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Renting has become a lifestyle choice for many. Younger generations, in particular, are choosing to rent units close to jobs and transport rather than buy further afield, meaning demand for high-quality, stable rental accommodation has grown.
Planning authorities are also encouraging high-density development, as they simultaneously try to capitalise on existing infrastructure and rein in urban sprawl.
It's not surprising that interest in build-to-rent (BTR) developments is on the rise, particularly from institutional investors looking to diversify.
However, the BTR concept has yet to take off in Australia, with less-than-favourable tax conditions and a general lack of government support leading investors to look elsewhere.
With more mature markets currently reaping the benefits of investor interest, policymakers need to ensure Australia doesn't get left behind.
BTR is a great deal for investors and tenants. Investors team up with developers to build residential properties for the purpose of collecting rental income over the long term.
The UK has one of the fastest-growing markets for BTR housing, having seen a 30 per cent increase in 2018 according to the British Property Foundation.
In the US, the Altus Group identified that the model accounts for a quarter of the institutional property investment market, while in Denmark, Savills determines it to be up to half of all real estate investment activity.
BTR developments are designed and managed with the needs of renters in mind, and for institutional investors with extended time horizons, they offer predictable long-term returns and less risk associated with properties being vacant for a length of time.
If BTR housing is to reach its potential in Australia, barriers to investment need to be removed. In some more mature BTR markets, such as France and the UK, governments have provided incentives to investors in the sector through tax breaks, funding and debt guarantee schemes, and fast-track planning.
In Australia, industry groups and investors have been involved in discussions with policymakers about the BTR model, and there are some indications that they're listening.
The Victorian government changed guidelines for the foreign investor stamp duty surcharge and vacancy tax to provide exemptions for eligible BTR developments.
In NSW, an industry working group has been established to explore options for a BTR asset class. In Queensland, the Palaszczuk government announced a $70 million investment in a BTR Pilot Project to deliver a large-scale BTR development close to Brisbane's CBD.
Moves such as these represent a significant step forward for the BTR sector in Australia. Not only do they point to a growing awareness of the role BTR could play in ensuring we have a sustainable, affordable housing market, they also send a strong signal to investors that policymakers have their back.
Diane Skapinker is a partner and Asia Pacific co-head of real estate at Ashurst.