Concerned about the state of the economy and society we’ve created for the next generation, the young people who embarked on adult life in the last few years or will do so later this decade? I am.
All signs suggest that inequality has become more deeply entrenched since the onset of the COVID pandemic in early 2020. That means it’s a poor outlook for those who are just getting started, unless they’re in the fortunate position of being bolstered by family money.
One of the most striking ways inequality is manifesting itself is in the residential property sector. On both sides of the Tasman – and indeed all around the world – the build-to-rent market is going absolute gangbusters.
As housing prices have headed into the stratosphere – they rose by 25.8 per cent in Sydney and 16.3 per cent in Melbourne in 2021, pushing the median prices in those cities up to $1,090,276 and $788,484, respectively – tens of thousands of unpropertied young people are seeing their dreams of home ownership recede into the next decade, or the never-never.
Rates down, prices up
Perhaps ironically, it’s a situation that’s been exacerbated by monetary policy machinations designed to shield economies and individuals from the ravages of 2020’s swift and sharp COVID-induced recession.
Pushing interest rates down to record lows and printing money triggered a flight to property, as investors sought the security that bricks and mortar have always represented – and took advantage of those record-low rates to buy up big.
Two years on, Australians with a house or unit, or several, in the investment portfolio are sitting pretty. But if you’re a first-time buyer who’s looking for a place to call home, it’s a very different and far more depressing story.
For those without a healthy income and six-figure deposit (Sydney buyers hoping to put 20 per cent down must now scrape together around $220,000, exclusive of transaction costs), a hefty line of credit with the bank of mum and dad or an inheritance coming down the line, a lifetime of renting beckons.
The rise of the corporate landlord
No coincidence then that we’re seeing the rapid corporatisation of “residential landlord-ism” as institutional investors pile into a segment of the property sector they believe will be safe as houses for many years to come: build to rent (BTR).
In November 2021, for example, Macquarie Bank announced it had secured the services of former Grocon heavyweights Dan McLennan and Matthew Berg to oversee a $500 million push into the market, via a BTR platform dubbed Local.
Its first project? A 500-apartment complex in the inner Melbourne suburb of Kensington, slated for completion in late 2024.
Further north, established property investment group Mirvac opened the doors to its first BTR development, LIV Indigo at Sydney Olympic Park, in mid-2021.
It’s a similar story over the ditch, where listed property trust Kiwi Property has embarked on a $221 million BTR project at Sylvia Park, immediately adjacent to its flagship Lynn Mall centre in Auckland.
Having spent several years in the US, where the BTR market is both large and mature, Kiwi chief executive Clive Mackenzie has clocked the fact that around half of Auckland’s adult population is now comprised of renters; a figure that’s expected to rise to 60 per cent by 2024.
The home you have when you can’t have a home
They all need somewhere to live.
Housing stability, in the form of well-situated, maintained and managed apartments available on flexible lease terms, in complexes that offer access to recreational and leisure facilities, is the value proposition BTR operators are offering.
For many Aussies and Kiwis in this growing cohort of likely long-term or lifelong renters, the prospect of dealing with a commercial organisation whose onsite representatives respond rapidly and professionally to maintenance and repair requests will be a compelling one. Compare and contrast with the experience of wrangling the typical mum and dad residential landlord, whose customer service can be somewhat less sedulous, and it starts to look even more attractive.
What customers want, the market will supply. In the next few years, we’ll undoubtedly see scores more developers piling into the BTR space, chasing the long-term renter dollar with an array of lurks and perks, from libraries and pool rooms to onsite storage facilities.
Keeping the have-nots happy
But will the “lifestyle benefits” on offer be sufficient compensation for being locked out of the property market, for the thousands of young people who can no longer reasonably expect to ever own a home of their own, be it ever so humble?
I can’t see it, but in the unequal world the grown-ups have created for them, getting settled in comfortable rental digs may, sadly, be the only option for many.
Peter Rose is the chief revenue officer at Forbury.