British rental houses are experiencing unprecedented investment levels from private equity firms and pension funds, with deployments reaching historic highs over the past two years amidst escalating demand and an ongoing housing affordability crisis.
Investment deals for single-family rental homes surpassed £1.5 billion by September’s end, tripling the total investments seen in either 2021 or 2022, according to Savills estate agency data. This follows last year’s record-breaking £1.9 billion in transactions.
Investors are increasingly gravitating towards single-family homes rather than large apartment blocks, seeking more stable, long-term tenants. The shift is particularly notable as houses prove easier to develop within Britain’s strict planning framework. Single-family homes now represent 54 per cent of new rental investments, a significant rise from 32 per cent in the previous year and merely 5 per cent in 2019.
Major institutional players, including Aviva, L&G, and Lloyds, have been joined by international heavyweights in the market. Blackstone, the global real estate investment leader, has acquired approximately 4,500 rental homes from Vistry since late 2023, with deals valued at £1.4 billion. The Canadian Pension Plan Investment Board has also entered the market, launching a £1 billion joint venture with Kennedy Wilson.
The surge in institutional investment comes as traditional housebuilders face challenges in the sales market. Investors initially benefited from discounts of 15 to 20 per cent on unsold properties following the 2022 mini-Budget’s impact on mortgage rates. These margins have since narrowed as developers reduced output, prompting investors to explore direct land acquisition and construction partnerships.
While critics view this trend as symptomatic of the housing crisis, preventing families from achieving homeownership, institutional investors argue their presence enhances rental stability and property standards. The UK’s institutional ownership of rental properties remains relatively low at 3 per cent, compared to 37 per cent in Germany and 41 per cent in the United States, suggesting potential for continued growth in this sector.
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