According to Savills latest UK Single Family Housing (SFH) Spotlight report, over £1bn has been invested into the single family housing market in the first three quarters of 2023, with investors looking to deploy a further £25bn into the sub-sector over the next five to ten years. By April, 2023 was already a record year, boosted by several significant deals including Project Domus, the sale of 918 homes in the North West from Goldman Sachs to PGIM.

A slowdown in housebuilder sales rates means more housebuilders are looking to weave SFH into their business models. Although UK housebuilders are becoming more active, with nearly 2,000 homes sold to institutional and other large scale investors, supply remains suppressed with 18.5% fewer properties available to rent in comparison to the 2017-2019 average.

According to Savills, a key factor driving lower supply in this market is the decrease in turnover for rental properties. This can be attributed to buy to let landlords leaving the housing market and is evidenced by the rise to 43% Q2 23, of landlords intending to sell property in the next year.

Piers de Winton, head of national residential investment & single family comments, “The fundamentals for investing in SFH remain strong as demand continues to outstrip supply. The shortage of houses across the country has seen that there is an increased demand for rental properties which will in turn push up the cost of rents. There is unlikely to be a shortage of demand given the aspiration of homeownership has become increasingly distant in a higher interest rate environment. Tenants demand for amenities such as proximity to local schools, green spaces and health services is also on the rise and SFH offers such benefits. SFH clearly has a role in alleviating the UK’s supply crisis, but will need to scale up considerably if it is to shift the dial.”

SFH developments have traditionally been limited to supply in the North West, but Savills notes a geographical shift to the Midlands and the South; 95% of investors are targeting locations in the South East with 85% targeting the Midlands and 80% targeting the South West. This shift can be attributed to the increased viability of rental growth and investors looking to diversify their portfolios. The South is also where housing is needed the greatest so we are seeing investors focussing their strategies on markets with greater need of supply.

In the drive towards net zero we are seeing more investment into sustainable developments and Savills research indicates that most SFH homes have been delivered with EPC ratings of ‘B’ or above. Looking ahead, all investors are targeting a minimum of EPC ‘B’ with 21% targeting a minimum of EPC ‘A’. This will help to improve the quality and energy efficiency of the Private Rented Sector, where 58% of existing dwellings are at EPC ‘D’ or below.