Victoria is leading the nation in Build-to-Rent (BTR) housing developments, with state incentives helping to expand rental options for people at all stages of life.
The BTR model creates homes for the rental market instead of selling to individual buyers and is providing Victorian renters with high-quality and well-maintained homes on secure leases.
Melbourne is home to more than half of all BTR projects completed in Australia last year and 83 per cent of the total number of units built – 1,600. Completed projects include Realm Caulfield, Home developments in Southbank and Richmond and Mirvac’s LIV development at Queen Victoria Market.
Realm Caulfield, owned by global real estate giant Blackstone, was designed by ARM Architecture and features 437 apartments ranging from studios to three-bedroom homes across eight buildings. Since opening in November, 60 per cent of units have been leased to tenants ranging from young singles to couples in their 80s.
In a statement, Treasurer Tim Pallas said that build-to-rent has been a “real winner” in Victoria. He said the market is “growing” and “creating affordable, quality homes for Victorians.” Pallas also said the Victorian government “recognised Build-to-Rent’s potential early on to create more housing options for Victorians.” He said it is “great that the Albanese Government has come on board with further incentives.”
Melbourne is also leading ongoing BTR expansion with more than 7,100 units either under construction or with planning approvals – 63 per cent of the national total.
Blackstone Australian Head of Real Estate Chris Tynan said build-to-rent offers tenants “flexible leasing terms, long-term rental security, and the opportunity to be part of a resident community.” Tynan also said that projects like Realm have the potential to “play a significant role in Australia’s housing market, addressing the growing demand for professionally-managed, rentable homes.”
These developments include Home in Docklands, LIV in Docklands and Brunswick, Greystar in South Melbourne, Fitzroy, South Yarra and Kensington, Local in Kensington and South Melbourne, Indi in Footscray and Southbank, and Altis/AwareSuper in Preston, Melbourne and Moonee Ponds.
The Andrews Labor Government announced land tax concessions in 2020 – which we extended in 2021 – to encourage developments for long-term renters.
In Victoria, eligible BTR developments receive a 50 per cent reduction on the taxable land value for land tax and a full exemption from the Absentee Owner Surcharge for up to 30 years.
Reforms adopted by the Albanese Government in last month’s Federal Budget reversed 2019 legislation that doubled the Managed Investments Trust withholding tax rate from 15 per cent to 30 per cent on payments to foreign investors from residential housing income. Overseas investors are the BTR industry’s primary funding source.
The BTR sector is still in its early stages in Australia, but it has the potential to provide a significant new source of housing supply and to help address the growing problem of housing affordability.
The benefits of BTR
There are a number of potential benefits of BTR for both renters and landlords. For renters, BTR can offer:
- More choice: BTR developments can provide a wider range of housing options than the traditional rental market, including apartments, townhouses and houses.
- More security: BTR leases are typically longer than traditional rental leases, giving renters more stability.
- Better quality: BTR developments are typically built to higher standards than the traditional rental market, with features such as high-quality finishes, modern appliances and amenities.
- Professional management: BTR developments are professionally managed, which can provide peace of mind for renters and landlords alike.
For landlords, BTR can offer:
- More predictable income: BTR leases are typically longer than traditional rental leases, providing landlords with more predictable income.
- Lower risk: BTR developments are typically managed by professional property managers, which can reduce the risk of property damage and unpaid rent.
- Access to capital: BTR developments can provide landlords with access to capital for other investments.
The challenges of BTR
While there are several potential benefits to BTR, there are also some challenges that need to be addressed. These include:
- Cost: BTR developments can be more expensive to build than traditional rental properties.
- Regulation: BTR developments are subject to a number of regulations, which can add to the cost of development.
- Public acceptance: There is some public skepticism about BTR, with some people concerned that it could lead to a decline in rental housing quality.
The Future of Build-to-Rent in Australia
The build-to-rent market is still in its early stages in Australia, but it has the potential to grow significantly in the coming years. The market is being driven by several factors, including the increasing cost of home ownership, the growing number of single-person households, and the increasing demand for flexible rental terms.
As the build-to-rent market grows, it will likely significantly impact the Australian housing market. Build-to-rent projects could provide more affordable housing options for Australians and help address the growing demand for flexible rental terms.
