Retirement living developments and purpose-built student accommodation (PBSA) together with Build to Rent (BTR) make up the UK’s stock of residential operational real estate. It's currently valued at £223 billion and we predict it will reach £880 billion once the sector reaches maturity.

Of these three sectors, it’s BTR that is set to grow most in value, rising from today’s £9.6 billion to a potential £543.6 billion, providing homes for more than 1.7 million households.

The current valuation is less than 1 per cent of the total value of privately rented housing in the UK, which is dominated by individual buy-to-let landlords. However, they are coming under pressure from recent changes to tax and regulations. We’ve calculated that landlords have redeemed 120,000 buy-to-let mortgages* since the introduction of a 3 per cent stamp duty surcharge for additional dwellings in April 2016. This comes at a time of rising demand for rental accommodation, particularly as Help to Buy is wound down and withdrawn completely in 2023.

Private renting is not a new concept in the UK, but large-scale, institutional investors have only begun to make their mark over the past few years. Despite similarities between PBSA and BTR, relatively few investors are active across both sectors, so there is huge opportunity for crossover. Goldman Sachs, Legal & General, M&G, Greystar and Aberdeen Standard are among the few to have invested in both.

Given the similar challenges in development and management we would expect to see more investors expanding their capabilities. Student housing operators have the potential to extend their brands into BTR and use a strong track record in a very established sector to secure favourable finance terms to maximise the opportunities.

Ten years ago BTR was a niche topic at investment conferences; now it is one of UK real estate’s most exciting asset classes.

*  Savills analysis of UK Finance data (April 2019)

Further information

Read more: The sky’s the limit