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BTR underperforms all property as values rise just 0.4%

UK multifamily capital values underperformed the all property rate of 0.7%, rising by just 0.4% in the six months to September, according to the latest CBRE UK Multifamily Index.

The small increase was driven by rental value growth of 2.5%, said CBRE. Gross income increased by 4.2% in the six months to September, supported by a rise in occupancy rates.

The average occupancy rate for schemes in the index was 96% in September 2024.

Capitalisation rates for assets in the Multifamily Index moved out slightly in the six months to September, with an increase in the average capitalisation rate of three basis points. This compared with a rise of 20bps in the six months to March, suggesting that pricing pressures are starting to ease.

Jason Hardman, executive director, valuation and advisory services at CBRE, said: “The multifamily sector continues to perform well. Although capital growth was slightly below that for commercial real estate over the last six months, results for the last three years have shown that the multifamily sector is resilient in the face of challenging market conditions.

“Moreover, with capital waiting to be deployed into multifamily, and over £4bn of opportunities on the market, we expect investment volumes in the BTR market to grow in 2025, particularly as interest rates fall.”

Jennet Siebrits, CBRE’s head of UK research, added: “The private rental market is set to see further supply pressures from next year. The impending Renters’ Rights Bill and energy efficiency regulations both take steps to improve tenant experience but will provide additional cost to landlords that could force them to leave the market.

“However, this pressure is likely to be concentrated on small landlords, whereas modern build-to-rent stock is well positioned in relation to the upcoming regulatory requirements. Meanwhile, the recently introduced 2% stamp duty surcharge on second homes will act as further deterrent for small buy-to-let landlords looking to enter the market.

“This all points to constrained rental supply, which translates into strong fundamentals for the build-to-rent sector.”

CBRE’s UK Multifamily Index is based on 64 assets comprising more than 12,000 flats with a combined capital value of £4.2bn.

Photo by Andy Rain/EPA-EFE/Shutterstock

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