A decline in mortgage affordability is prompting developers to shift focus from build-to-sell residential to build-to-rent schemes, according to London-based alternative lender Maslow Capital. The firm’s latest deal in the sector – backing a Liverpool BTR scheme – is its 24th transaction in Northwest England – a region in which it sees a strong case for BTR due to a lack of supply and growing demand.
“The Northwest continues to be a region of England in which we allocate considerable capital, reflective of the strong rental growth prospects and the continued undersupply of residential accommodation,” James Henry, director of deal origination at Maslow, told Real Estate Capital Europe.
“We are seeing a trend of developers looking to pivot from build-to-sell to build-to-rent strategies, to meet the ever-increasing demand of the UK’s private rented sector, as mortgage affordability diminishes due to rising interest costs. We expect this trend to continue in the near-term,” he added.
This week, Maslow provided a £45 million (€51 million) loan to support Starlight Investments, a real estate investment and asset management firm, with its BTR scheme on the Princes Dock, Liverpool.
The scheme, part of the wider £5 billion Liverpool Waters regeneration project, will see the construction of 278 high-quality residential units, ranging from studios to three-bedroom apartments.
Maslow’s 24 loans in the region have backed schemes with an aggregate gross development value of £1.2 billion. The majority of deals have been based in Manchester – 19 deals backing schemes with £931 million GDV.
“Maslow has a longstanding presence in Manchester, a city distinguished by its low unemployment, growing student population, and a thriving start-up scene,” Matt Pigram, senior partner at Maslow said.
“It’s vibrant culture and high ratio of young adults aged 24-37 – the highest in the UK – is fuelling strong housing demand against the backdrop of continued supply constraints,” he added.
Maslow was founded in 2009, and last month, private credit firm Arrow Global completed the full purchase of the firm.
The overall UK BTR sector has strong fundamentals. The second quarter of the year saw £1.26 billion in investment, the highest Q2 total ever recorded, according to real estate consultant Savills.
The broker said with fewer homes to rent and record private sector wage growth, rents grew by 10.4 percent in the year up to May 2023.