Research & Forecast Report Accelerating success. THE INTRODUCTION OF BUILD TO RENT IN AUSTRALIA November 2019 Accelerating success. MAXIMISE THE POTENTIAL OF DATA IN-DEPTH DATA At the forefront of the real estate industry, we Granular datasets covering historical understand the demand and forecast data with over 2,000 datapoints updated quarterly. for reliable and accurate data is more prevalent than ever. Our enterprising technology, Colliers Edge, offers comprehensive DETAILED property data that enables TRANSACTIONS you to delve deeper into the Australian property Individual reporting of market, using data to major transactions. become more informed and deliver enduring value. 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Joanne Henderson Director | Research +61 410 391 093 [email protected] colliers.com.au/colliersedge RESIDENTIAL | Build to Rent Report | H2 2019 By John Nicolopoulos In the United Kingdom, the Build to Rent sector has grown strongly Manager | Research since its inception in the early 2010s, and as of March 2019, there [email protected] were approximately 32,000 completed units/homes, a further 36,000 under construction and 74,000 in planning (British Property Representing the largest percentage of global workforce by Federation). approximately 2025, Millennials are set to drive demand of BTR Despite this success, BTR initially encountered numerous challenges, development many of which derived from local authorities who struggled to differentiate the model from Build to Sell and affordable housing. The result was the inability to create viable BTR developments. Changes An independent BTR policy and taxation framework is needed to from government and authorities in relation to planning framework enhance opportunities for delivery of supply and policy (lowering tax rates on BTR investments) has since improved sentiment and feasibility. In recent times, the model has attracted high levels of institutional investors looking to capitalise on Opportunities exist outside CBDs where land is more affordable and a deficit of higher quality rental supply and to lock in stable returns. rental demand is strong Whilst the sector continues to expand across the UK, the momentum of BTR in London has been driven by the rising cost of home ownership, employment and lifestyle opportunities. What is Build to Rent? Build to Rent (BTR) refers to an alternative development model where a developer builds and holds the stock specifically for long term income-generating assets, opposed to the traditional Build to Sell (BTS) model. BTR is an established asset class in both the UK and USA, and as the ‘Australian Dream’ of home ownership has become progressively difficult, the model is beginning to garner interest throughout Australia. BTR is complex and there are a number of variables that will impact the implementation of the model in Australia. Despite the challenges ahead, opportunities do exist. BTR has proven to be a Global Success With the inevitable introduction of this new asset class into Australia, it is important we gain insights and learnings from the success of other international markets, especially the US and UK given the structural and market similarity to Australia. In the United States, where the size of the Build to Rent (known as multi-family housing) market has been growing significantly since the 1980s, over 14.5 million residences have been created. Currently, the sector represents the second largest asset class in the nation with the output of multifamily housing hovering around 300,000 units yearly. According to the National Multifamily Housing Council, the asset class also contributes US$3.4 Trillion to the economy annually, supporting approximately 17.5 million jobs. The strength of BTR within the US can be associated with the maturity of the market and levels of offshore capital being poured into the asset class (accounts for approximately 25 per cent of institutional property investment – second to office). A simpler planning framework, rezoning of regeneration areas and increased demand for city living have also contributed to the success. In the US, 36 per cent of households are inhabited by renters (over 43,000,000). If we look at the age distribution of these renters, 50 per cent are aged under 30, just over double the next highest age bracket of 31-44 years old (NMHC). 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