Rapid expansion of single-family housing investments - according to a recent report
In the dynamic world of UK real estate, the Single Family Homes (SFH) sector within the Build to Rent (BTR) industry is experiencing a surge in capital commitment. This growth is driven by robust investor appetite, improved development activity, and positive market fundamentals such as affordability and stable financing conditions.
According to recent data, almost £870 million was invested into SFH in the first half of 2025, accounting for 45% of BTR deal volumes. This marks a significant increase from the previous year, where SFH accounted for just 38% of BTR investments. This growing confidence in SFH's long-term fundamentals is evident despite development challenges.
A key factor supporting this increased investment is investor optimism and development focus. Over half of SFH transactions in 2025 involved development projects, demonstrating confidence in future housing delivery through the BTR model.
Improved housing affordability is another significant factor. UK affordability metrics have reached a decade-best level, with a house price-to-earnings ratio at 5.75x. This eases barriers for renters and buyers, sustaining demand.
Favorable mortgage rates and lending conditions also contribute to the growth. The moderation of mortgage rates from 5.7% to around 4.3% for five-year fixed deals has improved financing conditions, supporting both development and investment.
The UK’s 2025 housing market reforms, including a new tax on properties over £500k and changes in capital gains tax, have encouraged a shift of institutional capital into suburban SFH and BTR assets. These are perceived as lower risk and provide stable income streams.
Despite overall UK property investment volumes being subdued in Q2 2025 due to economic uncertainty and high gilt yields, the living sector, including SFH, showed robust activity and doubled institutional purchases compared to Q1.
Investors are targeting suburban SFH markets, particularly outside London, leveraging regional price growth and affordability gaps for better returns and lower risk.
This trend of increased investment volumes is expected to continue into 2024 and beyond. Institutional investors plan to commit £17bn of capital to the SFH sector within the next five years. The remaining investment was targeted at multifamily apartment schemes and co-living.
The number of Single Family Rental (SFR) units in the UK is projected to almost triple from the current level of 26,575 homes. Developers and housebuilders are becoming more comfortable with incorporating SFH into their strategies.
The geographic distribution of the SFR sector is broadening, with institutional investors showing interest in suburban markets across regions like the East of England and West Midlands. The strong fundamentals of the SFH sector are attracting a growing weight of capital.
The SFR sector is experiencing growth in suburban markets, with institutional investors actively looking to invest at scale. Knight Frank's research highlights the opportunities for SFR housing in addressing the UK's housing shortage, particularly for families.
Jack Hutchinson, a partner in the residential investment team at Knight Frank, said that the SFH sector is experiencing significant growth. He expects this trend of increased investment volumes to continue into 2024 and beyond.
The SFR sector is attracting attention for its potential role in addressing the UK's housing shortage, particularly in suburban markets. Oliver Knight, Head of Residential Development Research at Knight Frank, stated that SFR can play a significant role in addressing the UK's housing shortage, particularly for families.
The launch of Knight Frank's 2024 Single Housing Family (SFH) report yesterday underscores the growing importance of this sector. The report shows a fivefold increase in investment into SFH, with £1.9bn invested last year compared to £388m in 2022. Over 6,200 rental homes were acquired or funded for development last year.
In conclusion, the UK's Single Family Homes sector within the Build to Rent industry is experiencing a significant boom. With robust investor appetite, improved development activity, and positive market fundamentals, this trend is expected to continue, playing a crucial role in addressing the UK's housing shortage, particularly for families in suburban areas.
- Institutional investors are planning to commit £17bn of capital to the Single Family Homes (SFH) sector within the next five years, with a focus on suburban markets.
- The Single Family Rental (SFR) sector in the UK is projected to almost triple from its current level, as developers and housebuilders are more comfortable incorporating SFH into their strategies.
- The SFR sector is attracting attention for its potential to address the UK's housing shortage, particularly in suburban areas, and institutional investors are showing interest in regions like the East of England and West Midlands.
