One of the most exciting developments this year has to offer has to do with more investors finding sites to develop a new emerging sector which is the built-to-rent class. Basically, the build-to-rent sector is about private rented residential that’s known not just in Australia, but in the United Kingdom as well. This emerging portion of the property market is predicted to continue to grow this year. So, what’s the build-to-rent sector?
Build-to-rent, in simple terms, refers to the building and construction of residential property that is meant for renting rather than selling. Institutional investors typically own this type of asset class. This year, Hillbrook Projects is determined to explore further. Plenty of units under construction and projects are on the way. But the real question is, is the general public ready to embrace this emerging concept?
But first and foremost, we have to investigate some of the challenges that this sector is expected to go through. Here are some of the most important things to know about the build-to-rent sector.
One of the biggest issues surrounding BTR or Build-to-Rent has to do with existing tax policies. The current tax policy has affected investors seeking ROI when they invest in build-to-rent, mainly because some of these tax policies don’t seem to be in favor of this concept. However, any change in the federal government could open doors for more review. Reports also show that this year, land prices will continue to rise but dwelling prices are expected to go lower as the year goes due to the rise of apartment supply. And as the land prices decline, this would have a positive effect on the economics of build-to-rent.
Most BTR developments that have proposed are in Melbourne’s fringe markets. Although Sydney has always been the one that gets a lot of attention when it comes to property markets, the majority of projects including the BTR concept will mostly take place in Melbourne and Perth due to lower costs in good locations compared to Sydney. Unfortunately, investors without existing land holdings will have a difficult time finding residential lots that are considered economically viable. It will also be a struggle in expensive markets.
The BTR sector in Australia is quite similar to the United Kingdom which also meant that the challenges are the same. The United Kingdom eventually gave its support to the sector particularly in terms of planning rules where they amended it in order to have an easier construction. The government also helped with the financial aspect by forming a recoverable fund. And because of the need for this sector in the UK, the support would obviously come. This should also be the case in Australia.
The BTR sector is indeed facing challenges but we can see that there’s a demand for it. People have been signing up and are seemingly keen on trying the sector. This relatively new concept is something Hillbrook Projects would like to keep working on. We are determined to make a way for investors to experience ease in the renting process, great building quality, and providing what is needed as well as what is deserved.