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Build-to-rent sector rising, says report

09 July 2018 Eliot Hastie
Build-to-rent

A new research report shows that investors and renters in Australia are ready for the rise of a build-to-rent sector.

The Knight Frank research report Multihousing: Tenant & Investor Survey 2018 has found that among 15,000 renters, 41 per cent rent by choice and 61 per cent expect to still be renting in three years.

In the past 25 years, rented dwellings in Australia have risen by 1.065 million, equating to roughly 42,600 new dwellings a year.

In comparison, the number of households who own their homes has increased by less than 270,000 in the same period.

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Knight Frank Australia director of research and consulting Paul Savitz said that the research showed that Australians are moving from owning homes to renting and that the trend isn’t changing.

“It is expected that demand for rented properties in Australia will continue to grow, at the continued expense of those that own their own property outright,” the research director said.

Mr Savitz said that despite a low interest rate for home loans, ownership was still unaffordable for a growing portion of the population.

“The growth of iGENs and Millennials who are opting to rent instead of buy is increasing, as they are attracted to the flexibility associated with renting,” the research director added.

The report highlighted that the rental sector had soared by $770 billion over the past five years and the total value of residential dwellings was estimated to be $6.9 trillion, which valued rental accommodation at $2.1 trillion.

Knight Frank Australia director of residential capital markets Tim Holtsbaum said that investors were finding it harder to purchase residential investment properties, which would lead to a rise in a build-to-rent sector.

“Over the next decade, we expect the emergence of the build-to-rent sector to lead and accelerate the growth and delivery of rented dwellings, financed by institutional capital which takes a longer-term view on its investment return,” Mr Holtsbaum said.

Mr Holtsbaum added that their research in the UK and US found that the build-to-rent sector had thrived, and Australia could see similar results.

“The US and UK are notable examples of where large-scale investment into build-to-rent has thrust the sector into a mature and desirable asset class — albeit relatively low-yielding.

“Investors in Australia believe net yields for this type of rental accommodation could settle around 4 per cent by 2021.”

Build-to-rent sector rising, says report
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