The build-to-rent (BTR) sector increased 11% year-on-year at the end of Q3 2023, the latest research by The British Property Federation (BPF) shows.

The analysis, conducted in partnership with Savills, reveals that the total number of BTR homes completed or in the pipeline across the UK rose to 263,694 at the end of Q3 2033, from 237,554 for the corresponding period last year.

The volume of completed residential units rose 11% to 82,660, while property under construction and in planning increased by 12%, to 52,852, and 10%, to 102,042, respectively.

Ian Fletcher, policy director at the BPF, commented: “There is huge demand for purpose-designed homes for rent in London and major cities, but the sector is facing significant headwinds in terms of delivery.

“Uncertainty on inflation and where interest rates will peak is causing projects to stall, particularly in London, where developments are typically higher-density and more complex.

”However, there are nearly 60,000 homes with a detailed planning application in the sector, suggesting market activity could pick up quickly when conditions are right. But policymakers must recognise more support may be required to sustain the growth of the sector in the short-term.”

In regional cities, which account for 60% of all completed and pipeline BTR homes, activity remained relatively robust, with the number of homes under construction increasing 16% year-on-year to 40,231 and new starts in Q3 2023 totalling 3,339 homes.

Meanwhile, in London, new start totalled just 434 homes in Q3 and 266 in Q2. Homes under construction increased just 5% year-on-year in Q3.

The report also highlighted that 200 local authorities had granted permission to BTR developments or had project in the planning pipeline, up from 100 authorities five years ago, reflecting the fast growth in the sector nationwide.

According to the latest national planning pipeline, there are 57,214 homes with detailed planning permission, and 25,792 at detailed application stage.

Jacqui Daly, director of residential research and consultancy at Savills, commented: “With the Bank of England signalling that interest rates are now expected to stay higher for longer, demand for homes for sale is likely to remain weaker in the short to mid-term, further fuelling BTR demand.

“The sector is expanding beyond the major cities and evolving to offer a wider mix of single-family and multi-family products, which will see it become an even more important component of overall housing supply.”