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Offshore Interest Accelerates Build-to-Rent

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Australia’s booming build-to-rent development industry grew almost 70 per cent in the past 12 months off the back of substantial offshore investment.

CBRE’s build-to-rent development pipeline report estimates the market is worth about $10 billion with 40 projects and almost 15,000 apartments in the pipeline.

Offshore institutional investment currently accounts for 57 per cent of the funding of build-to-rent developments. But with recent changes to tax concessions in New South Wales and Victoria it is expected more Australian banks and investors will funnel money into the asset class.

“We expect the momentum to be maintained with more projects announced as developers work through a pipeline of several thousand units currently under due diligence and taking advantage of recent tax reforms enacted in NSW and Victoria,” CBRE associate director Puian Mollaian said.

“Offshore institutional capital has been critical to support the launch of the first generation of projects in Australia. Almost two-thirds of projects announced have secured equity capital from global investors, mainly those based in North America and Europe.”

▲ Build to rent investor profile. Image: CBRE
▲ Build to rent investor profile. Image: CBRE


Mollaian said Covid-19 had stimulated further interest in build-to-rent from developers and investors in addition to planning incentives and tax reforms in New South Wales, Victoria and Queensland.

“Locally, preliminary data from the first wave of projects’ performance during Covid-19 indicate a level of resilience as evidenced by broadly stable rents and occupancy levels,” Mollaian said.

Melbourne continues to lead the way in the build-to-rent sector, with more than 50 per cent of projects in the capital city, including Assemble's East Village development (artist's render pictured above) on a 4.3ha former industrial site at Bentleigh East.

Sydney accounts for about 25 per cent of the national market.

Mollaian said Victoria and Queensland offered the most opportunity for Build to Rent due to the availability of “suitable development sites and lower barriers to entry in comparison to Sydney” where prices remained high.

▲ Build to rent market share by state. Image: CBRE
▲ Build to rent market share by state. Image: CBRE


CBRE Debt and Structure Finance managing director Andrew McCasker said it was encouraging to see traditional lenders and non-bank lenders allocate funds to the growth sector.

“We expect funding appetite to increase as the asset class, and knowledge of the industry, evolves and matures in Australia,” McCasker said.

The Property Council of Australia welcomed the change to New South Wales’ planning laws to help stimulate the build-to-rent sector further.

“Build-to-rent delivers much needed housing supply, is good for renters, keeps jobs in construction and is also great for our economy,” PCA executive director for NSW Jane Fitzgerald said.

Fitzgerald said the changes would provide a shot in the arm for build-to-rent in NSW by providing a planning and tax framework designed specifically with the new sector in mind.

“The planning changes not only acknowledge that build-to-rent is a different housing ‘product’ to build-to-sell but also provide clear guidance to investors, developers and consent authorities.

“The tax changes will improve certainty for investors and remove disincentives that would have held the sector back.”

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Article originally posted at: https://www.theurbandeveloper.com/articles/build-to-rent-boom

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