The Growing Build-To-Rent Market in Australia

There has been some reprieve in the house price boom, but the rental market is going the other way with rental costs rising and housing availability dropping.   
  

The rental market is reaching crisis point with long queues at inspections and bidding wars on leases becoming an unfortunate norm in 2023.   

Australians find themselves in the midst of a housing crisis with rising rates, rental costs and cost of living pressures are taking their toll.   

Almost one third (32 per cent) of Australians are renting but scarcity isn’t simply driving demand, it is putting pressure on the market and creating big problems for people seeking stable, safe and consistent rental opportunities.   

Before we reach breaking point, other solutions are needed and one that is making a real impact is the build-to-rent model which is a welcome boost to the rental market.   

While the build-to-rent sector has remained a new concept to Australian shores, it has proven its success overseas and is experiencing growth across the nation.  

Build-to-rent is in its infancy in Australia but is gaining real momentum, it will soon be a more mainstream and widely considered model of housing and it is coming at an ideal time.   

What is build-to-rent?  

Put simply, build-to-rent offers the flexibility of renting with the security of home ownership.   

These properties are purpose-build for renters, not landlords, and rented out directly to the tenant. Renters often enjoy flexibilities around painting walls, hanging up pictures and keeping pets on the premises, as well as additional amenities such as swimming pools, green spaces and co-working areas. Thanks to the nature of these developments, they aim to foster a sought-out sense of community. Build-to-rent properties may range from a building encompassing several units right through to high-rises.  

How can build-to-rent assist housing affordability?  

While the build-to-rent model wasn’t originally designed to combat the housing affordability crisis, they offer an attractive solution. With the cost of living on the rise, we are unlikely to see stories of skyrocketing rent fade into the background anytime soon. Build-to-rent offers new accommodation with flexibility that is attractive to renters. Many developers are happy for renters to stay for any amount of time that suits them, or even offering the option to upsize to a larger apartment within the building to accommodate life changes.  

Some build-to-rent projects are required to include lower-cost options as part of the development. A great example of this is the Queensland Build-to-Rent Pilot Project, which will see two projects include 240 apartments with cheaper rent.    

Across the nation, there are over 7000 institutional build-to-rent units in the pipeline for delivery by 2024. Melbourne is in the lead, currently accounting for 68 per cent of the total number of units, with Sydney in second place at 21 per cent.   

Who is build-to-rent suited towards?  

The housing crisis does not discriminate. While build-to-rent properties usually come in the form of apartments, they come in various sizes to accommodate singles as well as couples and families. Various build-to-rent properties have been developed with specific demographics in mind, taking location, design and amenities into account to cater to their desired demographic.    

There are different types of build-to-rent developments being tested in the Australian market, finding that they work well in desirable suburbs. While build-to-rent is a hot topic, it still has its risks. If caution is not exercised or there is no funding early on, the project has the potential to fail.