Report

Build-to-rent in Australia: product feasibility and potential affordable housing contribution

Rental housing Housing development affordable housing Australia
Description

Key findings:

  • Coinciding with shifts in international investment markets, developments in Australia’s demographic profile and ‘residential consumer’ sentiment have recently combined to enhance the prospects for the emergence of a ‘mainstream market’ Build-to-Rent (BtR) sector.
  • The eight BtR projects publicly announced across Australia since 2017 (see p49) are set to offer premium rental product in prestige locations. While some industry experts envisage diversification of product location and market targeting as the sector expands over time, the financial feasibility of this scenario – or, indeed, any major BtR expansion – remains questionable under current conditions.
  • Antecedents to (BtR) developments in Australia include the corresponding US and UK sectors, of which Australian stakeholders are increasingly aware; Australian commercial property sectors, in which international investors are increasingly active; and forerunners such as Meriton’s rental business and purpose-built student accommodation (PBSA). PBSA has already generated over 90,000 newly-built units in Australia’s cities over the past 10-15 years.
  • Pipeline BtR projects may presage the emergence of a significant new component within Australia’s housing market. Under current Australian housing market conditions and policy settings, however, it remains difficult to envisage any rapid BtR take-off of the kind seen in the UK in recent years, or the establishment of a large and highlyembedded purpose-built-for-market-rental industry as in the USA.
  • Although Australian BtR project returns are impaired by both market conditions and policy settings, the industry tends to focus on the latter; highlighted in particular are land tax, GST and income tax as it affects overseas investors utilising Managed Investment Trust (MIT) vehicles.
  • Of these policy levers, evidence suggests that the single most significant impact on BtR returns would arise through re-balancing state/territory government land taxes to incentivise purpose-built professionallymanaged rental (as opposed to small-scale letting of existing properties).
Publication Details
Publication Year:
2019