Two of Australia’s most popular cities - Melbourne and Sydney - are tipped for a Build to Rent (BTR) boom, according to Assael Architecture.
The British architects – backed by large institutions such as Legal & General, Grainger and Essential Living – says more than 30 major BTR projects, totalling 11,667 homes, have been confirmed in Australia over the last 12 months.
This is likely to increase, with predictions of a significant decline in build to sell apartment construction levels post-Covid, and the government more willing to incentivise BTR to sustain construction activity.
Both New South Wales and Victoria State Government have announced that they would provide measures to encourage both domestic and offshore investment in BTR, and Assael and JLL expect other state governments to follow suit.
Similar to Brits, Australians have historically placed a high value on owning their own home, but attitudes are changing. The Australian Bureau of Statistics found homeownership fell from 70% in 1998 to 66% in 2019 – the lowest level since 1994.
The BTR model is inspired by the US multifamily sector, which has been around for decades. The aim is to take the stress and hassle out of renting by offering longer tenancies, no agents fees, smaller deposits and apartments with utilities that are ready to go from day one.
The apartments are designed specifically for rent, with modern interiors and shared social spaces, such as residents’ lounges, fitness centres, yoga studios, games rooms and co-working areas, also included.
Sydney and Melbourne are likely to be at the epicentre of an Australian BTR boom, with each ranked the third and fourth least affordable cities to live in globally respectively.
Melbourne is the largest market, currently accounting for more than 50% of Australia’s BTR sector. This is partly because it is easier to acquire development sites than in pricier Sydney, which accounts for a quarter.
Loren Thanyakittikul, director at Assael, comments: “We know that investing time in researching and developing the product itself is key if you want to attract the core audience of future renters – whether discerning young professionals or increasingly time-poor families that require services and flexibility.”
“They are paying for the experience of living in a BTR community, so getting the quality right is important – particularly when it comes to communal spaces.”
A JLL report said that the UK was the best market for Australia to learn from as the fundamentals and the point at which they are starting from were similar and that Australia could “learn from the successes and previous inefficiencies” that the UK had experienced.
Paul Winstanley, head of BTR for Australia & New Zealand at JLL, agrees the time is ripe for a boom in BTR: “The challenges of 2020 have, if anything, fuelled international appetite for the sector across Australasia, largely driven by the resilience of the sector in the more mature global markets and the investment performance of operational assets.”
“All the signs indicate an exciting future for this emerging asset class in Australia and New Zealand that could be key to helping solve the housing crisis and provide investors with predictable long-term returns in the process.”
“Ministers in both Australia and New Zealand are increasingly prepared to consider what this emerging asset class could offer. They are particularly interested in its potential role in being a major contributor to the economic recovery following the Covid-19 global pandemic,” he concludes.