The UK Rental Market is Americanizing

Institutional investors, including so-called US mega landlords, have increasingly been gaining dominance in the UK’s rental market.

Photo of homes in the UK
Photo by Huy Phan via Pexels

Sign up for smart news, insights, and analysis on the biggest financial stories of the day.

Why sell houses when you can rent to people who can’t afford to buy?

Berkeley Group, a UK-based housebuilding firm, announced on Wednesday that it’s going to add a string to its bow by entering the rental market. Historically Britain’s rental market has been dominated by small, independent landlords, but increasingly institutional investors, including so-called US mega landlords, have been gaining market share. 

Tough Numbers

British newspaper The I reported in February that build-to-rent investment in the UK hit a record high of £4.6 billion ($5.9 billion) in 2023. Of that investment, more than a third came from North American companies; the biggest purchase of that year came from a Blackstone-backed firm called Leaf Living, which bought 1,500 homes. Earlier this month, Blackstone bought 1,750 new homes to rent out.

Berkeley Group’s move into the rental market signals large home-grown corporations are taking notes from their American cousins, and adapting to an unusual housing market:

  • Berkeley Group CEO Rob Perrins told the Financial Times that the firm was responding to the fact that “rents have gone up so much and house prices haven’t moved in the same vein.” 
  • In February, the average monthly rent in the UK rose 9% from the same month the year before, the biggest increase since records began nine years ago. House prices are not rising at nearly the same pace — their annual growth rate sat at 1.3% in May — but they are still sitting at record highs.

We’ll Never Get There at This Rate: This week did see a breath of hope for the UK as inflation came down to to the government’s target 2% in May, but it’s not quite enough of a relief for the Bank of England to let up on interest rates just yet: The BBC reports the BoE is expected to hold interest rates steady at 5.25% to make sure things stay nice and even, with banks holding out hope for an August rate cut. Keep calm and carry on, chaps.