Build-to-rent properties in the US have gained ground in investment portfolios this year. Driven by increasing demand for larger homes in suburbia, the sector has experienced strong growth in 2020. Analysts point to continued interest in the sector next year as the huge housing shortage drives the market.
More build-to-rent properties
According to the National Rental Home Council (NRHC), 2020 has seen a sharp increase in the number of new build-to-rent properties. It estimates that construction has started on around 55,000 to 60,000 single-family homes this year.
This represents a significant increase on 2019 when around 40,000 homes were strated. The rise of over 37% comes on the back of strong demand for families looking for more space. Rentals are often the only option for would-be homebuyers, forced out of the purchase market by rising prices and lack of supply.
Record occupancy rates
Occupancy statistics reflect the strong demand for rental homes. In Q2 this year (latest figures available), the occupancy rate for single-family homes stood at 94.7%. This figure represents a 1% increase in a year. It is also the highest percentage for 30 years.
Strong demand and high occupancy are the engines behind the strong growth in build-to-rent properties in the US this year. Analysts expect similar increases in 2021.
“You could probably double the number rental houses under construction again within a couple of years, said David Howard, executive director for NRHC.
Shift to the suburbs
As well as the search for larger homes, families are moving away from city centres to the suburbs. Areas with easy access to nature as well as amenities are in particular demand.
“The growing demand in lower density markets stems from the fact that housing is less expensive compared to urban areas,” said Chuck Fowke, Chairman of the National Association of Home Builders (NAHB). He also pointed out that in the suburbs, “buyers can afford larger homes to accommodate home offices and other specialty rooms which are in higher demand since the pandemic.”
Builders’ confidence still high
The NAHB reported continued builder confidence in December. The monthly index stood at 86, the second highest reading on record. It fell by 4 points on November whose reading was the highest ever.
“Housing remains a bright spot for a recovering economy,” said Robert Dietz, Chief Economist at NAHB. But he also underlined the challenges facing the new-build industry. They include the shortage of available building land.
New-build prices rise
Meanwhile, median prices for new-build single-family homes continued to rise across the country. According to NAHB figures, the median price in October was US$330,600, up 2.5% in the year.
Inventory levels, however, continued to fall and in October, the supply of new single-family homes in the US was just 3.3 months. Industry experts calculate that there is a shortage of between 1 and 2 million across the country.
Build-to-rent opportunities
This scenario of rising demand and shrinking supply has caught the attention of investors. Build-to-rent properties in the US now feature on many portfolios.
Several REITs include them and non-property investors are also interested. In May this year, JP Morgan Asset Management went into partnership with the REIT American Homes 4 Rent to build 2,500 new rental homes.
Join the trend
At BRIC Group, we always advocate a solid exit strategy for any property investment. The high demand for single-family home rentals makes a strong case for investing in build-to-rent properties in the US.
We offer investors the chance to buy plots of land in Southwest Florida with the option of a build upgrade. Investment starts at just S$26,500 for prime plots with all infrastructure in place in a sought-after residential area. Find out more about build-to-rent in Florida.
(Source: NRHC, NAHB)
