Investment in the UK’s single family housing (SFH) rental market hit a record high of £1.9bn last year, according to Knight Frank’s 2024 Single Family Housing Report.
The figure represents a fivefold increase on the £388m invested in the sector in 2022. SFH investment accounted for more than 40% of all build-to-rent (BTR) investment in the UK during 2023, with the remainder going into multi-family apartment schemes and co-living.
Knight Frank surveyed institutional investors currently active in the SFH space about their future investment plans and found they plan to commit £17bn of capital to the SFH sector over the next five years, which could translate to the delivery of more than 60,000 new SFH rental homes at current valuations.
By 2029, 65% of the investors surveyed by Knight Frank said they plan to significantly increase their investment exposure to the UK‘s SFH market.
Jack Hutchinson, a partner in the residential investment team at Knight Frank, said: “The single family housing sector is experiencing a period of significant growth, as evidenced by a fivefold surge in investment volumes in 2023, reaching £1.9bn, compared to the previous year. Despite an improving sales market forecasted, we fully expect this trend in increased investment volumes to continue into 2024 and beyond, thanks to a growing weight of capital attract to the sector by its strong fundamentals.
“In addition, developers and housebuilders are becoming more comfortable with the concept of incorporating single family housing into their wider sales and marketing strategies, which is helping to accelerate delivery of much needed housing.”
Oliver Knight, head of residential development research at Knight Frank, added: “Our research provides clear evidence of the opportunities for single family rental housing to play a key role in addressing the UK’s housing shortage, particularly for families. The geographic distribution of the sector is broadening as institutional investors increasingly eye suburban markets across regions like the East of England and West Midlands to deploy capital at scale.
The news came as data from CBRE suggested that investment in UK BTR fell by almost two thirds (63%) year-on-year from £1.2bn in the first quarter of 2023 to just £433.3m in the first quarter of 2024.
Andrew Saunderson, head of residential capital markets at CBRE, said: “Investment into the sector in Q1 2024 has been more subdued, particularly relative to the end of 2023 which was bolstered by Blackstone’s partnership deal with Vistry. That being said, the pipeline of investment is robust with an estimated £1.6bn currently under offer. Yields were stable this quarter for the first time since 2022, indicating that prices in the sector have stabilised. Looking forward, with the headline rate of inflation now standing at 3.4%, the chances of a pre-summer interest rate cut have increased, which would be well received by the market.”
