"With substantial investment from both domestic and international investors, improved viability and strong rental growth, there is a significant opportunity for SFH to meet the growing demand for rental homes and contribute meaningfully to the Government’s ambitious housing targets"
- Piers de Winton - Savills
The Private Rented Sector makes up a fifth of households in England, according to the English Housing Survey. With less investment coming from UK Buy-to-let investors, particularly those reliant on mortgage debt, Single Family Housing will increasingly play a critical role in meeting rental home needs.
The UK Government is aiming to increase housebuilding to 300,000 homes a year. This equates to an annual requirement of 60,000 private rented homes, with 32,400 needed in suburban markets, where 54% of renters live. Savills' latest report found that SFH investors delivered 8,000 homes between 2019 and 2024, highlighting the need to significantly increase the rate of current delivery.
There are now 14,000 completed SFH homes, with a further 13,000 under construction. While the North West leads in delivery, new market entrants and geographic expansion mean SFH has now been brought forward in nearly 40% of Local Authorities in England and Wales.
This broadening of investor focus has been supported by the high levels of rental growth seen across the market, improving viability for housebuilders looking at SFH as an alternative exit option. Savills' analysis shows that 99% of Local Authorities saw rents grow faster than house prices in the three years to August 2024.
Rental growth has boosted markets with high demand and strong fundamentals, especially in the London commuter belt and locations such as Cambridge and Oxford, which have always been favoured by investors. High house prices relative to rents have previously meant that housebuilders have concentrated on selling into the private-for-sale market in such locations, at prices investors were unable to match.
However, with the improved viability of SFH due to rising rental values, more opportunities will come forward in markets with higher average sales values, where investors had previously struggled to break even. For example, Present Made is currently delivering its 373-home Eddington scheme on the edge of Cambridge, which is set to become the largest suburban rental scheme in the UK.
In 2024, £2.5 billion was invested into UK SFH, up from £2.0 billion in 2023, and new sources of capital were attracted to the market. In late 2024, Greykite purchased 11 sites in the Midlands, Yorkshire and the North East, from Persimmon Homes in a Joint Venture with Gatehouse Investment Management acting as asset manager. The partnership will target a range of housebuilders as it seeks to build a portfolio of 2,500 new homes, with £750 million of investment.
Cross-border pension capital has also shown an appetite for the sector. CPP Investments committed £500 million in a Joint Venture with Kennedy Wilson, while the National Pension Service of Korea (NPS) committed £300 million to seed a fund managed by Long Harbour, targeting a fund size of £1.6 billion.
Institutional investment is not only driving growth but also improving sustainability and design standards in SFH. Savills research shows that with the SFH market aiming to attract and retain tenants and avoid potential long-term retrofitting costs, sustainability features are being factored into the value of assets for investors. This means assets maintain their value better than assets that do not meet the same environmental standards.
Piers de Winton, Head of Single Family Investment at Savills, said, “Our research shows the critical role of the SFH sector in addressing the UK’s rental home shortfall. With substantial investment from both domestic and international investors, improved viability and strong rental growth, there is a significant opportunity for SFH to meet the growing demand for rental homes and contribute meaningfully to the Government’s ambitious housing targets.”
