Build to rent? Not quite yet

David Oudshoorn

State Director, Property – Business & Private Banking, ANZ

“Build to rent” is not there yet.

Issues with access to housing in Australia’s two-speed property market are driving numerous innovative solutions, including built-to-rent homes, a method increasing in both popularity and public awareness.

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Known as ‘multi-family accommodation’ outside Australia (notably in the United States and United Kingdom) build to rent sees homes built for that specific purpose by developers, rather than being sold to owner-occupiers. Its supporters argue the sector is a landmark change for renters.

"I think the build to rent model has a pretty important part to play in addressing that increase in [housing] supply going forward.” - Gradwell

But according to a panel of experts, there’s still a way to go before it is the solution to housing shortages.

Speaking on video, ANZ Senior Economist Daniel Gradwell said as population growth continues in Australia, a drop in foreign purchase was helping expand the supply of housing. As those factors subside the market will begin to look for different channels to fill the void, he said.

“I think the build to rent model has a pretty important part to play in addressing that increase in [housing] supply going forward,” Gradwell said.

General Manager at VIMG Joe Khougaz said his group was interested in the concept but cited a need for culture change among property buyers as a potential barrier in the short term.

“It’s a class of asset we’re looking into at the moment. I'm not sure if there's anybody out there though who has successfully modelled it yet in Australia,” he said.

“The Australian dream is to own a home and we haven’t got past that yet.”

Reassuring signs are emerging. In July, developer Mirvac announced a build-to-rent ‘club’, in a sign of the growth of the concept in Australia. Earlier this year ANZ agreed to fund Make Venture’s $A60 million build to rent project in Kensington, Victoria.

In July ANZ research showed the stark divergence between the residential and commercial property segments in Australia is continuing.

Amid an overall sense of confidence, an ANZ-PCA report showed ongoing credit tightening and macro-economic factors such as immigration and unemployment levels are poised to drive change across the property market over the next 12 months.

David Oudshoorn is State Director, Property – Business & Private Banking, ANZ

The views and opinions expressed in this communication are those of the author and may not necessarily state or reflect those of ANZ.