The new Australian housing model investors can't get enough of

Build-to-rent (BTR) residential property has emerged as one of the key sectors of interest among institutional and private high-net-worth investors across the Asia-Pacific region, according to a new report from CBRE. In a survey of 500 investors, BTR recorded the strongest uptick in interest, particularly among investors targeting value-added strategies to achieve double-digit returns.

CBRE said the residential investment sector is set to attract more capital this year, with investors in Japan, Australia and mainland China the primary markets of focus for BTR development. BTR is different from regular apartment developments because the developer or investor–owner retains the entire building for long-term rental income. Knight Frank forecasts that by 2030, about 55,000 dedicated BTR apartments will have been completed in Australia.

Knight Frank says BTR is a proven model in overseas markets and Australia is now following suit.

“Investors are gravitating toward the residential sector because of the perception that it offers the ability to adjust rental income streams more quickly than other sectors in response to high inflation,” Knight Frank explained in a BTR report published in September 2023.

The report shows Melbourne has the most BTR apartments under construction, followed by Sydney. Most of them are one and two-bedroom apartments. The BTR sector is also growing in Canberra and Perth where land costs less and apartment rental yields are among the highest in the country at 5.1 percent and 6.1 percent, respectively, according to the latest CoreLogic data.

In BTR developments, there is typically a strong lifestyle emphasis to encourage renters to stay as long as possible. Developments often have proactive maintenance programs, concierges, add-on cleaning services for tenants, and amenities such as a gym, pool, yoga room, cinema, communal working spaces and outdoor barbecue and dining areas.

Some blocks allow tenants to switch apartments as their space needs change, many are pet-friendly and some even run social events for residents. However, such amenities and services can result in BTR properties being expensive to rent. Some developers and investors have been given subsidies to reserve a portion of BTR apartments as ‘affordable homes’ for local essential services workers.

Ray White chief economist Nerida Conisbee says Australian BTR is a long way behind the United States, where five percent of the country’s rental supply is owned by large companies. She says BTR is Australia’s “best bet” to raise rental supply amid today’s chronic shortage that has seen vacancy rates drop below 1% nationwide and rents skyrocket 40% over the past four years.

Nerida Conisbee says the BTR market is Australia’s ‘best bet’ for addressing the housing crisis.

Ms Conisbee says 84 percent of Australian rental homes are owned by private landlords, typically mum and dad investors, and nine percent are owned by governments. “With Australia currently in the midst of a rental crisis, the question of who provides rental properties needs to be considered,” Ms Conisbee said. “We have relied heavily on private landlords for almost all our rental properties but we may not be able to so readily in the future.” She points out that large companies can access and manage debt more easily than private landlords when interest rates are high.

The CBRE report shows that Asia-Pacific investors are also interested in other types of residential properties. These include student accommodation, particularly in high migration markets like Australia, and retirement communities in markets with ageing populations, such as Japan and Korea. Most Asia Pacific investors said they intended to increase or keep their real estate allocations the same this year, with more than 50 percent of Australian respondents intending to invest more.

Australia’s housing debate is often dominated by affordability and supply, but a new collaboration between Brickworks and acclaimed architecture firm Kennedy Nolan argues the conversation should also focus on the quality and longevity of the homes being built.

The project, titled Our Next Neighbourhood, examines how suburban housing could evolve in response to shrinking block sizes, rising energy costs, increasing density and changing family structures.

Rather than proposing luxury dream homes, the initiative focuses on what its creators describe as achievable suburban housing models that are more flexible, sustainable, and better suited to modern Australian life.

Brickworks commissioned Kennedy Nolan to investigate what suburban housing might look like if “design, long-term liveability and enduring materials were placed at the centre of the conversation”.

The result is two housing concepts, known as the Street Terrace and Canopy Terrace, which explore higher-density living while maintaining access to green space, natural light and privacy.

The designs incorporate adaptable floorplans that can evolve as family needs change, along with passive design principles intended to reduce reliance on mechanical heating and cooling.

Brett Ward, General Manager of Marketing at Brickworks, said the company wanted to broaden the discussion around housing beyond simply increasing supply.

“Much of the housing conversation today is understandably focused on supply and affordability, but there is an equally important discussion to be had about the quality and longevity of the homes we build,” he said.

“We wanted to explore how thoughtful design, combined with durable, resilient materials, could create homes that not only function well today, but continue to support Australian families and communities long into the future.”

Kennedy Nolan said the project was partly inspired by concerns that contemporary housing often struggles to adapt to changing household structures and environmental pressures.

The architects said innovation in suburban housing was “essential” to address changing family groupings, energy use, urban heat island effects and growing disconnection from place.

According to the design team, the concepts draw on lessons from some of Australia’s most influential housing projects while seeking to create neighbourhoods with stronger links to landscape, community and local identity.

Rachel Nolan, founder of Kennedy Nolan, said the practice saw an opportunity to reimagine suburban housing as something “more connected to our climate, our landscape, our communities and our Australian identity”.

The project comes as policymakers, developers and planners continue searching for ways to deliver more housing without sacrificing liveability, neighbourhood character or long-term sustainability.

The new Australian housing model investors can’t get enough of

Savvy high net worth players from Australia and Asia are getting on board as the residential landscape shifts

Brickworks has enlisted acclaimed architecture studio Kennedy Nolan to explore how homes could become more adaptable, energy-efficient and connected to community.