Overview
The UK economy entered 2026 with a strong base from the previous year. This performance continued in the first quarter of the year where GDP grew by 0.6% (q/q). The challenge is to hold on to this momentum in the face of several headwinds.
High energy prices, tighter financial conditions and uncertainty caused by political changes are likely to weigh on household finances and business investment decisions over the coming quarters. The weak outlook for the economy will be one of many challenges facing the Bank of England (BoE) in their interest rate policy deliberations in the months ahead.
Build to Rent and Single-Family Rental
Viability challenges alongside wider market uncertainty continued to impact on the UK Build to Rent (BTR) and Single-Family Rental (SFR) sectors in Q2 2026. Nonetheless, the fundamentals of this sector continue to underpin rents. Structurally, the market remains undersupplied, and this is unlikely to greatly change in the short term despite the latest data on housebuilding showing that new starts have continued to trend higher.
Student Housing
Despite challenging market conditions in Q2 2026, there were some initial signs pointing to an improvement in the UK Purpose-Built Student Accommodation (PBSA) sector. The latest data on leasing from StuRents showed that bookings for the 2026/27 academic cycle were in line with 2025/26 after lagging behind for most of the cycle. Naturally, this did vary across locations based on different supply and demand indicators. This same story was reflected in Unite plc’s Q2 trading update which noted that beds reserved were now marginally ahead of last year.
This is significant and is supported by the 30th June 2026 deadline data from UCAS that showed higher education establishments have made 1.3m offers to UK 18-year-olds, which is up from 1.2m last year.
Key Living sector activity
Investment activity across the BTR, SFR and Co-Living sectors hit £2.2bn in Q2 2026; the highest second quarter on record. While total investment was high, the number of deals was low, with a handful of transactions dominating volumes. The largest deal of the quarter, and one of the largest residential investment transactions ever completed in the UK market, was the sale of the L&Q PRS business, Metra Living, to Morgan Stanley and Ridgeback for £1.045m. This significant transaction, advised by BNP Paribas, demonstrates the depth of investor appetite for high-quality, income-producing residential assets.
Investment activity in the PBSA sector was low in Q2 2026, reflecting wider market sentiment against an uncertain backdrop. The Middle East conflict which increased uncertainty and led to concerns around another increase in construction and borrowing costs in the UK is likely to have delayed some transactions that may have completed before the quarter ended. Initial indicators suggest that there were a number of assets and portfolios brought to market in H1 2026 and point to considerably stronger levels of activity in Q3.
To read the full report, download the PDF.
If you would like to discuss these findings and what they could mean for your business or investment strategy, please get in touch with Rebecca Shafran, Head of Research, BNP Paribas Real Estate UK.
