Build-to-rent housing specialist PRS Reit (PRSR ) has seen rental growth jump 7.5% as it continues to benefit from the ‘grossly insufficient’ supply of new homes.

The £462m portfolio of single-family houses is the largest of its kind in the UK and, according to a recent update, continued to expand in the fourth quarter, adding 70 new houses. The real estate investment trust (Reit) now owns a total of 5,080 as at the end of June.

Occupancy level in the three months to end of June, which is the Reit’s fourth quarter, was 97% and rent collection was 99%, while a further 59 homes were reserved at the quarter end for those applicants that had passed reference checks and paid deposits. Total arrears at the end of June were just £600,000.

However, affordability remains strong, at 25% of rent as a proportion of household income, which is lower than Home England’s guidance of less than 35%.

The affordability is still within target despite the strong like-for-like rental growth, which rose from 5.7% at the end of the third quarter. The estimated rental value of the homes at the end of June was £55m, a 15% increase on the same point last year.

Fund manager Graham Barnet, of Sigma PRS Management, said demand remains strong. ‘Homes are well-located and close to employment centres, good primary schools, local amenities and transport links, with these factors helping to drive demand,’ he said.

The closed-end fund also continues to benefit from market fundamentals, with Barnet pointing to ‘a rapidly expanding rental sector, population growth, changing household formation, and grossly insufficient new housing volumes’.

Last month PRS refinanced its £150m revolving credit facility, securing a £102m facility of fixed-rate debt for 15 years, and another £75m of floating rate debt for two years which includes an interest rate cap. This resulted in 82% of the company’s debt being covered by long-term facilities with an average term of 16 years and an average blended interest rate of 3.8%.

‘With rental demand strong and rising, and the build-to-rent sector still nascent, the board believes that the encouraging fundamentals should be reflected in future asset valuations,’ said Barnet, querying the 27% discount at which PRS shares trade below NAV.

Numis Securities investment company analyst Andrew Rees said: ‘Successfully capturing further attractive rental growth will be critical in helping the fund grow into its valuation yield – 4.3% at 31 December – which is currently lower than the marginal cost of debt from the new 15-year £102m facility and two-year £75m revolving credit facility.’

Following the update. the 4.9%-yielder declared a 1p dividend for the quarter.