Letting agents and landlords will need to keep up with the lifestyle being offered to tenants by new build-to-rent developments in order to stay competitive in the coming decade.
Build-to-rent looks set to dominate the private rented sector in the coming years. There’s no question that it’s become more difficult to be a private landlord in the past decade. Like letting agents, landlords have had to contend with more regulation, while also being hit by increased stamp duty and the abolition of mortgage-interest tax relief, making the private rented sector a less attractive investment option for private landlords.
Given that more than half of landlords are 55 or older, a third are retired, and 63% view their property as an investment in their pension, it’s not surprising that increasing numbers are exiting the private rented sector - with the number of landlords falling by more than 120,000 in less than three years.
Meanwhile, the government has moved from subsidising buy-tolet landlords - who don’t increase the overall property supply - to institutional investors. There are now 139,508 build-to-rent (BTR) homes in the UK, of which 29,416 are complete, 43,374 under construction (an increase of 40% on the previous year) and 66,718 in planning - an increase of 10% on the previous year. Investment in the coming years will be more focused on the regions, with 56% of development by volume expected to be outside London.
BTR homes are proving an attractive alternative for tenants, offering flexible, longer tenancies of up to five years, all-inclusive rent, amenities including gyms, bike storage and residents’ lounges, and many allowing pet ownership. These developments do attract a premium - an analysis by JLL found tenants in London BTR developments paid 11% more than the local average.
Letting agents and landlords will need to up their game to stay competitive with the services offered by these new developments. The “exponential rise” of BTR developments, says JLL, will mean more of the rental population “will experience living in a fully equipped PRC and begin to understand how much amenities are worth”.
“I think the market is heading towards concierge-type services for tenants, where they move in and everything is sorted for them - they won’t have to worry about anything," says Nicholas Edwards, Group Lettings Manager at Gibbs Gillespie. "Over the next five to ten years, you will start to see tenants expecting that, on the day they move in, the bed is made, there’s a towel in the bathroom and everything is ready to go.
“A lot of the build-to-rent developments are already heading towards that model - maybe not to the extent of milk in the fridge, but many of those schemes have really embraced the idea of being totally ready for tenants to move in and everything working the second you step through the door. I do think that part of the market will certainly be developing further in the next few years and any good agent now has a lot of additional strengths to their bow and will already be offering a lot of the services that tenants are looking for.”
