In a market still shaking off the twin shocks of inflation and rate volatility, Australia’s build-to-rent sector is rewriting the rules of real estate capital.
And industry is cautiously optimistic on the future growth pipeline for the emerging sector, according to developers, financiers and investors who attended a MaxCap leaders lunch recently.
Patient, long-dated capital is returning to the table. But to make the numbers work, the capital stack itself is evolving—and quickly.
The rise of patient capital
Two years ago, the story was different. Inflation was running hot, rates were rising, and institutional money was retreating from real estate risk.
Today, capital is back—but with a new mindset.
Investors, particularly from Japan and Europe, are showing greater comfort with core and core-plus mandates that accept lower, steadier returns in exchange for long-term exposure to Australia’s housing shortage, according to Pro-invest Group director of portfolio management and transactions Brian O’Driscoll.
The logic is simple: when supply is scarce and demand is structural, patient capital wins.
Apt.Residential co-founder Puian Mollaian said securing a long-term mandate just as inflation peaked in 2023 allowed the build-to-rent developer to “invest through the cycle and hold for multiple cycles”.
Mollaian said the strategy was built around quality fundamentals and location, rather than timing.
“That’s how we are able to unlock opportunities such as Broadway (near central station) and Bondi, because we’ve got a longer term view on the world,” Mollaian said.
“So we don’t have that pressure of realising value on exit in a three to five year horizon, which means you are beholden to timing on when you enter the cycle and when you exit.
“That kind of capital is very scarce, but it’s exactly what this sector needs.”
The feasibility gap
Project feasibility remains the sector’s biggest hurdle.
With cap rates hovering in the low fours, build-to-rent continues to compete unfavourably with other asset classes—industrial, retail and office—that can deliver yields in the fives and sixes. Add in higher construction costs and planning delays, and many projects simply don’t stack up.
The conversation, Pro-invest’s Brian O’Driscoll said, “always comes back to yield, yet more institutional investors are recognising that build-to-rent delivers defensive, inflation-linked income that can warrant development risk”.
The result has been a shift towards hybrid structures—combinations of development equity, mezzanine debt, and private capital designed to balance risk across the stack.
In some cases, Japanese groups have stepped in as development-phase investors, while Australian institutions take a long-term hold once projects are stabilised.
“Everyone’s trying to solve the same equation,” MaxCap director of investment Adam Matkovich said.
“You can’t rely on one type of money anymore.”
Global money, local hurdles
Australia’s reputation for stability is helping to attract foreign mandates.
European pension funds and Canadian institutions, spooked by geopolitical volatility and uneven growth across the US and UK, are turning to “boring but reliable” markets like Australia and Japan.
“Our friends in England say boring is good,” Mollaian said, “And Australia is boring—in a good way.”
But those inflows come with expectations.
Compared to more mature multifamily markets overseas, Australian build-to-rent remains embryonic—barely 0.1 per cent of total housing stock according to MaxCap head of research Bruce Wan.
Global investors expect institutional-scale product, stable tax settings and planning certainty, and often struggle to reconcile Australia’s fragmented approval system and persistent policy shifts.
“The capital wants to feel welcome,” Apt.Residential’s Mollaian said.
“You can’t force it in. The government needs to signal support—through tax, planning and policy—so investors know the door is open.”
Private credit steps up
As traditional banks tighten lending criteria, private credit has become an increasingly important player in the broader market.
Non-bank lenders are now offering construction finance and bridge facilities at modestly higher margins but with greater flexibility around leverage and structure, Matkovich said.
Typical senior debt is running at 50–55 per cent loan-to-cost, with mezzanine or preferred equity covering the gap.
“There’s only a small difference in pricing where private credit and banks sit,” Matkovich said.
“But we can move faster, and structure around development risk.”
This evolution reflects a broader rebalancing in Australian real estate finance. The big four banks’ retreat from complex residential projects has created a vacuum that specialist lenders—and offshore investors—are rushing to fill.
Beyond the cycle
Despite the challenges, the outlook for build-to-rent remains robust.
Interest rates are lower, population growth is strong, and the housing deficit is widening, MaxCap head of research Bruce Wan said.
The fundamentals are so strong that the sector is forecast to triple by 2030—from roughly 6000 units in 2025 to more than 15,000 per year.
That trajectory will require capital—lots of it—but also creativity.
The developers leading the charge are blending traditional finance with new models of partnership, aligning private and institutional investors under a single, long-term vision.
Build-to-rent is no longer a speculative niche; it’s becoming a core part of Australia’s housing response.
But as the sector matures, its success will depend less on construction pipelines and more on financial innovation—on rewriting the capital equation to match the realities of an undersupplied market.
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