Housebuilders increase bulk deals despite rising sales rates

Charles Allen, Head of European Real Estate recently spoke to Green Street News about housebuilders increasing bulk deals within the institutionally funded private rental sector to de-risk pipelines and boost delivery. At Fiera, we see this as a positive approach, bringing forward housing delivery at scale, whilst creating stable, long-term investment opportunities.

Berkeley has flirted with build-to-rent (BTR) for years. It was one of the first to sell a portfolio of assets – 534 units across 13 locations, to M&G in 2013 – and has since done deals as and when it needs to.

So it was not too surprising when it finally decided to take BTR in-house in mid- 2024, even if investors were fairly unimpressed at the time.

Berkeley, as a London-focused builder, stands apart. But it is not the only listed builder to take a more tolerant view of private rented sector (PRS) and BTR deals, despite previous worries that they implied lower sales rates.

New analysis by Green Street News shows that bulk sales (a proxy for PRS) across the listed housebuilders increased by 48% over the past year, despite an improving private sales market.

Indicative numbers based off a mixture of reservations and sales shows that around 8,000 homes were sold through bulk deals across the five main listed housebuilders. Even excluding Vistry, the number of bulk sales rose by 32%.

Many commentators had expected bulk sales to dwindle as the private market picked up, especially as many commanded a substantial discount in price.

However, the crushing weight of finance seeking to enter the single-family residential (SFR) market – not to mention encouragement from government to increase development – has helped continue to boost output and, importantly, change perceptions.

Fresh take

Vistry was the first housebuilder to switch from a for sale to partnerships model, in a move that meant its share price jumped by 12.6%.

Since then – and despite its current financial difficulties – it has increased its annual output to more than 17,000 homes, making it the UK’s largest housebuilder by volume. Last year it sold 21% of those homes into the PRS.

Other housebuilders had been slower to follow suit – not least because bulk deals, which often come with discounts of 10% to 20%, often implied to shareholders they were unable to sell stock. However, a flurry of sales in the last downturn to the growing number of SFR operators allowed them to keep sites open and sales continuing.

But since then, perceptions have changed. Charles Allen, head of European real estate at Fiera Real Estate, said: “As single-family housing has matured as an asset class, we’ve seen the sources of delivery expand to unlock scale.

“This has included partnerships between housebuilders and institutional capital, with the most popular investment models being forward funding or forward commitments, either on a single or multi-site basis.”

Persimmon said in its latest results that it completed 1,456 bulk sales to investors in 2024 – nearly double the 780 it sold in 2023 – and it “continues to expect this segment of the market to contribute circa 10% to 15% of our future volume”.

It added: “With the institutional investor and BTR markets presenting a large and growing opportunity, we will continue to develop long-term relationships to secure sales that enhance capital returns and accelerate delivery.”

The demand from SFR has been a huge success story, with the creation of portfolios far easier than in the multi-family space. Savills estimates that it accounted for around 50% of the £5.1bn deployed into rental product last year, with half of that going to SFR.

Developers remain tight-lipped about the level of discount, but one analyst said they suspect this will have declined as the housing market has steadied and there has been more pressure to deploy capital among the SFR builders, who have also been able to make more punchy rental assumptions.

However, there has also been an acceptance of the usefulness of forward funding through PRS sales, which can be instrumental to unblocking larger schemes.

Charles Ferguson Davie, co-chief executive and chief investment officer at Moorfield Group, said: “We see partnerships with single-family investors as having enduring appeal for housebuilders as bulk sales allow them to de-risk sites and accelerate cashflow receipts.

“This can be both during the development stage or at the end of a sales phase, with the potential to improve returns on capital employed at all stages of the economic cycle.”

Not without caveats

However, not all housebuilders have been increasing bulk sales.

Taylor Wimpey’s proportion of bulk deals declined slightly this year – to around 10.6% of reservations, down from 12.9%. Although this was more down to an increase in private sales rates.
Barratt Redrow also said that its PRS sales had decreased since its merger, having almost halved between 2023 and 2024. However, the number of bulk deals in its reservations rates has increased, from 0.05 per outlet per week to 0.06 – which would imply they still make up around 9.8% of sales.

One commentator pointed out that for SFR developers – despite the ease of setting up a strategy – the model is not without risk. As the for-sale market improves, they will be forced to buy units at less of a discount, which could undermine models.

Despite this, the outlook remains promising. Vistry – away from its financial troubles – has shown the popularity of its low-risk, high-churn model, which has resonated with investors. This, combined with the renewed focus on affordable housing, could see more focus on bulk deals and partnerships.

Jack Hutchinson, partner in the BTR funding team at Knight Frank says that single-family housing has evolved over the years to become a fundamental part of housebuilders’ business strategies today.

“The sector is experiencing significant growth as an asset class, driven by compelling partnership opportunities between institutional investors and developers. Housebuilders are increasingly attracted to SFH because it offers genuine additionality to housing supply while providing de-risked delivery models through forward-funding arrangements.”

The likelihood is that bulk PRS deals, after many years in the doldrums, are here to stay.