21 May 2024

The Growth of Single Family Housing SFH in the UK

By Build Zone
consumer code for new homes

Although this shift is still at an early stage compared to the US—where large-scale institutional investors make up as much as 50% of the market—the UK’s rental landscape differs notably. Unlike the US, which primarily features multifamily homes managed by large operators, the UK’s private rental sector is more varied, predominantly single-family homes.

Single Family Housing (SFH) is exactly as it sounds: traditional housing units with one family renting each property. This differs from multi-family housing (MFH), which consists of apartment blocks where each unit accommodates a different family. While some SFH properties were originally constructed by housebuilders for owner-occupation, most SFH stock intended for institutional investment was specifically designed for rental purposes and fell within the Build-To-Rent (BTR) category.

Knight Frank says the UK’s SFH sector is experiencing rapid growth. Last year, investors poured a record £1.9 billion into acquiring or funding over 6,200 homes, significantly increasing from £388 million in 2022. This investment represented just over 40% of all Build to Rent (BTR) sector investments for the year. 

“Since 2018, the combined market size of operational and planned SFH units has nearly tripled, highlighting strong interest in this sector from developers, investors, and lenders.”

Savills predicts that single-family rental homes could reach 30,000 by 2027 and 70,000 by 2032. Consequently, the share of single-family homes in the UK Build to Rent market is expected to increase from 12% to 18% over the next decade. Although the overall investment in Build to Rent was £1.9 billion in the first half of 2023, down 21% from the previous year, investment in the single-family housing sector hit a record £460 million during the same period.

SFH serves as the suburban counterpart to BTR  apartments typically found in city centres. SFH primarily consists of traditional low-density family houses, offering many advantages associated with the broader BTR sector, including access to local amenities, communal spaces, and high-quality management and specifications.

So far, experiences reveal that SFH presents a greater potential for sustainability than traditional ‘for sale’ housing options. With investors planning to hold onto these assets long-term, the initial higher costs of integrating sustainable features—like photovoltaic panels, air source heat pumps, and electric vehicle charging stations—prove advantageous over time, as these houses tend to maintain their value better. Additionally, tenants are increasingly seeking out these eco-friendly features and may be willing to pay higher rents, which could balance lower energy expenses.

Amid uncertainties in the broader housing market and fluctuating mortgage rates, home purchasing has become unappealing or unattainable for many families. The quality of products in the private rental market varies significantly, leading some to prefer the reliability of renting from a specialist provider in a well-regulated and professionally managed Build to Rent home, which often better meets their needs.

References:

https://btrnews.co.uk/unlocking-the-full-potential-of-single-family-homes-with-technology/

https://www.savills.co.uk/research_articles/229130/333313-0

https://content.knightfrank.com/research/2633/documents/en/single-family-housing-report-2024-11095.pdf

 

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