Single family housing (SFH) took a record-breaking share of investment at £1.9bn, accounting for 42% of the total figure, up from just 8% in 2022.

Savills notes that a key factor driving the surge in investment is the demand for rental homes.

Strong rental demand is linked to elevated mortgage rates, lower numbers of BTL properties and the end of the Help to Buy scheme.

However, the report warns that if the government is to reach its 300,000 homes per year target, 60,000 homes will need to be delivered for private rent each year.

The UK’s BTR stock surpassed a significant milestone of 100,000 completed homes, with a further 53,800 homes under construction.

The future pipeline currently stands at 112,800 homes, including those in the pre-application stage, bringing the total size of the sector to 267,000 homes.

•   The Finance Professional Show 2023: The Video
•   Wates secures £21m SHDF contract
•   Puma launches framework to provide 'impactful' developers with financial incentives

Over the next five years, London and the core cities are expected to provide 62% of completions, with London providing 35,000 homes and core cities delivering 33,000 new BTR homes.

Guy Whittaker, head of UK BTR research at Savills, commented: “Despite the macro-economic challenges — elevated cost of debt and continued material and labour-cost inflation — the sector has proven resilient.

“The BTR market has seen continued growth due to the housing supply and demand imbalance and high levels of rental growth.

“This has led to inflation-matching returns while yields have proven comparatively strong.”

“The fundamentals of investing in BTR remain sound with growing possibilities to leverage operational efficiencies from better data on portfolio performance and experience.

“This has put the sector in good stead for its next phase of growth and we project the sector will grow to reach 360,000 homes by 2033.”