More than seven in 10 professional property investors plan to invest in build-to-rent developments despite a sharp fall in the number of new homes entering construction.
Handelsbanken’s fifth annual Property Investor Report found that 71% of respondents intended to invest in the sector, suggesting that purpose-built rental housing is becoming a more important part of professional residential property portfolios.
The research, based on a survey of 200 property investors, property management professionals and landlords, also found broad demand for established forms of rental housing.
Almost two-thirds of respondents, or 63%, planned to increase their exposure to houses during the next 12 months, while 59% intended to invest more in flats and 48% in houses in multiple occupation.
Among those planning to increase their overall property holdings, 58% cited strong rental demand as one of the reasons for expanding.
James Sproule, UK chief economist at Handelsbanken, said: “Professional investors are looking across a much broader range of rental housing than the traditional buy-to-let model alone.
“Build to Rent is particularly striking in our findings, but there is also significant appetite for houses, flats and HMOs. That suggests investors are thinking carefully about where rental demand is coming from and which types of property are best placed to meet it.
“Strong rental demand remains an important part of the investment case. For professional investors, the question is increasingly not simply whether they want exposure to residential property, but which type of rental housing offers the right opportunity in a particular market.
“That is likely to mean greater variety in how investors build their portfolios, with traditional rental property sitting alongside newer and more specialised forms of housing.”
RENTAL INVESTMENT BROADENS
Houses were the most widely favoured residential sector for increased exposure in the research, but investors also showed substantial interest in other types of rental accommodation.
Student housing attracted interest from 44% of respondents planning to increase their exposure during the next 12 months.
The findings indicate that professional investors are spreading their interests across houses, flats, shared accommodation, student housing and build-to-rent developments rather than relying on a single residential model.
Different assets may serve distinct local markets, with houses appealing in family and suburban areas while flats, houses in multiple occupation and purpose-built rental developments provide access to other tenant groups and locations.
Sproule said: “There is no single rental market. Demand can look very different depending on location, property type and the needs of tenants, and professional investors recognise that.
“The breadth of investment intentions in our research suggests investors are looking to build portfolios that can respond to those differences. Build to Rent is an important part of that story, but it sits alongside continued demand for more traditional residential property.
“For investors, understanding local demand and selecting the right type of property will remain critical. The opportunity may look very different from one town or city to another, which makes local market knowledge and a clear investment strategy increasingly important.
“No doubt next year’s Property Investor Report will reveal whether our investors are changing tack and if so, where the new opportunities could be.”