Inside Build-To-Rent

Build-To-Rent is a relatively nascent residential living market — one that is quickly moving beyond an ‘emerging’ tag as it spreads out across Australia.

To understand the platform is to comprehend that where standard development equates to the construction of residences to be sold on completion, BTR developments are held, operated and rented by the developer.

While the premise is straightforward it does present with a number of issues — among them land tax discounts and premium land transfer tax, alongside funding and consumer uptake issues that have caused it to stutter in its national rollout.

Where the BTR industry in Australia continues to find its footing as a fresh consideration, BTR has been delivered and engaged in US markets for the best part of 40 years. Elsewhere, European markets such as London — which has expanded rapidly in alignment with federal government support since 2013 — has around 28,000 BTR properties completed, 16,000 under construction and 38,000 in planning, according to Statista research.

Local experts such as Craig Godber, CBRE’s Associate Director, Head of Residential and Build-To-Rent Research Australia indicates that local trepidation may be more a case of ‘seeing is believing’ amongst prospective consumers.

“I think that Australians have always partly accepted that there’s either owning a home or private renting, and it’ll take a few successful projects before a gradual uptake by renters is made,” said Godber.

Where BTR differs from traditional renting is in its want to retain renters across extended periods and through a number of additional services such as dedicated concierge services, mail rooms, meeting rooms and mixed-use office spaces.

Further, with one central controlling body overseeing each building operation, BTR offers flexible long-term tenancies, client-centric onsite management as well as appealing allowances in rewards to personalisation (painting and decorating) and pets.

The caveat is that more lifestyle services means increased outlay.

“There is the expectation that rents in BTR developments will be higher as opposed to the private market, and that may take some time for the consumer adjust to,” added Godber.

The premium services offered by BTR have dispelled early market fears about it being rebranded social housing.

“That perception existed early on, particularly as the developments are purpose built, but as people and investors continue to learn about it that stigma fades away.”

Godber is increasingly optimistic about the future, buoyed by with a number of projects by renowned operators Mirvac and Grocon and an expansive market being further fed by various overseas developers.

Sydney and Melbourne remain key with the Victorian capital outpacing the northern city’s pipeline by almost double, according to research from Knight Frank.

The number of BTR apartments in Melbourne’s planning currently sits at 6000, well ahead of Sydney’s 3300 and Brisbane’s 1600.

11.1% of development sites purchased in 2020 in Melbourne were earmarked for high-density, BTR projects while in Sydney that figure was 0.7%.

Despite the recent interest and development proposals in the pipeline uptake is still expected to be rather gradual when compared to the recent explosions in popularity of BTR in Europe.

Godber indicates that further government assistance and incentive, aligned to increased interest at an institutional investor level will help BTR continue to grow across Australia.

“Financial models, the combination of better taxation and the structuring of funds as institutional investment vehicles for build-to-rent are all essential to seeing the sector continue to grow.”

The Australian housing market is rapidly evolving, with new research revealing changing activity in regional and city areas.

The latest Regional Movers Index from the Commonwealth Bank showed the exodus from Australian cities to the regions is significantly exceeding pre-COVID movements, sitting at 19.8 percent higher. Even more revealing is data which showed relocations are 1.8 percent up on the average recorded during the height of the lockdowns. At the same time, people in regional areas are staying put.

The report is a partnership between the Commonwealth Bank and the Regional Australian Institute. RAI CEO Liz Ritchie said the regions have become the permanent home of choice for more Australians.

“The inter-regional migration index —which tracks regional to regional relocations — has fallen by 5.1 percent, suggesting that more regional residents are content to stay where they are. With the continuing strong jobs market across regional Australia, increasing city property prices and ongoing cost-of-living pressures, it’s no surprise the regions remain desirable,” Ms Ritchie said.

She said this had significant implications for planners, with a better understanding of infrastructure needs required by planners.

“Regional Australia is truly the nation’s new frontier. There are so many opportunities in our regional communities, but likewise we know there are challenges. Housing for example remains a key ongoing concern in many communities,” she said. “Regional Australia is growing and for that to continue we need adequate foundations. The time to lay them is now.”

Among the areas to benefit from this shift over the past quarter was the Hunter Valley city of Maitland in NSW which saw a 3.4 percent increase in net migration from the cities and other regional areas. Long seen as the less desirable locale in the wine growing region, Maitland has attracted more buyers looking for an affordable home with lifestyle benefits. CBA Executive General Manager Regional and Agribusiness Banking Paul Fowler said it was an area on the rise.

“There is significant development happening around Maitland, with extensive land releases for residential, industrial, commercial and retail fuelling strong employment and construction industry opportunities,” Mr Fowler said.

“Maitland is also set to benefit from major investments in the area including the nearby Newcastle Airport which will welcome international flights from 2025, further enhancing the region’s accessibility and economic profile.”

And while Melbourne property prices continue to experience a lull, it’s a different story outside the capital, with regions closer to main city centres performing particularly well.

“A move to regional Victoria remains on trend among those relocating, with the state’s regional areas experiencing the largest surge in popularity in the 12-month period to September 2024, with its share of net regional inflows rising from 21 percent to 30 percent,” Mt Fowler said. “Trending scenic LGAs like Queenscliffe on the coast, as well as Moira, Wangaratta and Strathbogie located further north, offer attractive and more affordable lifestyle opportunities for many Australians.

“With more corporate employers setting up or relocating to Geelong, Queenscliffe’s proximity to Greater Geelong and the Melbourne CBD means more regional Australians can enjoy diverse employment opportunities while living in a beautiful location with enhanced lifestyle opportunities.”

Inside Build-To-Rent

The Australian uptake of the ‘new’ development platform remains dwarfed by overseas expansion — but things are moving.

Buyers are moving there in their droves while existing residents know they’re on a good thing