What will be the key property trends of 2022? The exponential growth of the suburban build-to-rent (BTR) market will surely be one to watch.
What’s noticeable is that suburban BTR is now benefiting from equivalent levels of institutional investment as the urban BTR sector traditionally has done in years past. There have already been some big recent tie-ups between investors and developers: Legal & General, for example, established a new dedicated suburban BTR arm, while UK challenger bank Gatehouse plans to build 2,500 single-family rental homes starting in the Midlands and north of England. At McBains, we are also exploring a number of suburban BTR sites.
Investment in the BTR sector as a whole is at record levels: the first half of 2021 saw an 80% increase compared with the same period in 2020, with £2.35bn invested. But tie-ups like these suggest that next year could break all records.
One reason suburban BTR is on the rise is that the new hybrid working model means more families are seeking out-of-town properties that can accommodate adequate workspace and smart technology. A report from Knight Frank found that around three-quarters of developers are more likely to provide home offices and touch-free tech in future homes as a result.
The changing BTR demographic means there are new breeds of renters that are willing to pay for such extras, meaning greater returns for investors. Strong tenant demand is increasingly evident: for example The Thistle Portfolio, which Goldman Sachs purchased in early 2021, has had consistently high occupancy in excess of 97%.
The suburban BTR market can also compensate developers for the end of Help to Buy and the stamp duty holiday, two policies that have helped support housebuilding over recent times. Suburban BTR means developers can continue to deliver homes at scale to compensate for any fall in demand for homes for sale as a result. Furthermore, stricter regulations are pushing private landlords out of the traditional buy-to-let market, making them more likely to sell up, leaving a rental vacuum that still needs to be filled.
It has been a record year for BTR but all the signs point to even better results in 2022.
Clive Docwra is managing director of property and construction consultancy McBains