Over £1bn (€1.1 bn) has been invested in the UK single family housing (SFH) market in the first three quarters of 2023, making it a record year, according to Savills latest UK SFH Spotlight report.
The positive trend is set to continue, with investors looking to deploy a further £25 bn over the next five to ten years.
Housebuilders are increasingly looking to SFH as a way to diversify their business models, as sales rates for new homes have slowed down.
Despite this, the supply of SFH rental properties remains low, with 18.5% fewer properties available to rent than in the 2017-2019 average.
Savills claims that the main reason for the low supply of rental properties in the UK is that buy-to-let landlords are selling up. This is supported by the fact that 43% more landlords said they planned to sell their properties in the Q2 2023 than in the same period a year earlier.
Piers de Winton, head of national residential investment & single family, commented: ‘The fundamentals for investing in SFH remain strong as demand continues to outstrip supply. The shortage of houses across the country has seen that there is an increased demand for rental properties which will in turn push up the cost of rents. There is unlikely to be a shortage of demand given the aspiration of homeownership has become increasingly distant in a higher interest rate environment. Tenants demand for amenities such as proximity to local schools, green spaces and health services is also on the rise and SFH offers such benefits.’
Traditionally, SFH developments have been concentrated in the North West of England. However, Savills notes that there is now a geographical shift towards the Midlands and the South, with 95% of investors targeting locations in the South East, 85% targeting the Midlands, and 80% targeting the South West.
This is due to a number of factors, including the potential for higher returns, the desire to diversify portfolios, and the high demand for housing in these regions.
Investors are putting more money into SFH developments that are built using sustainable methods and materials. This is because the UK government has set a target of achieving net zero carbon emissions by 2050, and the housing sector is a major contributor to greenhouse gas emissions.
According to Savills research, most SFH built recently in the UK have an EPC rating of 'B' or above, and all investors are now targeting a minimum EPC rating of 'B', with 21% aiming for a minimum rating of 'A'. This will help to improve the quality and energy efficiency of the private rented sector, where 58% of existing dwellings have an EPC rating of 'D' or below.
