4 Feb 2019

This year will be a big test for build to rent in Australia as tenants start to move into the first crop of apartments in the emerging asset class.

3,500 build-to-rent units are in the planning and development stage – up from 1,600 last year.

Speaking to Ingrid Fuary-Wagner at The Australian Financial Review, Urbis Director Mark Dawson said, “Developers will be watching with keen interest.”

“The key things people will be looking out for is to see what sort of speed of absorption and rental rates are being achieved because at the moment, until there is market evidence, everyone is asking ‘how to do we prove up this concept?’”

Developers will be watching with keen interest.

Mark Dawson View Profile

The norm in Australia is for developers to build apartments that are sold to owner-occupiers or individual investors, whereas developers of build-to-rent properties keep them and generate ongoing income as a large-scale landlord.

The build-to-rent model has already made significant inroads in the past 12 months, with more than $1 billion worth of projects now planned across the country.

With the renter demographic growing in Australia, a downturn in the property market hampering off-the-plan sales, and a federal election on the horizon that may see negative gearing limited, Mr Dawson said it was crunch time for many developers seeking out other ways to make a profit than the traditional build-to-sell model.

If the market takes off, there could be 100,000 build-to-rent units across the eastern seaboard within a decade, Urbis predicts.

“It’s about seeing how it plays out here. Is it something customers are prepared to pay a premium for and to what extent is it going to drive returns overall to the point they become attractive enough to compete with other land uses?” Mr Dawson said.

The above is an excerpt from The Australia Financial Review. To continue reading the article, please click here (paywall).