Why build-to-rent is overtaking buy-to-let
08-30-2016
Changes in the property market, new regulations and a shift in the renter’s attitude have all led to the establishment of a hot new kid on the property block: build-to-rent.
Build-to-rent has – in less than 12 months – swept the property market off its feet. What makes this new asset class so fascinating is that build-to-rent, compared to buy-to-let, floats so well with investors and tenants alike.
What investors think
The additional stamp duty surcharge as well as reducing mortgage tax relief to the base rate have made one fact fairly obvious to most investors: the Government isn’t the biggest fan of the continuing growth of the Private Rental Sector.
Buy-to-let in its traditional form proved to be a great investment opportunity over the last 20 years, giving many landlords a way into the property market. After all these adjustments and new regulations in the industry, the environment has changed too. Buy-to-let, however, hasn’t changed. Or at least it hasn’t evolved.
Especially after June 23 and the country’s decision to wave good bye to the EU, British investors are now searching for security when investing their money. Or for a way to lower their overall risk.
Whilst buy-to-let is a hands-on investment which puts landlords at risk with void periods, unreliable tenants and property management, build-to-rent takes all those factors out of the equation, by being completely hands-off and managed through companies rather than investors themselves.
Build-to-rent – probably – offers investors the best of both worlds: high demand and even higher returns. While the sector is forecast to grow tremendously (to a worth of £50bn by 2020, according to Knight Frank), it also offers investors a lower risk level in the form of assured rental returns and high tenant demand.
What tenants think
In total, 20 million Britons are now living in rental accommodation. And this number continues to grow. One quarter of them says they don’t or they’re not sure yet whether they would ever want to own their own home, highlighting once more the importance of adequate rental accommodation.
This new accommodation that so many renters are hunting for needs to make sure it fulfills a certain standard. This way, once tenants have found what they’re looking for, they’re less likely to leave again.
Build-to-rent offers purpose-built accommodation in a community where tenants are surrounded by other renters with similar values. Build-to-rent offers a home for those who like to keep some flexibility in their lives.
The old buy-to-let system:
- Traditionally on a residential street, probably surrounded by owner-occupiers
- Difficult to create a community due to different situation and age of residents
- Problems hard to resolve with amateur landlords
- Often come unfurnished or with old, thrown-together furniture
- Responsibility for all utility bills and council tax lies with tenant
The new build-to-rent system:
- Properties that incorporate modern design
- Public space for socialising
- In-house management team that takes care of maintenance and bills
- Usually well located close to city centre or to public transport
- Facilities like gyms right at your doorstep without additional costs