In both its Housing White Paper earlier in the year and in the Queen’s speech the government announced plans for a greater focus on the purpose built private rented sector (PRS), with a particular focus on affordable rent.
According to the British Property Federation (BPF) there are 95,918 build to rent units either completed or planned across the UK (17,001 completed, 24,012 under construction, and a further 54,905 with planning permission).
The rise in popularity of this sector raises questions for the future of standard buy-to-let landlords – already operating in a challenging environment in recent years. However industry experts say these landlords (and brokers) should not be too concerned.
“Build to rent provides opportunities for development finance investors and not necessarily traditional landlords, however that’s not to say the rise in popularity of such developments is all bad news for buy-to-let,” says Ying Tan (pictured), managing director, Buy to Let Club.
“Indeed, what this means is that more people are looking for quality rental accommodation and anything that improves the rental sector overall is good news for buy-to-let. With interest rates set to rise in the not too distant future it’s likely we’ll see more people looking to the rental sector for accommodation so there is plenty of tenant demand to go around.”
Rob Bence, co-founder of The Property Hub – a global community of investors, says the increase in build to rent should improve standards across the industry.
“There are certainly a large number of purpose build PRS developments being built across the UK and these are proving popular with certain demographics – namely young professionals and students,” he says.
“What these developments show us is that what tenants expect and, indeed, demand from their rental accommodation has changed. They want smart accommodation, wifi, extra amenities such as concierges and on site gyms. However, these developments do not appeal to all renters. As such there is still plenty of opportunity for the traditional landlord in the buy-to-let market, but what will be paramount is quality.
“Landlords who want to compete with purpose built accommodation must be offering properties that are a high standard. Therefore, if the boom in build to rent improves quality across the board, this can only be a good thing for the market,” he adds.
Large role for classical landlords
Meanwhile David Smith, policy director at the Residential Landlords Association (RLA) says it is inevitable that the growth of the more institutional sector will mean that smaller landlords will be a smaller part of the sector.
“However, most studies have cast doubt on the institutional landlords ever being more than 50% of the PRS so smaller, more classical, landlords should still play a large role,” he says.
“However, it does create concern in that government attention is already focused on institutional landlords, slightly to the detriment of the smaller landlord, and if institutions were to form a larger part of the sector this shift in attention could grow,” he added.