Changes in the market and in the attitude of many renters have led to a big shift away from buy-to-let and more towards build-to-rent. But what is this new asset class all about? And what makes it stand out so much against buy-to-let?
Build-to-rent has hit the UK property market like a storm. A very, very good storm. The most fascinating aspect of this new asset class? The fact that it floats so well with both, investors and tenants.
Why investors like it so much
2016 has been an interesting year for investors with many big events. Whether it’s the additional stamp duty surcharge or the reduction of mortgage tax relief to the base rate, the Government has made it fairly obvious that it isn’t the biggest fan of the Private Rental Sector.
Buy-to-let, over the last 20 years, has more than proven what a great investment opportunity it really is. For many who call themselves property investors today, early buy-to-lets were a great and fairly affordable way into the world of property investment. In recent time, however, the property market has changed. New rules and regulations came into effect, demand is rising and supply is dropping. People’s living circumstances are changing at a fast pace. Buy-to-let, on the other hand, hasn’t changed. Or at least it hasn’t progressed, not enough.
June 23 and the country’s decision to leave the EU saw another big moment for property investors and a good amount of uncertainty coming their way. Ever since, the sentiment has changed, investors are now – more so than ever – looking for some kind of security for their investment. They are looking for a way to minimise the risk they’re taking as drastically as possible.
Buy-to-let, typically, is very much so a hands-on investment. It puts landlords at risk with void periods, unreliable tenants and sometime even the management of their property. Build-to-rent tries to take some of those factors out of the equation, by offering completely hands-off investment options, including tenant and property management.
Chances are, build-to-rent offers investors the best of the property world: high demand and even higher returns. The sector is forecast to grow excessively over the next couple of years (to a value of £50bn, if Knight Frank’s research is correct), what might be even more important for investors right now are the assured rental returns developers often offer and the high demand from tenants.
What tenants like it so much
Across the country, 20 million Brits are now living in rental accommodation. And this number will continue its growth. Once asked, 25% of renters said that they didn’t or hadn’t decided yet whether they ever wanted to own their home. This highlights once more how important adequate rental accommodation has actually become across all of the UK.
And because this new form of accommodation is more and more becoming long-term homes for the country’s population, it needs to tick certain boxes, like close proximity to public transport, quality furniture and a welcoming community behind it.
Build-to-rent, on average, offers all of this: high-quality, purpose-built accommodation in a community where tenants are surrounded by other renters with similar values. Build-to-rent is a home full of comfort and warmth for those who like to keep their lives flexible.
Here an overview of the differences between buy-to-let and build-to-rent.
The old buy-to-let system:
The new build-to-rent system: