Contributors
The Single Family Housing (SFH) market has been prevalent in the US housing market for many years and, although relatively new terminology in the UK real estate market, has continued to gain momentum recently. In the US, SFH grew primarily from capital funds cashing in on the mass foreclosures during the global financial crisis. By contrast, in the UK, the SFH market has been driven by housing developers and specialist SFH investors.
For housebuilders and developers, sale to SFH investors is an attractive option as it offers cash certainty and predictability and decreases some of the sales risk for developers. It also works well alongside sales to the private market.
Womble Bond Dickinson (WBD) have been at the forefront of SFH activity throughout the country and we're seeing a continuing upward trend, with SFH developments being approved in over 100 local authorities across the UK. The aim for many SFH investors is to acquire high-quality stock (often including full apartment blocks, houses pepper-potted throughout an estate or a complete phase of a development) in locations where the demand is greatest. The figures suggest that SFH is now considered to be a key element of housing delivery in the UK and this is anticipated to continue to rise.
There is a growing pool of SFH investors and deals vary in how they are structured depending on the circumstances, for example, forward funding with separate land and development agreements, forward acquisitions, golden brick and turnkey transactions. The transactions we're seeing taking place in the market range in scale and structure. For example, at WBD we have advised on purchases of:
- 41 tenanted apartments across three blocks in Portsmouth for £8m
- A complete scheme of six zero-carbon houses in Kent for £2m
- 163 new-build homes across the UK from three major UK housebuilders with an aggregate value of over £31m
- 70 new-build units from a national housebuilder for £23m
- 74 units in Basildon for £22m
- 122 (private & affordable units) in the East Midlands for a value in excess of £30m.
We are predicting that 2023 will continue to see growth within the Single Family Housing market. The drivers for this include:
- Government policy – the withdrawal of Help To Buy last year saw an end to the support of c.53,000 homes per year between 2019 and 2022. This has the potential to reduce the number of private sales and increase the need for house-builders to interact more fully with SFH investors in order to maintain sales rates
- Economic turbulence – we continue to see significant increases in construction costs. SFH transaction models offer substantial advantages to developers in terms of both defraying of risk and the supplementing of cashflow by SFH investors
- Working from home culture – the pandemic has led to a permanent change in working practices, with more than a third of workers still working from home at least part of the time. As such, residential real estate is an increasingly attractive investment as property portfolios are re-evaluated by both property type (office to housing) and the location (urban to suburban) being a key consideration. The demand for new homes in the UK continues to exceed supply and competition for rental homes is fierce.
WBD have a broad build to rent (including SFH) client base and have supported our clients on SFH transactions with £110 million aggregate deal value and for delivery of 560+ new homes in 2022.
The Real Estate team at WBD offers specialist dedicated advice and support to Build To Rent developers and investors alike. We are proud to be able to work closely with so many key players in this sector, including:
- Grainger
- Hearthstone Investments
- Leaf Living
- Packaged Living
- Gatehouse Bank
- Citra
- Vistry Partnerships
- Platform.
For further information on SFH transaction and specialist sector insight, or if you have any questions regarding the advice and services that the WBD Real Estate team can provide - please do get in touch or visit the Real Estate page on our website.
