The USA’s demand on the multifamily/ build to rent market remains high, despite being 10 years post recession and increased rental costs at an average of 3.3% per year. The country has also seen high levels of new supply, yet the vacancy rate has remained under 5% for the past five years.
Colleen Pentland Lally, Senior Director of Capital Markets at CBRE says there are three primary conditions which have enabled multi family to thrive in the USA and the UK will also see it succeed in Australia:
- “Large populations of city-dwelling millennials and Gen Zs are getting married, buying homes and having children much later in life than all prior generation. If they can’t afford to buy in the area they want to live, they would prefer to rent in those areas. (i.e. in the city, live-work-play environments, not the ‘burbs.)”
- “High costs of housing and major affordability issues are prevalent in almost every major city in the world. High-quality rental accommodation has provided an alternative for those more affluent young renters who are not quite yet ready to be homeowners. (This comment would focus more on the renter-buy-choice cohort looking to rent in urban high-rise accommodation, rather than the renter-by-necessity on the lower end of the rental spectrum.)”
- “Also consider, Australia has a very similar homeownership rate to the U.S. – around 65% I believe. The 35% of the population in rental housing are simply renting from mom-and-pop, rather than professional managers/operators. There is a large proportion of American renters also in mom-and-pop or single-family rental accommodation.”
Australia’s build to rent market is still in its infancy, with the tax regime being flagged as one of the biggest barriers preventing the full potential of BTR from being realised.
“As happened in the UK over the last several years, there could be some relief to these issues as the sector is better understood and pressure mounts from institutional investors (including the superannuation funds),” Colleen explains.
“Another headwind globally are impacts from rent control and affordability requirements. If governments, municipalities and other stakeholders hope to increase quality housing stock through private sector developers, there is a fine balance that must exist in order for that to work.”
Despite the barriers, Australia has made huge progress over the past two years, quickly evolving from an overseas case study to a billion dollar industry. Given rising housing costs and dropping availability, the BTR industry seems to have a sure future.
“The expansion of the multifamily sector means more housing is being built, and major Australian cities are in great need of new housing. Adding any units to the housing stock is a benefit to those communities, and it expands the choice of housing for all levels of society.”
Colleen has been with CBRE since 2007 and is responsible for both identifying and facilitating inbound and outbound global capital and exposing existing and potential cross-border investors to investment opportunities directly. She has a deep understanding of the multifamily capital markets in the US and emerging multifamily markets globally.
Hear from Colleen directly at the 3rd Driving Growth & Investment in Build to Rent conference, being held from 19 – 20 February in Sydney. Established as a platform for providing a holistic insight into the opportunities, barriers and potential growth of BTR, the event shares best practices on planning, design, delivery, operations and financing models.