Hundreds of people tuned in to RWC’s November Between the Lines webinar, where a panel of experts discussed the build-to-rent market, an emerging market in Australia.
Ray White head of research Vanessa Rader was joined by RWC Western Sydney director Victor Sheu, and Coolamon Consulting director Bennett Wulff.
The build-to-rent (BTR) has been a hot topic in Australia in recent times as the market begins to grow. “BTR is a very mature asset class in some overseas markets, but it’s very much still emerging here in Australia,” Mr Wulff said.
“Traditionally if you’re renting in Australia you’re renting from a mum-and-dad investor, there hasn’t really been the opportunity to have an institutional landlord.
“BTR in Australia was defined in 2021 in the State Environmental Planning Policy for housing diversity, and that was the first definition that BTR had in the NSW
context which has gone some way with assisting with the emergence of BTR, particularly from a planning point of view.
“What it essentially is is large-scale, purpose-built, rental accommodation with a minimum of 50 dwellings, held for a minimum of 15 years.
“It’s a separate asset class to affordable accommodation, student housing, and co-living. They’re all from the same family, but BTR is private market rental.”
Ms Rader asked what the difference was between BTR and co-living and purpose built student accommodation (PBSA).
“BTR is a little bit less commercialised than co-living or PBSA,” Mr Sheu said.
“PBSA and co-living have a very specific mandate and a very specific target audience, and they both require operations management which BTR also requires, but your target audience is so specific.
“The size and scale of the projects are vastly different as well. When we talk about co-living, or what used to be referred to as boarding houses, and PBSA, you’re usually talking about rooms to be held under one title and the goal is to keep them under one title.
“With BTR, while it is initially held under one title, there is potential, whether it be in 15 years or 20 years, to subdivide.”
With the current housing crisis being experienced across the country, Ms Rader said Australia was starting to see some desire from the government to have BTR as an option, with some subsidies and taxation breaks for offshore investment. She asked Mr Sheu if BTR was an asset class of interest for his clients.
“When we’re selling land, BTR has been in the discussion over the last couple of years, and it’s being assessed as one of the angles when people are looking at land and its highest and best use,” Mr Sheu said.
“But when it comes to developers or delivery partners for these major institutions, they have a very specific mandate that they’re looking for to fulfil their pipeline.
“In essence, as Bennett mentioned earlier, we are in the infancy stage of BTR. BTR takes up less than one per cent of our total housing supply.
“If we’re talking about a goal of delivering 1.2 million dwellings by 2029, we’re talking less than 30,000 - it’s not a very large piece.
“So whenever they’re getting into assessing BTR as a final outcome, my clients are investor driven, so they are after a very secure project to own and a very secure investment to own at the end of the process, and there are a lot of blockages for BTR.
“Despite what we already know about interest rates and rising construction costs, BTR projects are usually quite large, and the amount of people looking at doing 50-150 dwellings is very minimal.
“At that scale point, if the project is well positioned enough, which is one of the requirements for BTR, people will just run build-to-sell (BTS) because that’s what people are used to, that’s what funders
are used to, and that’s what banks are used to. And that’s one of the blockaids people are seeing in the BTR assessment.”
Ms Rader then asked Mr Wulff how his clients felt about the BTR market.
“There are barriers to any development, and planning certainly was one, but in 2021 we sort of had a watershed moment when BTR became its own thing and got its own definition,” Mr Wulff said.
“So what that’s enabled is some runway for BTR, and the NSW Government has been quite accommodating, for example there are some zonings where BTR can be delivered that BTS can’t.
“There are certainly efforts being made to unlock BTR.”
