In recent years, build to rent properties have gained popularity among institutional and individual investors in the UK. As the demand for rental housing continues to rise while housing affordability declines, build to rent provides attractive yields and stable income. However, tax policy changes have made individual buy-to-let investments less profitable. Despite this, there are still good reasons for investors to consider build to rent properties.
Build to rent supported by rising demand and government policy
The build to rent sector has expanded rapidly, with over 148,000 build to rent homes built or in development across the UK. Strong demand is driven by high rents and lack of affordable housing, especially in London. Population growth is also increasing demand for rental housing. The UK government has introduced policies to encourage build to rent, seeing it as a way to increase housing supply.
Build to rent offers economies of scale unavailable to individual landlords
Institutional investors in build to rent can benefit from economies of scale in development, management and maintenance that individual buy-to-let landlords cannot match. Build to rent providers employ professional on-site management and can negotiate discounts on repairs and upgrades. This helps maximize yields for investors.
Long-term stable yields despite tax changes
Tax changes since 2016 have made individual buy-to-let investing less profitable. However, build to rent investments can still deliver stable long-term yields as they are focused on rental income rather than capital growth. Investors are attracted by incomes indexed to inflation from long tenancies and low vacancy rates.
Locations accessible to transport links remain attractive
Many build to rent developments are located near public transport links, especially in outer London boroughs where rents are more affordable. These locations remain attractive to tenants despite tax changes. Individual landlords unable to match these locations may face greater challenges.
While individual buy-to-let investors face challenges from tax changes, build to rent continues to offer stable long-term yields. Investors should consider build to rent, especially in locations supported by housing demand and near transport links.