What is Build to Rent?
While still a relatively new concept in Australia, Build to Rent or BTR is an alternative residential asset class that is gaining traction, with growth estimated at a $10 billion pipeline. Purpose built rental apartments are changing how residential developments are designed, developed, owned, and experienced by a tenant.
With housing affordability issues, some Australians are being priced out of the market, there are also many looking at a more urban lifestyle that offers a vast range of amenities within their communities and higher energy (and cost) efficiencies to run homes. Build-to-rent is fast becoming an attractive option for investors with steady yields and a diversified income source.
But what exactly is Build to Rent and what impact is it likely to have on the Australian rental landscape?
What is Build to Rent?
Build-to-rent properties are typically large-scale residential high-rise blocks where all the apartments are built, owned and maintained by a single owner (developer) and are rented to tenants rather than offered for sale, usually on mid to long term leases.
Build to rent buildings come in many varieties, often incorporating ‘mixed use’ with retail and/or office space including co-workspaces as part of the development and public amenity such as green spaces.
From an asset class perspective, BTR is a residential product which is entrenched in commercial asset principals. The ownership structure often being held by either a fund or REIT, the capital flow which funds BTR developments, and how these developments are managed. While BTR at an operational level is relatively similar to standard property management principals, there are some stark differences particularly around metrics which are needed to be reported on during particular points in the cycle of the asset.
BTR in Australia is still in infancy compared to other regions globally. The US has a mature BTR economy starting over 30years ago known as multifamily in the US, it is the largest investment asset class with 31.4% of Americans living in multifamily housing. While the UK is about 10 years ahead of Australia and continuing to gain pace accounting for 20% of all new housing builds.
Who owns Build to Rent developments?
Big offshore players include funds and firms such as Greystar, APG, Ivanhoe Cambridge, GIC, UBS, Blackstone, Morgan Stanley, Oxford, Hines, Frasers and Sentinel, while in Australia Sentinel, Frasers, Urban Property Group, Mirvac, Cromwell and Meriton are all active in the BTR market.
In Australia, most BTR developments (around 65%) are concentrated in Melbourne, with both Sydney and the Brisbane market “gaining momentum”.
How does BTR differ from other residential rentals?
|Developer, Fund, REIT Owned & Operated||The conventional developer model is build-to-sell where an investor purchases an individual apartment or unit to own and then rents it out either via a property management agency or self-managed.|
|Single Title||BTR apartment complexes are held under a single title rather than strata and are professionally managed, typically with on-site management and operating teams.|
|Resident Experience||The focus is on the Resident being offered better facilities & amenities, flexible lease arrangements and mid to longer term tenancy even low or no bond requirements.|
|Community culture||The buildings typically include a number of amenities from pools and shared outdoor spaces, gyms, yoga studios, communal working spaces, community gardens and even cinemas & concierge.|
What does the future hold for Build to Rent in Australia?
Over a third of Australian households are renting, this is for a multitude of reasons from housing affordability to lifestyle preferences. The Build to Rent model is designed to attract and keep tenants, offering vast array of facilities, more secure and longer term tenancies and onsite maintenance making it an attractive offering and driving demand.
It is also a great long-term option for investors and even proven formidable against economic cycles. State governments including NSW and Victoria have made significant policy and funding commitments, including an NSW 50% land tax discount for new BTR developments, however current tax laws affecting GST and stamp duty do not cater for BTR investments.
To learn more about the impact Build to Rent on the Australian property industry, join us at MRI Ascend APAC as we bring together a panel of industry experts from property management, strata, social housing and the commercial sector to weigh in on the challenges and opportunities BTR brings as we ask them: Will Build-to-rent change apartment living in Australia and is this better for residents and the property industry?
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Build-to-rent will change apartment living in Australia – is this better for residents and the property industry?
With a growing build-to-rent sector and an estimated $10Billion pipeline, purpose built rental apartments will change how spaces are designed, developed, owned and how engagement with tenants is managed. In this panel hosted by MRI’s Josh Sym