes in the planning system is higher still at 325 units.

Geographically, growth of the sector is spread evenly between London and the regions, with both areas seeing total growth of 20%.

The number of build-to-rent units inside the capital and in the regions is also similar at 63,200 and 60,337 respectively.

However, in terms of units completed the regions saw the biggest increase, with a significant rise of 41% over the year to Q3 2019.

Ian Fletcher, director of real estate policy at the British Property Federation, said: “The build-to-rent sector continues to attract investment and deliver much needed homes.

“Not only do we have an impressive 31% growth in completions between Q3 2018 and Q3 2019, but the pipeline of new projects is also strengthening.

“Right across the country we are seeing growth in the sector, allowing people to access high quality, institutionally-managed rental properties.

“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.”

Jacqui Daly, director of Savills Residential Research who conducted the research for the BPF, added: “As individual households increasingly cannot afford to access the housing market, particularly once help to buy is withdrawn, so demand for the quality rented homes the sector provides will rise.

“Built-to-rent already makes a significant contribution to housing delivery, and we project this will increase to one in five new homes as more and more people rely on renting.

“This will change the housebuilder model, with bulk sales to investors growing their share of housing delivery.

“In our opinion, in 10 years, the customer lists of housebuilders will see pension funds and life insurers alongside first-time buyers and second steppers.

“Rather than shouldering the full burden of risk, housebuilders will act as master contractors, forging long-term partnerships with landowners and investors.”

By Ryan Fowler

Source: Mortgage Introducer

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Investors swoop on British build-to-rent sector

Property firms are turning to Britain’s budding build-to-rent sector, which caters to students and city dwellers seeking affordable accommodation, as traditional home building and selling falters on weak consumer confidence.

U.S. real estate firm CBRE Group Inc (CBRE.N) said it had agreed to buy British property developer Telford Homes (TELF.L) for about 267 million pounds, in a deal representing a premium of about 11% to Telford’s closing price.

In a separate deal announced on Wednesday, student housing provider Unite (UTG.L) said it would buy rival Liberty Living Group for 1.4 billion pounds.

Established in 2000, Telford has focussed on London, building housing blocks in up-and-coming outer areas of the capital such as Stratford, Bow or Finsbury Park.

“The UK is in the early stages of a secular shift towards institutionally-owned urban rental housing, similar to what we have seen in the US over the last two decades,” CBRE Chief Executive Bob Sulentie said in a statement.

Traditional UK house builders and developers have been struggling due to a slowdown in European growth and home buyers holding out for further falls in house prices as the country faces uncertainty over plans to leave the European Union.

At the same time, demand for rental property is rising, according to Britain’s Royal Institution of Chartered Surveyors (Rics), as the amount of rental stock falls, with tax and legislation changes deterring would-be landlords and prompting small-scale landlords to sell up.

This has left room in the market for large players looking to capitalise on rising rents.

Schroders, which has a 2.88% stake in Telford according to Refinitiv data, said in a report last month that investors were being pushed to consider investment opportunities in alternative, non-mainstream sectors.

But the asset management firm’s head of real estate capital, Robin Hubbard, cautioned that segments like student accommodation and build-to-rent residential had already seen significant interest from institutional investors and yields had compressed as they had become mainstream.

REDUCING RISK
Telford in May reported a nearly 13% drop in annual profit for its fiscal 2019 as it sought to navigate a Brexit-dampened London housing market with an increased focus on low-risk build-to-rent properties.

“The difficult properties to sell have been the very expensive ones. I think a bit of the bottom is falling out of that market. A lot of their buyers were from overseas and with Brexit that’s creating a little bit of uncertainty,” said Paul Mumford, fund manager at Cavendish Investment Management and the 9th biggest shareholder in Telford Homes.

“Telford have decided they would prefer to do a less risky business than the business of building blocks to sell, and they’ve gone into partnerships in order to build to rent.”

CBRE has said its offer price is final, but that it reserves the right to raise it if another offer is made for Telford. Telford’s directors have recommended the offer.

Cavendish’s Mumford said: “At the moment we’re undecided what to do but it looks as though possibly one should be waiting to see whether there is a higher offer.”

Analyst Aynsley Lammin, an analyst at Canaccord Genuity,

said: “I don’t think any of the other UK house builders will be coming in to make a bid.”

“It’s quite a specific area of the market and so would require somebody who is already involved in the build-to-rent market and has the equity and skill base to manage these properties as well as develop them.”

Telford shares rose 12.4% to 354.25 pence by 1330 GMT – slightly above the offer price of 350 pence per share – indicating some hope among investors of a higher bid.

LUCRATIVE STUDENTS
Founded in 2000, Liberty Living has a portfolio of 24,021 beds which was independently valued at 2.2 billion pounds as of May 31.

“By combining two highly complementary portfolios, the enlarged group will be well positioned to meet the growing need for affordable, high quality student accommodation in university towns and cities where demand is strong,” Unite’s CEO Richard Smith said.

In 2015-16 there were 2.3 million students at British higher education institutions, roughly the same figure as a decade before, according to the universities’ representative body Universities UK, although the proportion of international students had risen from 14% to 19% over the same period.

Liberty Living posted turnover of 155.7 million pounds in 2018, an increase of 15%. Unite posted a 7% rise in profit before tax in 2018 to 246 million pounds.

Writing by Alexandra Hudson; Editing by Arun Koyyur, Deepa Babington, Georgina Prodhan

Source: UK Reuters

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London overtaken by rest of UK in build-to-rent growth

London’s build-to-rent sector has been outpaced by the rest of the UK for the first time, according to new figures from the British Property Federation (BPF).

Regions outside of London have overtaken the capital in construction of build to rent homes as demand grows for new properties that are built for rental purposes and managed professionally in hotspots such as Manchester, Liverpool and Bristol.

Although the sector largely emerged in outer zones of London, an increasing demand for build-to-rent is coming from areas such as Manchester, with many university graduates staying in the city after finishing their education.

While London had a total number of 62,016 build-to-rent homes completed, under construction or being planned in the second quarter of this year, UK regions recorded 62,021 homes in the same period.

Ian Fletcher, director of Real Estate Policy, British Property Federation, said: “This is a significant landmark moment for build-to-rent, with the sector’s total number of homes across the UK’s regions overtaking London’s total for the first time ever.”

Fletcher added: “Recognition of build-to-rent’s potential to deliver much-needed new, high-quality rental homes is gathering momentum across the country.”

The research, produced by Savills and commissioned by the BPF, also shows that the total number of build-to-rent houses complete, under construction or in planning has risen from 98,723 in the second quarter of 2017 to just over 124,037 in the same period this year.

The build-to-rent sector, which include services such as a 24-hour concierges and broadband as part of the rent, is aimed at mid-market buyers who want a wider package of provisions with their property.

One British property developer announced last year said that it would be offering free Uber rides which were included in the price of the rent.

Source: City A.M.