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UK BTR investment hits £1.7bn in H1 2022

rents grow

According to the latest residential investment figures released today by global property consultancy Knight Frank, institutional investment into the UK Build to Rent (BTR) market totalled £1.7 billion in the first half of 2022.

While £762 million was committed in Q2 2022 compared to 1 billion in Q2 2021, the figure is still 31% above the long-term quarterly average. Overall H1 investment was 25% higher than the long-term average.

In the two years since the onset of Covid-19, the amount of investment committed to UK BTR has totalled just shy of £9 billion.

Nick Pleydell-Bouverie, Head of Residential Investment at Knight Frank said: “The numbers, which track both on and off market deals, point to the ongoing resilience and strong investment appeal of the sector – even in the face of continued build cost inflation and a more challenging economic backdrop. The incredibly robust income offered by BTR and strong rental growth across the sector are continuing to attract significant new capital to the market”.

Average deal size for Q2 was over £75 million, up from an average of £64 million per transaction in Q1. Pleydell-Bouverie noted: “Increasing lot sizes reflect an ongoing search for scale among new and existing entrants to the market.”

Key deals to have transacted in the second quarter include Grainger’s acquisition of Redcliffe Quarter in Bristol for £128 million, Get Living forward fund of Maker’s Yard in Birmingham for £136 million and Heimstaden’s £125 million forward sale in Edinburgh, the latter showing the continuing flow of international capital into the UK market.

Positive momentum is expected to continue this year, with a further £3.1 billion worth of deals likely to complete by the end of 2022. Knight Frank forecasts that yearly investment could hit £4.8 billion by the end of 2022.

Rental growth across the UK has continued to pick-up through 2022 with numerous indicators suggesting rental growth is at a multi-year high across the UK. According to Knight Frank, London has performed exceptionally well, with data pointing towards a 20%+ rental growth increase in prime markets.

Lizzie Breckner, an Associate in the Residential Research team at Knight Frank commented: “Strong rental performance across the UK is also being driven by an ever-deepening mismatch between supply and demand. As has been the case since early 2020, the RICS lettings survey points to a significant gap between new tenant enquiries and landlord instructions, an imbalance which is likely to keep upward pressure on rents in the short to medium term. At the same time, short-term inflationary pressures will, inevitably, act as a moderating force on larger rises as household finances are stretched.”