Rental Revolution: the popularity of Build-to-Rent in the AU market.
Author: Belinda Botzolis, Head of Consumer Valuations
The rental market in Australia has been experiencing significant changes in recent years, with the rise of a new trend known as build-to-rent. This concept, which originated in the United States, has been gaining popularity in the Australian property market, offering a new option for both renters and investors. In this article, we explore the concept of build-to-rent and its increasing popularity in the Australian housing market, delving into the benefits it offers to both renters and investors, the factors driving its rise, and the future prospects of this trend in the Australian property market.
What is Build-to-Rent?
Build-to-rent (BTR) is a type of property development where a single entity builds and owns a large number of rental units. These units are then leased out to tenants, providing a long-term and stable source of income for the owner. Unlike traditional rental properties, build-to-rent developments are purpose-built for renting, with amenities and services specifically designed for tenants. This model of housing is designed to cater to the needs of modern renters, offering them a more convenient and comfortable living experience.
The Benefits of Build-to-Rent for Renters
One of the main benefits of build-to-rent for renters is the high-quality and modern living spaces that are offered. These developments often include amenities such as gyms, pools, and communal areas, providing a more luxurious and convenient lifestyle for tenants. Additionally, build-to-rent properties are professionally managed, ensuring a high level of maintenance and customer service for tenants. This means that renters can enjoy a hassle-free living experience, with any issues or repairs being promptly addressed by the property management team.
Another advantage for renters is the long-term stability that build-to-rent offers. Unlike traditional rental properties, where leases are typically renewed on a yearly basis, build-to-rent developments offer longer lease terms, providing tenants with more security and stability in their housing situation. This is especially beneficial for those who are looking for a more permanent living situation. Furthermore, the predictability of long-term leases can also help renters to better plan their finances, as they can expect a fixed rental cost for a longer period of time.
The Benefits of Build-to-Rent for Investors
Build-to-rent developments also offer a range of benefits for investors. One of the main advantages is the potential for a steady and reliable income stream. With a large number of units being leased out, investors can expect a consistent cash flow from their investment. Additionally, build-to-rent properties are often located in high-demand areas, providing investors with the potential for capital growth in the long term. This can be particularly attractive for investors looking for a long-term investment strategy.
Another benefit for investors is the lower risk associated with build-to-rent developments. As these properties are purpose-built for renting, they are less likely to experience vacancies or rental arrears, reducing the risk of financial loss for investors. Additionally, the professional management of these properties means that investors do not have to deal with the day-to-day management of their investment, making it a more passive form of income. This can free up investors' time and resources, allowing them to focus on other investment opportunities or personal pursuits.
The Rise of Build-to-Rent in the Australian Property Market
Build-to-rent has been gaining popularity in the Australian property market in recent years, with a growing number of developments being planned and built across the country. This trend has been driven by a number of factors, including the increasing demand for rental properties and the changing attitudes towards renting in Australia.
The future of build-to-rent in Australia looks promising, with a growing number of developments in the pipeline and a positive outlook for the rental market. According to the Property Council of Australia, . This growth is expected to be driven by both the increasing demand for rental properties and the supportive policies introduced by the government.
The Growing Demand for Rental Properties
The demand for rental properties in Australia has been steadily increasing in recent years, driven by a number of factors such as rising property prices, changing demographics, and lifestyle preferences. This has created a gap in the market for high-quality and affordable rental properties, which build-to-rent developments aim to fill. With the cost of homeownership becoming increasingly out of reach for many Australians, the demand for rental properties is expected to continue to rise in the coming years.
Additionally, the COVID-19 pandemic has also contributed to the growing demand for rental properties, as many people have been forced to downsize or relocate due to financial constraints. This has further highlighted the need for more affordable and stable rental options, making build-to-rent an attractive option for both renters and investors. The pandemic has also led to a shift in lifestyle preferences, with more people now prioritizing flexible and convenient living arrangements, which build-to-rent developments can provide.
Changing Attitudes towards Renting
Traditionally, the Australian housing market has been focused on homeownership, with renting seen as a temporary and less desirable option. However, this mindset is starting to shift, with more people choosing to rent for longer periods of time. This change in attitude towards renting has created a demand for higher quality and more permanent rental options, making build-to-rent developments a viable and attractive choice for both renters and investors. This shift in attitudes is also reflective of broader societal changes, with younger generations in particular placing less emphasis on homeownership and more on flexibility and lifestyle.
Government Support for Build-to-Rent
The Australian government has also shown support for the build-to-rent sector, recognizing its potential to address the growing demand for rental properties. In 2017, the government introduced a new tax framework for build-to-rent developments, providing tax incentives for investors and making it a more attractive investment option. This has helped to stimulate investment in the sector and has contributed to the growth of build-to-rent developments in the country.
Additionally, some state governments have also introduced planning and zoning changes to encourage the development of build-to-rent properties. For example, the New South Wales government has introduced a build-to-rent planning policy, which aims to fast-track the approval process for these developments. These supportive policies are expected to further drive the growth of the build-to-rent sector in Australia, making it an increasingly important part of the country's housing market.
The increasing popularity of build-to-rent in the Australian property market is a reflection of the changing attitudes towards renting and the growing demand for high-quality and stable rental options. This trend is expected to continue in the future, with the support of the government and the potential for growth in the rental market.
Whether you are a renter looking for a more permanent and luxurious living situation or an investor seeking a stable and low-risk investment, build-to-rent developments offer a promising option in the Australian housing market. As the sector continues to grow and evolve, it will be interesting to see how it shapes the future of the Australian property market.
If you'd like to read more about Build-to-Rent, Belinda also spoke with Australian Property Investor on the topic. You can read more in her article here.
Head of Consumer Valuations
0408 706 097