Canadian investment giant CPP Investments looks at every real estate market and asset class around the globe, analyses whether they have structural tailwinds and then looks at which have the best balance of risk and return.
It can invest anywhere in the world — and it has chosen UK single-family rental housing as one of its top picks.
“The UK single-family rental housing has come on top of that list for a number of reasons, but really the most fundamental is the supply-demand dynamics in the sector,” CPP Investments Director of Real Estate Europe Ira Panova told delegates at Bisnow’s UK Single-Family Housing Summit 2025.
The company is not the only one seeing potential. The capacity for rental growth, the ability to buy in bulk and attractive yields when forward-funding new developments are seeing global investors putting an increasing amount of capital into the UK single-family housing market.
Bisnow/Mike Phillips
CPP Investments’ Ira Panova, Kennedy Wilson’s Mike Pegler and Goodwin Procter’s David Evans
While it is a nascent sector in UK real estate, prospects are looking brighter than in many parts of the more established build-to-rent apartment market, and it will continue to grow, panellists said at the event, held at Glaziers Hall.
Just over £2.4B was invested in UK SFH last year, JLL data shows. That’s about the same as the BTR sector, but starting from a much lower base.
CPP has teamed up with private equity firm Kennedy Wilson to invest an initial £1B in the sector. That will see it build up a portfolio of about 4,000 homes. If the strategy performs well, the duo could invest more, Panova said.
Panova pointed to a 40% drop in rented residential listings since the start of the pandemic as private residential landlords leave the market as one reason the sector looks good. In addition, the UK has an overall shortage of housing.
“Looking beyond the statistics, the other important thing to note is the quality of the product, and that’s what is not covered by statistics,” Panova said. “We can actually deliver a high-quality product with consistent service for demand that already exists.”
About 50% of renters in the UK already live in single-family homes, she added, lessening the need to create a market that didn’t exist before.
Fellow Canadian company Oxford Properties teamed up in 2021 with fund manager PineBridge Benson Elliot to buy Sigma Capital Group, the specialist SFH developer and manager, which the duo own on a 50-50 basis. After providing capital to build out Sigma’s pipeline, the JV now manages about 4,200 homes.
“We’ve always been attracted to the fact that you can develop to a 5.5% to 6% yield on cost,” Oxford Director of Residential, Europe Nick Sissling said. “You’re starting off at a much more sensible base. Twenty to 25% of rents as a percentage of gross income suggests there’s room for growth. And if you get the operating model right, the operational intensity of running single-family homes is a lot easier.”
In this real estate and economic environment, SFH is looking more attractive than BTR, Sissling said.
“One thing that hasn’t surprised me in the past year is the success the sector’s had in attracting new capital compared to multifamily,” he said.
“There are clearly a bunch of headwinds impacting city-centre multifamily. It’s really difficult to develop new product. The rents have been very high for very long. To make the numbers stack, you need to believe in high headline rents, future growth and incredibly tight [operating expenses].”
Bisnow/Mike Phillips
Oxford Properties’ Nick Sissling, Long Harbour’s Jack Spearman, JLL’s Jonathan Smith, DoorFeed’s James Kirimy, Nuveen’s Limor Shklaz, PGIM’s Oscar Kingsbury and Knights plc’s Jonathon Hogg
Meanwhile, land prices haven’t moved, development costs are up, and the forward-funding market, where funding yield spreads were tight two or three years ago, is now nonexistent, he added.
Sissling said Oxford was looking at average internal rates of return in the mid-teens from the homes it developed.
When forward-funding a deal, there is a spread of about 150 basis points between the cost of finance and the stabilised yield once the homes are rented out. With that in mind, those that run their portfolios efficiently and don’t have huge operational expenditures only need rents to grow in line with wage inflation to hit those return levels, panellists said.
Although investing in the sector would be easier if interest rates were lower, elevated rates do have some benefits for SFH, Kennedy Wilson Europe President Mike Pegler said.
“It’s a double-edged sword,” he said. “The birth of this sector has almost come from the fact that interest rates are elevated right now, and that’s put a bit of a hold on the for-sale market. That has meant housebuilders have wanted to transact in bulk.”
If rates remain higher for longer, those bulk sales are likely to continue to come through, Pegler said. And while that is the case, it is up to investors to forge relationships so that when rates drop and the home sale market picks up, those builders still want to sell in bulk.
The JV with CPP is forward-funding developments by housebuilders rather than settling up its own development arm.
How housebuilders are accepting payment on schemes they build is helping returns, attendees heard.
“I think it’s also interesting to see that in terms of housebuilders’ appetite and willingness to work with institutional capital, they are willing to entertain deferred pay on the back end of delivery,” Nuveen European Housing and Alternatives Director Limor Shklaz said. “So in some instances, you’re seeing milestone payments as late as two years post-practical completion, which, of course, helps to drive the IRR.”
