The end of free movement: what SMEs need to know
Whilst BTR is a relatively new concept to the UK, it is already well established in many European countries (such as Germany, where renting your home is seen as the norm) and in the United States, where it is commonly known as ‘multifamily housing’.
BTR is driven by an increase in renting and with greater supply and choice, tenants will move away from ‘buy-to-let’ landlords (generally individual, amateur landlords with limited management experience), towards a more reliable, streamlined service offered by BTR through its professionally managed rental properties.
BTR developments are specifically focussed on the priorities and requirements of modern tenants.
Many of the major players in the BTR market are concentrating on the quality of the service on offer and in particular, the wide range of amenities available, which rival some 5-star hotels, such as on site restaurants, resident lounges, cinemas, rooftop swimming pools, health clubs, workzones (for the increasing number of individuals that need the option to work from home), chill-out spaces, and ultra-fast broadband.
Developments are being constructed which are tailored to tenants at all stages of life. Many are aimed at young professionals in cities, but there has also been a focus on families, with some BTR developments providing large communal spaces and play areas for children. Wellbeing is paramount (happy tenants = lower turnover = consistent rent) and those in the BTR sector are aware of this, organising social events or virtual exercise classes for their residents in a bid to encourage networking and try to combat loneliness.
Another benefit to tenants is that many BTR landlords do not charge agency fees or extra service charges, and many are willing to grant tenancies of three years or more (with the option of agreeing annual rent increases in advance), thereby giving tenants greater security.
The dream of home ownership is one that still resonates within the UK, but this is changing. Home ownership levels in England recently fell to a 30-year low and according to the Institute of Fiscal Studies, the chances of young adults on middle incomes owning a home in the UK have more than halved in the last 20 years. This is due to house prices growing by 152% over the last 20 years, versus growth in the average family income of just 22%.
It’s believed that one in three millennials will remain in private rented accommodation beyond their retirement, as these elevated house prices mean that rising numbers are forced to rent. According to a recent article the number of UK residents renting privately has doubled over the last 10 years, with 20% of households (rising to 30% in London) now in private rented accommodation.
BTR is unlikely to solve the housing crisis, but it may help to alleviate it, as it creates high quality housing stock for the rental market. The cost of renting such properties is still beyond the reach of many, but the good news for tenants is that BTR will lead to improved conditions. BTR offers a higher-quality of management than they may receive from an individual landlord, which in turn means that individual landlords will need to up their game.
Overall BTR does seem to have many advantages: increased housing supply; greater choice of housing tailored to the tenant’s needs; the repopulation of urban centres; and more reliable, professional management. However, it is not without its critics. According to a recent article in The Guardian, “these high-spec products only really seem to be an answer for affluent young professionals” as these new properties are on average, 11% more expensive that other nearby properties. However, if the property you rent enables you to live, work and work out under one roof, form new acquaintances and even lets you bring your pet along for the ride, then I’m sure there are many who think that the premium may well be a price worth paying.
Institutional investors are drawn to BTR as it provides a steady long-term income stream. The BTR sector has therefore attracted billions in investment and this is expected to increase substantially over the next few years. With the number of renters on the up, we’re bound to see more and more BTR developments appearing across the country.
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