Build to Rent or Multifamily Housing is an asset class that has long enjoyed success in the US and more recently the UK. While its name is obscure, overseas markets provide a clear pathway for success. As State Governments in Australia tentatively dip their policy toes into the water, the global property industry is poised to invest. The key to a successful BTR market in Australia will be the right levers.
As key cities such as Melbourne and Sydney grapple with population growth and housing shortages, the need to provide a range of housing options has never been greater. Expectations about where people live, whether they rent or buy, and the types of housing stocks required are changing from generation to generation. Younger workers are rejecting long commutes and detached houses for a dwelling that is close to work and near the places, services and people important to them.
At the same time, global and local property investors, wary of economic instability, search for stable, long term investments. How to provide more housing choice and provide sound investment opportunities is a challenge that many global cities have experienced. In the US and more recently, the UK, one of the ways to meet this challenge has been through Build to Rent (BTR) or Multifamily housing.
BTR means a developer (with backing from an institution such as a superannuation fund) can operate with a long-term view. The properties are rented out at a more affordable rate, but they also provide a long-term income stream to thousands of people who have superannuation. This is a major shift from the traditional Australian rental market, which is dominated by “mum and dad” investors and is usually limited to one or two properties.
The Property Council has been working with state and federal governments to create a framework for BTR to be established in Australia. The benefits are many; not only would a fully fledged BTR sector generate economic activity and jobs, but also inject significant housing supply at a time where supply is short in our key cities. It also introduces a level of amenity not always experienced by renters who rely on small landlords to maintain properties and respond in a timely way to repairs.
The major hurdle to a successful BTR sector in Australia is creating the right taxation and planning frameworks to facilitate timely construction and to ensure a viable rate of return on investment. In most respects, the changes required are simply streamlining inefficient and archaic processes and costs. With BTR being new and unknown – some extra impetus from government is highly desirable;
Australians can sometimes be reticent to embrace change. The New South Wales, Victorian and Queensland governments have begun facilitating BTR. Each has taken a different approach, and none provide the full investment settings that have made the US
and UK markets flourish.
Conservative estimates suggest a BTR sector in Australia could be worth $7 billion, and inject some 30,000 apartment buildings to rent in Australia. As someone who has worked in both the property sector as well as State Government, I am keen to see Australia’s BTR sector flourish and provide options that are responsive to community need at the right price. We look forward to working with government to get the policy settings right.
Don’t Miss Cressida Wall’s (Executive Director, Victoria Property Council of Australia) presentation on “Unpacking the perceived & true benefits of Build to Rent” at the Build to Rent Conference, 19th & 20th February 2019, Sydney.