UK construction House builders budget build-to-rent development
Marketing No Comments

Build-to-rent experiences boom

The number of completed homes for build-to-rent have increased by 42% between the first quarter of 2019 and the same period in 2020.

Research published by the British Property Federation shows there are 157,512 build-to-rent homes complete, under construction or in planning across the UK.

As it stands there are 33,505 build-to-rent homes under construction, 11% less than last year, though the number in planning is up 12% to £80,771.

Ian Fletcher, director of real estate policy, British Property Federation, said: “Pain is being felt across all sectors of the economy, but build-to-rent remains attractive to investors and we know from past experience that demand for rental housing usually leads homes-for-sale out of any recovery.

“Our statistics show that a quarter of build-to-rent delivery is now coming from major housebuilders and their support of the sector, through for example access to land, could really boost growth in this sector.”

Outside of London there were 58% more build-to-rent homes completed year-on-year.

However in the capital completions have increased by just 2% year-on-year, while homes in the planning stage are down 10%.

Fletcher added: “One concern is the London pipeline – the statistics show a sharp decline in the number of homes in planning across the capital.

“London was a leader in championing build-to-rent and the sector’s role in adding much-needed new homes to its housing market.

“The imbalance between housing demand and supply has not gone away, and if anything the impact of coronavirus has shown us that a safe and secure home for everyone is fundamental, and we should be doing everything we can to ensure the capital’s housing market delivers for everyone.”

Local developers are currently responsible for building 28% of the market, with UK housebuilders (27%), major UK developers (17%), contractors (14%), registered providers (9%) and major international developers (3%) making up the rest.

Jacqui Daly, director of Savills residential research, said: “We’d expect high levels of uncertainty to increase demand for rented accommodation as people look to avoid longer term commitments such as mortgages, or if borrowing remains more constrained.

“At the same time, we expect to see the leveraged buy-to-let sector to remain under pressure, driving demand into build-to-rent.

“This means that once lockdown is lifted, build-to-rent developers should be confident to progress stalled developments.

“Also, housebuilders will face particular pressure to restore their sales rates when restrictions on doing business are lifted so we could see a greater role for build-to-rent to absorb stock.

“Housebuilders now account for 27% of total build-to-rent pipeline compared to just 10% just three years ago. We could see this share increase significantly over coming months.”

BY RYAN BEMBRIDGE

Source: Property Wire

house
Marketing No Comments

Scottish build to rent market set to replicate success of Purpose Built Student Accommodation

Scotland’s build to rent (BTR) residential sector is expected to deliver many years of growth before reaching maturity, according to the results of Ryden’s latest detailed review of the Scottish commercial property market.

While relatively new in Scotland with only two schemes completed to date, Ryden predicts that new entrants to the Scottish BTR market look set to replicate the success of models seen in the North of England, such as family homes as well as large scale city centre apartment blocks, in a similar way to Purpose Built Student Accommodation.

Revealed to commercial property audiences at events in Edinburgh, Glasgow and Aberdeen last week, Ryden’s 85th Scottish Property Review has been expanded to include alternative property asset classes as well as analysing office, industrial, retail & leisure and investment property trends.

According to the report, demand for office space in Glasgow and Edinburgh is robust with many occupiers initiating searches well in advance of their lease events. Glasgow’s grade A supply is all but exhausted and is likely to result in a new headline rental figure for the city, while Edinburgh’s supply is also at record lows with occupiers choosing to renew existing leases rather than relocate, it added.

The industrial market in Glasgow and the west is enjoying a purple patch for pre-let and bespoke premises, partly driven by rising demand for discount groceries and the wider retail sector. Supply of industrial units has reached its lowest level of availability with popular areas commonly seeing rents rise by 20% to 50% at review or renewal. While positive for investment potential, this leaves businesses unable to find premises, constraining their growth.

In the east, unsuitable and obsolescent stock remains a major problem but with new developments due to complete in 2020 market confidence should improve.

Aberdeen is entering a market recovery phase and demand for office accommodation is increasing. Take up is 45% up on 2018 and heading towards the city’s five-year average. Similarly, industrial stock take-up accelerated during 2019, encouraging a number of developers to press ahead with speculative development.

Mark Robertson, Ryden managing partner and Scottish Property Review editor, said: “Forecasts envisage the economic growth rate doubling this year and next, although still below the long run average.

“The early signs in 2020 are that a period of greater political stability – notwithstanding the completion of Brexit and Scotland’s ongoing constitutional debate – is encouraging a more positive property market sentiment, particularly where the market fundamentals are strong.

“Those markets with the correct fundamentals include the nascent BTR residential sector, the prime Glasgow and Edinburgh office and industrial markets, and Aberdeen which is now clearly in the market recovery phase. The retail sector remains challenged, although there are selected, defensive retail submarkets and situations where pricing may now bottom-out.”

Source: Scottish Construction Now

First-time buyers new home build to rent
Marketing No Comments

Surge in build to rent holds up housing registrations

The number of build-to-rent flats completed last year soared by 57% to just under 4,800 units compared to 2018.

According to the annual NHBC new home registration figures build to rent is now equivalent to the total number of homes registered in Wales.

The surge in build to rent homes supported the new homes sector, which saw NHBC registration only edge up 1% last year to 161,022 homes.

Growth was also driven by London’s resurgence, where new home registrations increased by 37%, with both the capital’s affordable and rental (+42%) and private housing markets (+33%) performing strongly.

Across the country, private new home registrations fell 3% to 112,086 while the number of affordable homes rose 13% to 48,936.

NHBC – UK Registrations by Region
England – Regions20192018
NORTH EAST5,8286,375
NORTH WEST & MERSEYSIDE16,21018,086
YORKSHIRE & HUMBERSIDE9,84411,136
WEST MIDLANDS15,49613,299
EAST MIDLANDS12,89513,078
EASTERN19,11017,698
SOUTH WEST12,72514,240
LONDON21,72615,811
SOUTH EAST25,49626,766
TOTAL ENGLAND139,330136,489
SCOTLAND12,26812,093
WALES4,7695,448
NORTHERN IRELAND & ISLE OF MAN4,6554,848
TOTAL UK161,022158,878

Pete Ladhams, Managing Director at Assael Architecture, said: “These figures show the increasingly diverse nature of the UK housing market, with the number of registrations for Build to Rent homes growing significantly over the past five years.

“This is great news for renters in most major cities who now have the option of high-quality homes that are purpose-built for renting, with on-site professional management and amenities to use.

“Currently, most Build to Rent homes are in apartment buildings, but I expect in the coming years we’ll see far more suburban purpose-built rental housing emerging, aimed at families or those in older age.”

Dave Sheridan, Executive Chairman at ilke Homes, said: “Given the political and economic uncertainty that overshadowed much of 2019, and flooding that affected large swathes of the country towards the end of the year, the construction industry has shown incredible resilience.

“This 12-year high in registrations indicates that the industry is stabilising post the 2007/2008 financial crash.

“However, the industry is still some way short of meeting the government’s targets of 300,000 new homes a year.

“To reach these figures, it is crucial that we continue to find ways to breathe new life into the supply and delivery of housing, whether that’s through SME housebuilders or through embracing modern methods of construction such as modular manufacturing that will help to plug the gap that traditional housebuilders can’t meet.”

Written by Aaron Morby

Source: Construction Enquirer

Residential transactions London leavers first-time buyers RICS New sales Commercial Finance Broker Build to Rent Coronavirus House buyer demand mortgage lending
Marketing No Comments

Savills: UK sees influx of Build to Rent homes

The UK is seeing an influx of American-style purpose-built professionally managed rental homes, with the number of homes designed and built specifically for rent having grown massively in the last year.

Analysis by Savills for industry trade body the British Property Federation (BPF) has found the number of Build to Rent (BTR) homes has increased, with 150,000 BTR homes in planning, under construction or completed.

There has been a 51% surge in the number of completed US-style rental homes in key regional cities, with Manchester, Birmingham Liverpool, Leeds, Glasgow and Sheffield leading the way.

Richard Jackson, co-founder and managing director of Apache Capital Partners, which has a £2bn BTR development pipeline with Moda Living, said: “Given the wider investment landscape and the state of the traditional private rented sector in the UK, it’s no surprise that Build to Rent continues to attract interest from both investors and consumers.

“The under-performance of traditional investments such as sovereign bonds has encouraged institutional investors such as pension funds and insurers to look at emerging asset classes like BTR for long-term steady income streams to match their liabilities, while the poor quality of accommodation and service that many renters receive from private landlords mean a purpose-built, professionally managed offer like what we’re providing through our partnership with Moda Living is highly appealing.

“We’ve seen healthy demand at our first building to open Angel Gardens, and we see regional BTR going from strength to strength, buoyed by strong fundamentals and a renewed political focus on powering up the UK regions.”

There are now 152,071 BTR homes at various stages of completion in the UK.

Of these 40,181 are complete, with a further 35,415 under construction and 75,475 in planning.

This represents an increase of 15% over last year.

Manchester and Salford lead the way with almost 23,000 BTR properties either completed or in the development pipeline.

Birmingham meanwhile nearly doubled its pipeline from 4,800 BTR homes, to over 8,000, with Leeds, Liverpool, Glasgow and Sheffield all seeing an uptick in BTR activity too.

Pete Ladhams, managing director of BTR specialists Assael Architecture, which has designed BTR projects for L&G, Grainger plc and Essential Living, added: “The meteoric rise of Build to Rent in the UK last year shows the appetite for genuine alternatives within the rental market.

“As residential housing shifts towards being more service-led, rental properties are offering residents far more than just a home.

“With a range of amenities, building-wide social initiatives and boasting great locations, BTR is showcasing what a more professional, secure and high-quality rental product looks like.”

Franz Doerr, founder and chief executive of deposit alternative provider flatfair, said: “These figures show the demand for professionally managed rental housing that makes the entire experience seamless.

“As people rent for longer periods there will be an increased focus on service, and Build to Rent housing is leading the way.

“As more units come online, service will be the differentiating factor between developments, and those that embrace the technological solutions that make things easier for tenants will thrive.”

By Michael Lloyd

Source: Mortgage Introducer

Marketing No Comments

Commercial property: Build-to-rent is a growing family affair

Research by the Institute of Fiscal Studies suggests that owning their own homes is no longer a priority for younger generations, particularly those in the 25-to-34-year-old bracket.

But renting is not just for singles or couples. Families are increasingly turning to the private rental sector, with a five per cent rise in Scotland over the last last year and three and four-bedroomed houses generating the steepest growth in rent.

This is where build-to-rent (BTR) comes in – homes which are built to a high standard specifically for the long-term rental market.

Up until now, BTR developments have captured a completely different market, but if it continues to deliver only for young professionals it will not achieve its full potential.

Families who cannot afford to buy their own homes are looking for security and are much more likely to settle for longer periods, providing a steady income stream for large-scale investors.

This is ideal for BTR developers who offer greater security to renters, with specialist operators rather than local factors managing accommodation.

On the regulatory side, there have been some notable moves in the last few years to support the case for family-friendly BTR.

Local authorities were given the power to create Rent Pressure Zones (RPZ) in December 2017, capping rent growth at four per cent per annum in areas where rents were at risk of overheating.

This is particularly important for Scotland’s cities showing strong growth – including Edinburgh – with population growth forecasted at 7.7 per cent by 2026.

Perversely, by smoothing out the inflation and deflation cycle, RPZ provides greater levels of security for tenants and specialist landlords relying on a long-term investment.

The balance of risk between tenant and landlord has also shifted, with all leases in Scotland now based on a lifelong security of tenure.

Landlords can no longer terminate a lease on “no fault” grounds. Again, specialist landlords see this as underpinning the case for providing suitable and family-appropriate private rental accommodation.

Developers and investors should also take heart in the fact that a tax incentive, whereby six or more dwellings can be treated as non-residential thus exempting them from LBTT, is now in force.

This, coupled with economies of scale and efficacious modern methods of construction, is strengthening the business case for BTR in Scotland.

Some 6,300 BTR units are currently at various stages in the planning process, with developments such as Candleriggs Court in Glasgow and Lochrin Quay in Edinburgh, already complete.

A successful and inclusive BTR sector in Scotland is a win-win-win for policy makers and the Scottish Government, which is keen to meet ambitious housing targets; for developers and investors, who are seeking to capitalise on the growing demand for larger private rental accommodation, and especially for the growing family of Scotland’s renters.

By HEATHER PEARSON

Source: Scotsman

Marketing No Comments

Build-to-rent or buy-to-let? New research helps renters find the best property to live in

Finding the right sort of property to rent can be a bewlidering time for many when faced with the choice of buy-to-let or build-to-rent or some other jargon-filled combination.

However new research suggests the build-to-rent market will emerge victor and soon account for a third of the private rental market.

But many believe the government’s encouragement of iinvestment away from the buy-to-let sector and into the build-to-rent sector will be costly for those who want to rent.

Leading room share platform, ideal flatmate, looked at the cost of renting a room in all of their build-to-rent developments and then compared this to the average cost of renting in the wider buy-to-let market

The website has the exclusive listing rights for all UK build-to-rent properties, matching groups of tenants who show interest in a given development and then providing them to each developer once a flat is fully let.

Additional benefits

Its research found that the vast majority of build-to-rent developers offered a wealth of additional benefits included in the price such as gym use, amenities, wifi and even parking.

So ideal flatmate also looked at the cost of these extras on top of the average rent for the wider area to give a more like for like comparison on build-to-rent value for money.

The study shows that on average, the cost of renting a room in a build-to-rent development is just 15% higher than the cost of renting in the buy-to-let market – £868 on average compared to £752.

However, there are a total of seven areas across the UK where build-to-rent offers even better value than the wider market.

JLL – Queen Street, Leicester

JLL’s development in Queen Street in Leicester has a rental cost of just £405 a month, 33% cheaper than the room rental average and cost of amenities in Leicester (£605).

 Leicester
Leicester

JLL – Greenwich

Their development in Greenwich is also 18% cheaper than the wider cost of renting and amenities in the borough at £717 a month.

 Greenwich
Greenwich

Urbanbubble – Liverpool

Urbanbubble’s development in Liverpool costs just £500 a month compared to the average of £575 for a room and amenities elsewhere in the city – a 13% difference.

Allsop – Newcastle

Allsop’s Forth Banks development in Newcastle is also 13% cheaper at a cost of £500 a month with renting a room and bills across the city as a whole totalling £591.

Liv Group – Bath 

LIV Group in Bath and JLL’s Harrow development are also 6% and 5% better value than the wider area respectively.

 Bath
Bath

Way of Life – Manchester

In Manchester there is almost no difference in value between the average build-to-rent cost between LIV Group and Way of Life’s developments and the city average, coming in £2 cheaper on average.

The highest build-to-rent premium is in Tower Hamlets where the average cost of a room in a development is 44% higher than the borough average.

Lewisham is the home to the next highest rental premium at 35%, with Salford build-to-rent costing 14% more on average.

Co-founder of ideal flatmate, Tom Gatzen, commented: “Build-to-rent has come under scrutiny due to the higher rental costs but when you consider the additional benefits there is a very strong argument that these developments provide much better value for money.

“For a start, they are new builds so the quality is very good and they have a much more professional management structure in place to support tenants when compared to the traditional communication chain of the tenant, letting agent and landlord.

“They also offer a lot more for your money in terms of amenities included in the price, with many providing wifi, bills and a gym as standard.

“This comes on top of other benefits such as parking and private gardens and while you pay more as a lump rental sum for these benefits, the convenience of paying for everything in one go is something that appeals massively to today’s generation of tenants.”

By Amardeep Bassey

Source: Kent Live

Marketing No Comments

Key UK Property Investment Sectors to Quadruple in Value

A new report estimates the purpose-built student accommodation, build-to-rent residential and retirement sectors will eventually reach a combined value of £880 billion, as private and institutional investors from around identify the huge opportunity in these assets.

Summary:

  • Three of the UK’s biggest purpose-built property sectors are forecast to rise in value by four times their current combined amount
  • Purpose-built student accommodation, build-to-rent residential and retirement property sectors are receiving increasing levels of global investment, particularly from institutional buyers
  • “The fundamental demographic and economic changes supporting these sectors are difficult for investors and developers to ignore”, as changing generational attitudes are helping to drive the development of Britain’s property market

There is a huge growth opportunity for investors in the UK’s large-scale, professionally owned real estate sectors.

That’s the message from Savills, who estimate that three of the country’s largest purpose-built property sectors are set to quadruple in value once they reach full maturity.

At present, the combined value of the purpose-built student accommodation (PBSA), build-to-rent residential and retirement property sectors stands at £223 billion. But, as momentum in these markets continue to build, this will be rise four times to £880 billion.

Although already established sectors, they are still in their infancy in terms of the growth opportunity for investors. As more students, young professionals and retirees demand higher-standard accommodation, in locations close to places and amenities important to their respective demographics, the advancement of these purpose-built property sectors will continue to drive investment levels.

“Common to all these sectors is the recognition that investing in where people live has great potential for investors, particularly those seeking long term income streams,’ said Lawrence Bowles, Savills research analyst.

“The fundamental demographic and economic changes supporting these sectors are difficult for investors and developers to ignore. Institutional interest will continue to grow as these asset classes mature and can increasingly demonstrate their track record.”

Of these sectors, PBSA is currently the most mature, with Savills estimating its value at £51.2 billion. Last year, global investors poured £3.1 billion into the sector, and a further 35,000 PBSA are expected to be bought in 2019. However, while total PBSA unit numbers stands at 640,000, the UK’s student population has increased 9.7% over the last five years, underlining the undersupply the sector currently faces.

Like PBSA, the build-to-rent sector has helped to raise standards in the UK’s residential rental market, with high-quality apartments in key city centre locations, operated by professional management companies.

But build-to-rent is only just at the beginning of its development, presenting investors with huge growth potential. Savills currently values the sector at £9.6 billion, but projects it will be worth close to £550 billion at full maturity and provide over 1.7 million UK households.

Yet, despite their similarities, only a relatively small number of institutional investors operate in both the PBSA and build-to-rent markets. Savills, however, believes this will soon change.

“Given the similar challenges in development and management, we would expect to see more investors expanding their capabilities to cover the full spectrum of operational residential assets,” commented Peter Allen, Head of Savills Operational Capital Markets.

“Student housing investors have the potential to extend their brands into build to rent and use a strong track record in a very established sector to secure favourable finance terms to maximise opportunities in a newer, less mature sector.”

Source: Select Property

Marketing No Comments

Buying in to build-to-rent

Corporate landlords are tapping into healthy demand for rented property in the UK.

Professional landlord Tipi is urging people to “join the rental rebellion”. Its Soviet-style advert shows a clenched fist holding a key, and the tagline boasts that it is “throwing the rental rule-book out of the window and making renting better for everyone”. Its competitors have similarly utopian slogans. Get Living offers people “a new way of renting”, while Fizzy promises that it is “reinventing renting” with “zero faff”.

These companies are part of the fast-growing build-to-rent sector in the UK, where corporate landlords, often institutional investors, rent out flats in purpose-built towers. These flats are a cut above your typical grotty flatshare: they often come with access to posh gyms, cinemas and additional security. The build-to-rent model is already very popular in the US, but until recently it had been slow to take off in the UK.

The build-to-rent trend crosses the Atlantic

At the end of March there were more than 30,000 completed build-to-rent properties in the UK, according to estate agent Savills. This is an increase of 34% on the same time last year. When you include properties under construction or in planning, the total number of build-to-rent homes increases to 140,000, with the average scheme in planning comprising more than 320 flats.

There are several reasons why build-to-rent is becoming more popular in the UK. Clearly there is a shortage of affordable housing, whether for people to buy or rent, with housebuilding not keeping up with demand. In an effort to level the playing field between landlords and private buyers, the government cracked down on the buy-to-let sector, making it increasingly difficult for landlords to make money from it. As a result, landlords have left the sector in droves, further reducing the supply of rental properties (the number of landlords has fallen by 120,000 in the past three years, according to estate agent Hamptons International).

Yet, over the past ten years the number of rental households has increased by 74% to 4.7 million. So American-style corporate landlords are entering a market with healthy demand – either from people who might have accepted they’re not in a position to buy property, or who don’t want the commitment of home ownership but will pay for a slick rental flat in a fancy block. And it is a lucrative business. On average, the rent on build-to-rent flats is 11% higher than surrounding rented homes, according to an analysis of 25 rental schemes by real-estate services firm JLL. And investment in this sector is going mainstream. For example, investment bank Goldman Sachs recently made its first foray into build-to-rent, putting £184m into what is set to be Birmingham’s largest residential tower. By 2025, investors will have allocated £75bn to the professionally managed private-rented sector, says estate agent Knight Frank.

One way to invest in the build-to-rent trend is through Grainger (LSE: GRI). Grainger is the UK’s largest private landlord with 8,237 units in cities such as Manchester, Birmingham and London. In April it signed a deal with Transport for London to build 3,000 properties above and around Underground stations. Between 2017 and 2018, the group’s earnings grew by 26% to £94m, partly driven by like-for-like rental growth of 4%. Grainger’s shares currently trade at a discount of around 20% to net asset value.

By: Sarah Moore

Source: Money Week

build-to-rent
Marketing No Comments

Build-to-rent holds promise for long-term investment

The housing crisis is a hot topic not just in the property industry but across society as a whole. A report from the House of Lords Economic Affairs Committee said that the UK government needed to boost its homebuilding target by 50% to create 300,000 new homes each year to tackle the housing crisis.

But while we all agree more homes are needed, what form they should take is less clear.

Market dynamics in particular locations will dictate what is appropriate, but we also need to consider more fundamental shifts in demand. As people live longer, a range of options tailored to older people becomes increasingly important, as does allowing family homes to be freed up.

With more people living alone, options that suit single people’s lifestyles and budgets are vital and as the millennial generation chooses a more transient lifestyle and prioritises experience over ownership, high-quality homes for private rental are also key.

Figures from the English Housing Survey last year found that almost half of 25- to 34-year-olds live in the private rented sector, up from less than a quarter in 2006. The proportion of families living in rented accommodation has also grown. Knight Frank estimates that by 2021, nearly one in four households in England will be renting.

A major contributing factor to the increase in renting is the difficulty of getting on to the property ladder. The Office for National Statistics said in April that the house-price-to-earnings ratio in the UK had hit 7.77, the highest in the official time series going back to 2002. Meanwhile, rising student debt and a preference for living in urban locations make buying a first property even more of a financial struggle.

However, it would be wrong to assume renting has become popular purely because of the difficulty of buying. Knight Frank’s research found that 21% of renters rent to be able to live in a better area; 8% do not want the responsibility of owning a home; 6% need flexibility for work; 6% are downsizers; and 5% do not want to be stuck in one location.

For too long, renting has been seen as a last resort. But renting has moved on and is no longer the murky world of damp-ridden HMOs that many in the baby-boomer generation may have experienced in their 20s.

For many younger people – some of whom will have been used to living in modern purpose-built student accommodation during their time at university – living in a build-to-rent (BTR) property, with a strong amenity offer and a focus on service, is a natural next step that fits their requirements.

“For many younger people living in a BTR property is a natural next step that fits their requirements [after university]”

The millennial generation, after all, is less focused on the long term. Traditional mortgage lenders have not yet adequately recognised the rise in freelancing and the gig economy and the ability to move anywhere around the world at short notice is worth more to many young professionals than the prospect of home ownership.

BTR shifts the focus for the homebuilding industry, which has traditionally concentrated on short-term capital values rather than long-term stable income. Developers need to adapt and recognise that real estate is increasingly about service as much as product: more than ever before, we need to understand the customer and their changing priorities.

Successful BTR schemes will combine a single-operator management structure with high-quality, sustainable, flexible building design to attract and retain tenants while offering them lease lengths to suit varying circumstances.

Source: Property Week

Marketing No Comments

Comment: Build to rent and its advantages are here to stay

The latest Scottish Build to Rent (BTR) Forum, organised by Movers & Shakers and held in Edinburgh last week, demonstrated the growth of the BTR sector over the last year as well as the increasing appetite of investors to put their money into Scottish housing.

BTR is the provision of purpose-built private rented units by investors and developers. Many housing industry professionals now see it as a key part of the solution to the UK’s housing crisis. Such accommodation is highly popular in parts of Europe and the US and its influence is now growing in the UK too.

Rising house prices and still-high deposits have squeezed many potential – especially younger – house-buyers from home ownership. Many also choose to rent as they do not want the burden of a mortgage and prefer to retain flexibility at this stage in their lives. This has strongly boosted demand for rental accommodation, particularly in buoyant cities like Edinburgh, where over a quarter of all households are in the private rented sector (PRS) and two-thirds of younger households. However, PRS supply levels remain constrained due to numerous factors including a lack of new-build housing, tax and legislative changes in the PRS, and the rapid emergence of holiday lets. This combination of rising demand and constrained supply has seen rocketing rent levels – over the past five years rents in Edinburgh have grown close to 6 per cent annually on average, well ahead of inflation and wage growth.

As one developer at the forum put it, BTR is about providing housing for “the forgotten majority”, i.e. those who do not qualify for social rent but who do not want or cannot afford home ownership and are being squeezed by rapidly rising PRS rents.

By creating new supply through leveraging in private finance, BTR has a key role in helping to fix Scotland’s housing market crisis. Although there are only around 700 operating BTR units across Scotland, there are now close to 5,500 additional units that have been approved in planning, in the planning process or at a pre-planning stage. If these pioneering schemes prove their worth, there will be no shortage of investors willing to accelerate this delivery still further. While the current pipeline also represents less than 2 per cent of all PRS households in Scotland, the UK as a whole is now at more than three times this level and London is nearly five times.

This delivery also has wider economic impact. Homes for Scotland recently calculated that each house built in Scotland creates around four jobs. The existing pipeline could therefore contribute around 25,000 jobs and we could nearly double this if we were to raise BTR delivery to that of the wider UK.

In terms of attracting BTR investment, Scotland benefits from relatively low entry prices; strong yields; multiple dwellings relief on Land & Buildings Transaction Tax; a Rental Income Guarantee Scheme, and more certainty around the regulatory regime relative to the rest of the UK. However, it is also important to recognise that greater political uncertainty here (due to the potential for Indyref2 as well as Brexit) and the now-different landscape for the PRS in Scotland with the new Scottish Private Residential Tenancy (which started in December), has caused some cooling of interest in Scotland from investors. And it was argued at the Forum that, with some exceptions, local authorities in Scotland do not have a good understanding of BTR and the bureaucracy of the planning process (particularly in terms of negotiating Section 75 contributions) and securing a building warrant has created obstacles to investment. As one investor put it: “Scotland needs to get going or the capital will move elsewhere.”

Scottish Housing Minister Kevin Stewart spoke at the end of the Forum and reiterated the Scottish Government’s desire for this industry to grow quickly. BTR is here to stay, the question now is how rapidly we can grow it and help to build the homes needed.

Source: Scotsman