Property Council of Australia backs built-to-rent model to tackle housing crisis
Build-to-rent apartments could be the ‘silver bullet’ the Australian housing market needs, chief executive says
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Build-to-rent housing could deliver 150,000 new homes over a 10-year period, a new study released by the Property Council of Australia has revealed.
The report, commissioned by the Property Council and conducted by Ernst & Young over a five-month period to April 4 this year, showed that built-to-rent housing in Australia is now worth $16.8 billion but had the potential to become a $290 billion sector with the creation of 350,000 new apartments.
However, the report said a ‘viable’ market in Australia would likely require capital investment from foreign investors.
“The Government is to be commended for taking an interest in the Build to Rent sector, through the National Housing Accord and beyond,” the report said. “However, despite the numerous pilot projects, a viable market that is liquid enough to meet demand is still not realistic in Australia.
“In order to create a viable market, capital investment is required which is likely originated from overseas foreign investors in the short to medium-term. As such, Australia needs to remove barriers to entry to allow the flow of foreign capital and the creation of a liquid and viable investment proposition.”
Among the report’s recommendations are offering incentives to local and international investors through tax breaks, allowing a 15 percent managed investment trust withholding tax rate for foreign investors and addressing the regulatory barriers for domestic Superfund investors.
Property Council of Australia chief executive Mike Zorbas said the build-to-rent was a key tool to addressing Australia’s housing crisis in the coming years.
“With a 79,300-home deficit to 2033, Australia needs better planning, more land supply, proper housing targets and a national strategy on build-to-rent and purpose-built student accommodation,” Mr Zorbas said.
“The potential to create 150,000 homes over the next 10 years with just one asset class shows build-to-rent is about as close to a housing policy silver bullet as they come.
He said Australia faces a worsening housing affordability crisis with State Governments missing their housing targets and planning systems failing to keep up. Supporting a build-to-rent model would also ease housing affordability pressures, Mr Zorba said.
“More supply means downward pressure on the cost of renting and buying, and people who live in build-to-rent housing will enjoy the benefits of professionally managed properties, good locations, superior amenities and long-term security of tenure,” he said.
A relatively new model of housing in Australia, the NSW Department of Planning describes built to rent as “large-scale, purpose-built rental housing that is held in single ownership and professionally managed”. It’s a popular, long established model of housing in Europe where it made up one fifth of commercial housing in 2020, according to Canstar.
The Ernst & Young report said the Australian model should target Millennials and Generation Z, with a focus on young single and couple households.
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AI-powered travel agents are challenging online booking platforms, but Airbnb’s exclusive listings and direct customer relationships could give it an edge. Its next challenge: turning repeat guests into loyal customers through stronger rewards and innovation.
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AI agents like Muse can already find you the cheapest hotel room in Paris. But they can’t locate a cheaper version of that Catskills cabin you’ve been eyeing, because it might only be available on Airbnb ABNB -1.43%decrease.
Investors should pay attention to that distinction. When Meta Platforms META 3.38%increase launched its Muse agent last month, travel stocks including Booking Holdings BKNG -1.19%decrease, Expedia and Airbnb all fell sharply.
Airbnb, though, has a real chance to emerge as a winner from the upheaval. The catch: Its stock already reflects above-industry growth. To justify its valuation, Airbnb will need to turn repeat customers into loyal ones.
Online travel companies make much of their money by simplifying search and collecting fees on bookings. AI agents threaten that model.
But not all travel marketplaces are equally exposed. Booking and Expedia largely sell hotel rooms that travelers can also book directly or through competing sites. If an agent can find the same room elsewhere, it has little reason to favor either Booking or Expedia.
Booking and Expedia also sell sponsored listings that steer travelers toward particular properties. Wells Fargo estimates those will account for about 8% of Expedia’s revenue and a much higher percentage of profit next year.
Airbnb has more ways to adapt. More than half its listings are available only on its platform, and more than 90% of its traffic comes directly to its app or website.
The customer relationship doesn’t end after booking, either. Bernstein analyst Richard Clarke notes that 90% of Airbnb guests go on to message their hosts about arrival times, keys or local taxes, giving Airbnb a connection to both sides of the transaction.
How the companies have responded to the possible agentic future is telling.
Expedia quickly signed on as a Muse partner. Airbnb hasn’t, and Chief Executive Brian Chesky says AI chatbots have so far been a boon, sending customers to Airbnb’s website.
Chatbots might work for buying paper towels, he quipped at a Skift conference last month, but people enjoy planning trips. He argued that browsing dozens of homes isn’t something a text-based chatbot is well suited for.
Still, the AI jitters arrived just as Airbnb was persuading investors it deserved its pricey multiple. For years after its 2020 initial public offering, the stock—which trades around 25 to 30 times forward earnings—went nowhere. Investors saw a mature operator trading at a growth premium.
This year, Airbnb growth seems to be accelerating. The stock jumped in August after the company raised its full-year revenue-growth guidance with its second-quarter results. Wells Fargo analyst Ken Gawrelski credits a run of product improvements under a revamped leadership team.
Among the changes: letting guests reserve now and pay later, adding hotels, and a redesigned home page and app. Investors were also betting on what comes next, including thousands more hotels, car rentals and, eventually, advertising.
The irony is that some of those growth drivers push Airbnb closer to the kind of business Booking and Expedia run—the kind of business AI agents could threaten. Even if AI agents capture a large share of travel planning and booking, Airbnb would capture the demand. But it and others would slowly lose control over how customers find and choose properties.
That would undermine the advertising opportunity investors are counting on. The bigger point for Airbnb and other marketplaces is that losing control of customer acquisition could mean surrendering some of their pricing power and margins.
To bulletproof itself, Airbnb might look to another e-commerce giant that has so far kept AI agents at arm’s length: Amazon.
Like Amazon, Airbnb has a loyal customer base and hard-to-match supply. But it has nothing like Prime membership to make customers think twice before taking their business elsewhere.
That is where loyalty comes in. Business travelers stick with Hilton or Marriott because enough nights earn them perks. Leisure travelers rarely accumulate stays with one chain. Airbnb has millions of listings and plenty of repeat customers, but no broad rewards program. It has begun experimenting with credits on hotel stays, but it should make loyalty a priority, not just a promotion.
Airbnb also plans to launch its own AI agent next year. But travelers using an agent might still want it to search Airbnb, Vrbo, Booking and hotel websites alike, rather than limit itself to one company’s inventory.
Eventually, Airbnb might have to strike deals with agent makers, using its unique homes as leverage to negotiate favorable terms, says Gawrelski. Such deals, along with rewards for loyal guests, could over the long term eat into the company’s roughly 13% take rate, he adds. But if they bring in enough additional bookings, the trade-off could be worthwhile.
History offers a reason not to panic. The shift from desktop to mobile unsettled investors in Alphabet and Amazon, but both emerged as major beneficiaries. Companies with valuable assets can come out of a platform shift stronger, if they adapt quickly enough.
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