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What is Build-to-Rent in Australia

Building build to rent

The Australian rental and housing market is notoriously tight, and while supply is often cited as the solution, the type of supply being brought to the market is equally important. One potential solution being discussed is the build-to-rent (BTR) model.

It’s not hard to see why, with 72 reported BTR projects across Victoria, New South Wales, Queensland, and Western Australia it’s bound to have some impact. Oxford Economics Australia predicts that by the end of 2030, the Australian BTR sector will deliver an active stock of around 100,000 apartments, with a total valuation of approximately $100 billion.

What is Build-to-Rent?

The BTR model is straightforward — a developer constructs residential properties with the intention of renting them out. Unlike traditional models where units are sold to individual owners, BTR projects are owned and managed by a single entity. This unified management process can enhance the quality of service provided to tenants.

While BTR is well-established in countries like the United States and the United Kingdom, it has only recently arrived in Australia. In part, this is likely thanks to recent regulatory changes. Most states offer a 50% land tax reduction for BTR properties, although the finer details do differ on a state-by-state case. One of the benefits of these tax reductions is that it has encouraged construction in cities like Sydney, Melbourne, Brisbane, and Perth.

Advantages of Build-to-Rent

BTR properties come with a couple of benefits:

  • Quality and Maintenance: Constructed with the long-term in mind, these properties are often high quality and include timely maintenance services.
  • Community: With most residents being renters and communal spaces often provided, there can be a stronger sense of community.
  • Long-term Focus: The developer's objective is to generate a stable rental income stream, thus BTR properties tend to emphasise long-term tenancy.
  • Professional Management: Tenants usually benefit from more professional and standardised management services, including maintenance, security, and other amenities.
  • Amenities: BTR developments often include additional amenities like gyms, communal gardens, workspaces, and concierge services.
  • Lease Stability: Longer lease terms provide more housing security than what might be typically found in privately rented residences.

Disadvantages of Build-to-Rent

Despite these potential benefits, there are some downsides to be aware of:

  • Price Tag: BTR properties often come with a higher price tag due to increased amenities, location, and the targeted demographic.
  • Limited in Australia: As BTR is a relatively new model in Australia, availability may be limited. Currently, Melbourne leads in BTR developments.
  • Foreign Ownership: BTR projects come with reductions or exemptions from foreign land tax to encourage overseas investment. This could potentially increase competition for local residents seeking to rent in these new developments.

The Current State of Build-to-Rent in Australia

The short answer is yes, you can live in a BTR property in Australia, but your options may be somewhat limited compared to more established markets. Melbourne currently leads the way in BTR developments, followed by Sydney, Brisbane, and Perth.

Finding a BTR property can be done through online portals, real estate agencies, or directly from developers. The application process is similar to that of traditional rentals, but due to its competitive nature and higher demand, you may face a more rigorous screening process.

The Future of Build-to-Rent in Australia

The BTR sector in Australia is poised for significant growth. The government offers tax incentives, and with the housing market becoming increasingly unaffordable for many, BTR provides a viable alternative for both investors and tenants.

However, there are challenges that the sector needs to overcome: affordability, regulatory hurdles, and public awareness. A lot of Aussies are still unfamiliar with the BTR model, and increased awareness is important for the sector's growth. 

If you're in the market for a new rental, a build-to-rent property could be worth considering. Just be prepared for a potentially higher price tag and a more competitive application process. 

If you’re in the mix for a more traditional purchase, be sure to explore our home loans hub. There you can explore some of the best home loan rates in the market. 

Home loan comparisons on Mozo - last updated 19 April 2024

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* WARNING: This comparison rate applies only to the example or examples given. Different amounts and terms will result in different comparison rates. Costs such as redraw fees or early repayment fees, and cost savings such as fee waivers, are not included in the comparison rate but may influence the cost of the loan. The comparison rate displayed is for a secured loan with monthly principal and interest repayments for $150,000 over 25 years.

** Initial monthly repayment figures are estimates only, based on the advertised rate. You can change the loan amount and term in the input boxes at the top of this table. Rates, fees and charges and therefore the total cost of the loan may vary depending on your loan amount, loan term, and credit history. Actual repayments will depend on your individual circumstances and interest rate changes.

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Cameron Thomson
Cameron Thomson
RG146
Money writer

Cameron has a Bachelor of Creative Writing and History, and a background in broadcast media from his time at 2SER Radio. This diverse set of skills has informed his analytical yet creative approach to dissecting financial data and uncovering long-term trends in consumer finance. Cameron is RG146 certified for Generic Knowledge and keeps a keen eye on current and historical deposit and savings rates on the Mozo database. Cameron is also interested in tracking the investment space, particularly share trading platforms, to help Aussie consumers save and invest their money more wisely.