According to recently released half-year results, PRS Reit (PRSR ), the build-to-rent housing specialist bucked the downturn in property prices in the six months to 31 December, growing is net tangible assets 3% to 123.6p per share versus 120.1p at the end of June.

The return was driven by a 6% uplift in estimated rental value, which offset the softening of prices that saw yields move out marginally to 4.5% from 4.47% at the start of the period.

Rents increased to £22.9m from £19.6m, marking strong growth of 17% on the first half of the year, pushing EPRA earnings up 13%.

Despite the strong growth in earnings, dividend cover for the 2p interim payout remained just out of reach at 0.9 times. The £419m portfolio is yet to achieve dividend cover since launch in 2017 but the interim results state the 4p full-year dividend is ‘fully covered on an annualised run-rate basis from March 2024’.

Steve Smith, non-executive chair of the real estate investment trust (Reit), said the portfolio of ‘high-quality, professionally managed, build-to-rent family homes has delivered another strong performance’.

‘Despite the continued pressure in the wider economy, I am pleased to report that occupancy levels, rent collection, affordability, and demand have all remained at very high levels, while arrears continue to stay low,’ he said.

This has resulted in increased cash generation and driven ‘predictable income flows’.

At the end of 2023, the portfolio stood at 5,264 completed homes bringing in £60.3m annual rent, and as of 8 March this year it had grown to 5,306 completed new homes, with another 270 homes underway, making it the largest private rented sector (PRS) portfolio in the UK.

In December, occupancy stook at 97% and total arrears remained low at £1m, although a slight increase on the £700,000 recorded in the first half but on an expanded portfolio. Smith said the arrears fell to £600,000 in January.

The performance of the assets reflects the undersupply in the rental property market, with Smith pointing to Rightmove’s rental trends tracker report for the fourth quarter of 2023 that showed rents outside of London had reached a record new average high.

‘The new peak of £1,280 per calendar month meant that the average advertised rent outside of London was 9.2% higher than the prior year,’ he said.

‘There are long-term drivers supporting the private rented housing sector, most fundamentally lack of supply and burgeoning demand, which is driven by many factors, including the affordability challenges of buying a home and population growth.’

He said forecasters were predicting further rental growth across the country this year, ‘although not at the same level as 2023’.

The portfolio, which is run by Sigma PRS manager Graham Barnet, expects to deliver the balance of its housing by early summer 2025, taking it to the estimated target of 5,600 homes with an estimated rental value of £64m.

Deutsche Numis analyst Andrew Rees said the shares yield 5.2% but ‘successfully capturing further attractive rental growth should increase earnings further and help the fund grow into its 4.5% valuation yield, which remains tighter than most sectors within commercial property’.

At 76.9p, the shares are essentially unchanged since the half-year results were released last month, trading at a 37% discount to the December NAV. They have dipped from 82.3p when we tipped them before Christmas.

‘In our view, this represents attractive value for access to a portfolio of unique scale which PRS Reit has amassed in the structurally supported single-family rental sector,’ said Rees.