Build-to-rent is set to become a major new player in the Australian housing market, as an estimated $300bn worth of residential assets could be owned by institutional investors within the next couple of decades, according to a new report from CBRE.
Major residential investors – such as Lendlease, Mirvac, and Stockland – are poised to offer multi-family developments in Australia.
While the emergence of this sector won’t be a panacea to the housing affordability crisis, Stephen McNabb, CBRE’s senior director and head of research Australia, said it would go a long way in helping first-home buyers and investors with limited funds enter the property market.
He added that the multi-family sector represents about 15% of properties with five or more units in the United States, a position obtained after 25 years of growth. Overall, the sector accounts for 20-25% of the country’s USD$2trn institutional property investments, making it the second largest investor allocation after office real estate.
“Factoring in that 35 per cent of Australia's population rent, if the market here evolved to the level of the US, up to 5 per cent of the country's dwelling stock by value could be institutionally owned in several decades,” McNabb said. “In today's dollars, that represents about $300 billion worth of residential assets or about 300,000 apartments.”
Steve McCann, group CEO and managing director at Lendlease, said that while the imposition of GST in Australia has made it uncompetitive for developers to delve into build-to-rent (compared with building for resale), the sector was emerging as a potent new asset class.
“The units-to-rent sector is one we are entering as it is well established in the US and London,” McCann said. “It provides a potential new asset class in our investment segment. In Australia, it is a possible product for us, but there are tax issues that make it a challenge. The sector needs government support to make it viable.”
Other observers have taken a rosier view of the build-to-rent sector. Matthew Cranston, a journalist for The Australian Financial Review, said that if developers could obtain the backing of a major institution, such as super fund, they could build on a large scale with a long-term view. These new properties could then be rented out at more affordable rates, which would not only help solve the housing affordability crisis, but would also provide a long-term income stream to thousands of Australians with superannuation.
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