Article
HOW “BUILD-TO-RENT” IS SHAKING UP THE RESIDENTIAL DEVELOPMENT LANDSCAPE
BY CALLUM HOFLER
Last week, Ready Media Group published an article exploring Pace Development Group’s latest offering , and how it coincided with the rise in popularity for the build-to-rent (BTR) sector. Now, new market research from Cushman & Wakefield is highlighting just how prominent BTR could become, even within the next five years. “It is unlikely that the current supply of Australian housing will absorb forecast demand, pushing rents higher. Population growth supporting tenant demand, higher rents increasing investor returns, and a significant amount of capital targeting Australian housing are all tailwinds for build-to-rent over the next decade.” - Sean Ellison, Cushman & Wakefield Research Manager, NSW What is Build-to-Rent? BTR is a class of real estate assets encompassing institutionally-owned residential buildings. Unlike the more traditional build-to-sell (BTS) model, where a developer might construct an apartment complex and then sell each individual unit, BTR developments are rented to residents subsequent to completion. All of the units are owned and managed by a sole property manager. As income is generated through rent, revenues flow throughout the life of the project, rather than being received in a single lump sum, all whilst the owner faces maintenance and staffing costs. With there being fewer tax incentives for BTR in the residential property market, developers have conventionally eschewed this approach in favour of the BTS model. But this is changing rapidly. Why is it becoming more popular? In Australia, residential property has traditionally not been an institutionally-owned asset class due to relatively low yields and a market and taxation structure that favours capital gains. However, with yields on other forms of commercial investment declining in recent years, BTR is starting to become a viable alternative. Beyond just providing ample return to an investor, BTR also addresses a major concern in Australia right now; the housing supply issue. With demand currently exceeding supply, BTR will hopefully provide low-to-medium income renters with a reserve of affordable tenancy options. It’s this which has motivated the Victorian government to offer land tax concessions for eligible BTR projects that are completed and operational between January 1st 2022
BUILD-TO-RENT IS SET TO TRANSFORM THE RESIDENTIAL
MARKET IN AUSTRALIA
14 –June / July 2022
Powered by FlippingBook