Navigating nuance in the complex BTR market

Knight Frank reports that more than £1.1 billion was invested in UK build to rent (BTR) in the first quarter of 2025, the seventh year running that Q1 investment has exceeded £1 billion. However, the make-up of that investment is changing.

Forward funding of new development accounted for almost three-quarters of Q1 deals, joint ventures rose to 17% and stabilised acquisitions made up 11%, as some early investors recycle capital. Investment was split evenly between single-family housing and multifamily, which Knight Frank sees as a deliberate move towards suburban rental markets.

With further base rate cuts expected during 2025, the firm anticipates more core and core-plus capital returning. Its NextGen Living investor survey found nearly 70% of respondents planning to increase exposure to those strategies. Institutions own just 2% of private rented homes, and Knight Frank estimates BTR could eventually house at least 30% of private renters, equivalent to almost 1.9 million homes, including more than one million single-family units and nearly 850,000 multifamily apartments. The reopened Private Rented Sector Guarantee Scheme, with nearly £2 billion available, could support over 13,000 new BTR homes, about 12% of those currently consented.

Challenges remain. BTR homes under construction are down 11% year on year due to viability, cost and regulatory pressures, and delivery is expected to fall in 2026, with only 28 of 271 sites under construction due to complete in 2027. Building Safety Act gateways and capacity limits at the Building Safety Regulator are lengthening timelines.

Demand, though, is strengthening. First-time buyer mortgages fell to a ten-year low in 2023, and 29 local authorities gained their first BTR schemes in the past year. Knight Frank concludes that investors who can manage the funding environment and rising tenant expectations will be well placed.

Source: Knight Frank Newcastle, original article (9 June 2025)