M&G and an unnamed Asian pension fund are planning to invest £1B in the UK build-to-rent sector over the next three years to capitalise on low levels of new homebuilding.

M&G said it and its partner each put £300M of equity into a joint venture, which will be supplemented with debt and used to build out a portfolio of 3,000 rental homes. M&G’s equity would be coming from its £130B With Profits Fund.

The JV will have a particular focus on London but will also develop in regional cities, including Manchester, Bristol, Birmingham and Leeds.

Because housing delivery rates in London are at all-time lows, whilst demand for rental homes continues to outpace supply, UK residential property provides an attractive entry point for long-term investment, M&G said.

In London, each year 50,000 more homes are needed than are being built, and only 2% of privately rented homes are purpose-built.

BTR starts are at decadelong lows, data from Savills and the British Property Federation showed. That lack of new supply is pushing up rents, which is, in turn, attracting international investors to the sector. The market is also getting a boost from a reduction in delays created by the Building Safety Regulator.

In other major BTR news this year, QuadReal bought out its BTR joint venture partner, RealStar, and AustralianSuper launched a £500M UK living platform.