The rise of new entrants in the UK’s single family market
In recent years, the UK's single family housing market has emerged as a compelling proposition for institutional investors. What was once a relatively niche asset class is now firmly on the radar of a diverse range of players, eager to deploy significant capital into this increasingly mainstream subsector of the build to rent market.
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The scale of opportunity
The numbers are remarkable. Of the 6.2 million households renting privately in the UK, 3.1 million already live in suburban areas. Yet, institutional penetration remains fractional – just 0.2% of privately rented homes are operated by single family housing investors, rising to only 0.4% when including developments under construction.
Research from Knight Frank’s latest report on the market reveals its extraordinary potential. Based on current population and tenure distribution, we believe the wider private rented sector has the capacity to absorb more than 1 million single family homes, representing a tangible pathway to transforming the UK's rental landscape.
The last two years have been monumental for the single family housing sector. We saw a 24% year-on-year growth in deal volumes, with a record 31 deals completed nationwide. More than £1.8 billion was spent acquiring or funding single family housing – keeping pace with the record £1.9 billion invested in 2023.
Our survey of 60 of the largest UK living sector investors tells a compelling story – 71% plan to target single family housing over the coming five years, suggesting a significant jump from 41% currently invested. Notably, 29% of these anticipated investors are backed by capital from Europe, Asia Pacific, or the Middle East, signalling a truly global appetite.
Market dynamics and partnerships
One of the main drivers behind the sector's growth is the rise of strategic partnerships with housebuilders. Our survey of volume and SME housebuilders revealed that 60% have already sold units to multifamily or single-family housing investors. Developers like Persimmon are expecting institutional sales to contribute 10-15% of future volumes.
Landmark deals underscore this trend. Vistry Group has partnered with Blackstone-backed Leaf Living and Sage Homes in a landmark £819 million deal to acquire almost 3,000 new homes within the next few years, marking a significant step in Vistry's shift towards a partnerships-focused model.
New entrants in 2024, Kennedy Wilson and CPP invested more than £200 million across four deals to deliver around 900 units. Meanwhile, Invesco Real Estate forward funded their first UK single family housing deal for £40.6 million to deliver 99 homes with housebuilder Hopkins Homes, in Essex, Chelmsford.
Continued challenges within the wider private rented sector presents additional opportunities for institutional single family housing investors and underscores the positive momentum we’ve seen across the sector to date. In the fourth quarter of 2024, there were 26% fewer homes listed to rent compared to the 2017-2019 average.
The National Residential Landlord's Association reports that 46% of private landlords intend to sell properties within the next 12 months – up from 31% at the beginning of last year. This exodus is creating a vacuum that single family housing can fill.
Indeed, the sector is no longer confined to traditional markets. In 2024, 71% of total SFH spend was targeted at the South East and East of England – a dramatic shift from zero investment in these regions in 2021. SFH is now coming forward in 132 local authorities across the UK.
Looking forward
For institutional investors, single family housing offers a multifaceted opportunity. The sector provides access to deeper pools of tenant demand, with significantly lower operational costs compared to traditional multifamily investments. The demographic nature of tenants renting in this space – often with strong local connections to schools and work – creates more stable, long-term income streams with lower tenant turnover.
Perhaps most importantly, our analysis has identified over 1 million private plots on housing-led sites across England which are currently under construction or at some stage of planning. Assuming a sweet spot for investors of between 50-125 units per site, our analysis suggests that represents the potential for 488,000 SFH homes to be delivered. While not all will be suitable or available to investors, the volume of plots already in the planning pipeline highlights the huge potential for single family housing supply from existing sites.
While challenges around construction costs and interest rates persist, the long-term fundamentals of single family housing remain robust. As the market continues to mature, we can expect to see a continued influx of institutional capital.
Jack Hutchinson, Partner in the Residential Investments team at Knight Frank