With new homes in short supply and households renting for longer, the UK’s private rental, student and later-living markets are attracting billions in investment, offering investors the prospect of stable, long-term returns, while also providing much needed homes into an undersupplied market.
The UK’s residential real-estate sector presents a prime opportunity for investors, with tenants now renting for longer, overseas investors are already capitalising on the shift, say real-estate experts JLL.
A high demand for housing in the UK coupled with lagging supply – successive governments having failed to meet targets of up to 370,000 new homes a year– has created a critical shortage of homes, estimated at around 6.5 million.
This, together with slowing wage growth, a more challenging employment market and the fact that the average home in England costs more than seven times the average annual earnings of a full-time employee – up from four times in 1997 – has meant fewer buyers and an increase in renters.
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The Renters’ Rights Act, alongside changes to taxation for smaller landlords, has pushed some landlords to sell up, reducing the number of rental homes at a point when demand continues to rise
The result is a clear opportunity for investors to grow the private-rental market (aka Living) in line with that in the US and Germany, where institutional ownership of rental homes and renting longer term is the norm.
‘The biggest growth market [in the UK] is the private rented sector,’ says Marcus Dixon, UK Head of Living and Residential Research at global real estate and investment management firm JLL. ‘The number of people living in private rented accommodation has more than doubled over the past 30 years.’
Total UK Living investment reached £6.5 billion in the first half of this year, up 10 per cent year-on-year, of which £3 billion was in the Build-to-Rent market (flats and houses), followed by Student (private student accommodation) at £2.4 billion, and Healthcare (care homes and retirement living) at £585 million (quieter after a bumper Q4 2025).
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Living was the second largest sector by share of total investment over the period, according to figures from JLL. Overseas investment accounts for almost half (46 per cent) of the investment in Living, the bulk of which is coming from the US where the concept of institutional investment into rented homes is more mature compared with the UK.
‘People in the UK are renting for far longer than they used to,’ says Dixon. ‘The average age of a first-time buyer in London is about 34, so realistically you could be renting for a decade or more before you buy, based on those averages. This means, given the choice, you’ll be less likely to compromise on the quality of your home – essentially looking for somewhere you can put down roots in a decent location that you’re happy to come home to every night.
‘That demand for good-quality accommodation is going to continue, and it seems that government is continuing to pivot towards favouring larger investors (the Build-to-Rent model) than smaller traditional Buy-to-Let investors.’
While Build-to-Rent developments conjure images of urban towers with ample amenities, Dixon says there is now a shift towards suburban single-family houses. These are often less expensive to run and simpler to manage – no concierge, gym or pool to staff and maintain – and can be launched to the market in phases as there’s no need to wait for the whole development to be complete before moving renters in.
What’s more, ‘there’s strong demand for good-quality rental housing’, says Dixon, as would-be buyers delay their first purchase to get on the property ladder and others prefer the flexibility of renting over buying. Last year, half of all investment into Build-to-Rent went towards single-family housing.
‘[If you’re] able to offer a good-quality rental solution for residents, you’re going to see strong demand,’ says Dixon. ‘You might not necessarily see the double-digit rental growth that there’s been over the past few years, but most investors are just looking for strong long-term single-digit returns, alongside low voids and strong demand – and the UK definitely offers that in terms of investment.’
The UK’s supply-scarce market offers reassurances to investors that the market won’t see huge peaks and troughs and so will be stable and secure enough to offer long-term returns, Dixon believes. ‘Healthcare is a prime example of this. We saw significant investment into care homes in the UK in the second half of last year. We’d been expecting about £4 billion worth of investment into care homes in 2025 and in the end it was about £12.5 billion.’
Much of this was driven by large US firms such as Welltower investing in companies and assets in the UK. An ageing UK population and dwindling housing stock and care options suitable for older households makes the UK an interesting proposition for investors in the Living sector.
Research from the Homeowners Alliance, published earlier this year, found that 1.2 million UK homeowners aged 55 and over had abandoned plans to move in the last two years, with a third of those surveyed citing a lack of suitable homes to move into.
‘It’s far more common, as a retiree, to move into later living within the US than it is in the UK, so [US investors] see real potential within the UK market’ says Dixon, who also pointed to reliable occupancy rates in the UK Healthcare sector.
Despite recording only modest economic growth of 0.1 per cent in May, many other pull factors continue to drive overseas capital into the UK, not least its transparent regulatory framework, independent judiciary, sporting and cultural draws from the West End to the Premier League, as well as the English language itself. And then there’s its excellent universities – two of which, Oxford and Cambridge, rank in the world’s top five universities, according to Times Higher Education, with Oxford placing top for the tenth year in a row.
With this comes a thriving market for international students and yet another opportunity to invest in Living real estate through private student accommodation, often sought after by international students, who pay far higher tuition fees. The number of non-EU undergraduates applying for UK universities was up 7 per cent over the past 12 months.
Dixon says that investors were ‘often looking at places where you’ve got established, internationally recognised universities’, with the UK ‘in a really strong position as one of the world leaders in terms of higher education’.
‘In times of uncertainty, international investors look at markets where there’s some familiarity – maybe somewhere they’ve worked, studied or sent their children to be educated, or those recognised as centres of excellence, including towns and cities where there’s a university that they know is in the top 100 rankings,’ says Dixon. ‘In uncertain times, we’re seeing more caution around global investment, which means that that familiarity with markets is increasingly important when deciding where and how much to invest.’
Founded in the US, JLL operates across 80 countries, including the UK, with some 113,000 employees globally.
