A new type of renting is gaining traction in Australia, and the latest data shows the extent to which it’s set to change the rental landscape.
According to recent figures collected by commercial real estate and investment management company JLL, it’s impossible to deny that Australia is in the midst of a boom for new homes in the build-to-rent sector.
Build-to-rent housing is a model in which developers construct multi-unit buildings and then retain the apartments to rent out, rather than selling them off to individual owners.
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Melbourne has so far been known as Australia’s build-to-rent capital, with more projects than any other capital. Image: Unsplash
It’s a popular form of housing in the UK and USA, and Australia has been playing catch-up. So much so, that JLL’s data reveals the number of build-to-rent apartments that exist across the nation is set to nearly double in the foreseeable future.
The real estate firm’s research found that there 9,180 operational build-to-rent apartments as of Q4, 2024 in Australia, with 4,147 of those having been completed in 2024 alone.
Moreover, a further 8,199 are currently under construction. Roughly half of those – or 4,635 dwellings – are due for completion in 2025.
At the end of 2024, there were 17,043 build-to-rent units in the approvals pipeline waiting to get the green light, representing an increase of 32% over the course of the year.
The uplift is only expected to continue as these were gains made largely before new federal tax changes came into effect to stimulate the sector.
Governments back build to rent
Despite being on the agenda for most of 2024, it wasn’t until November that the government was able to pass its tax policy changes to encourage foreign investors to back built-to-rent projects.
The update altered the withholding tax rates for foreign investors in Managed Investment Trusts (MIT’s) from 30%to 15% for income generated by eligible BTR developments. It also accelerated depreciation tax allowances on build to rent.
Meanwhile, in WA, state lawmakers have introduced $75 million “Build to Rent Kickstart Fund” and increased the build to rent land tax concession.
The fund will offer up to 30% low-cost finance for build-to-rent projects – or up to $250,000 per apartment – in exchange for 30% of these homes being reserved for affordable private rentals.
For build-to-rent buildings with more than 40 apartments, the land tax concession will increase from 50% to 75% for projects that will commence within three years.
It’s hoped the measure could further stimulate interest in the build-to-rent sector in WA, which has not yet seen the level of investment as the country’s eastern states.
Roughly 8,000 build-to-rent units are under construction in Australia.
According to JLL’s data, Victoria leads the nation in build-to-rent, accounting for 52% of the forthcoming stock currently in the pipeline. Queensland accounted for 24%, and NSW 17%.
And while the pipeline for build-to-rent could be considered robust compared to recent years, it should be noted that construction of this housing type still only represents roughly 10% of the typical apartment pipeline across the nation.
JLL’s head of residential research in Australia, Leigh Warner, noted that the outlook for the sector was expected to continue improving throughout the course of the year.
“The growth of developments shows there is still a lot of optimism about BTR prospects in Australia longer term, despite more short-term challenges to getting projects started in 2024. Some of those challenges should fade in 2025 and we expect more projects to start construction,” Mr Warner said.
Are you interested in build to rent? Check out our New Homes section, where you can learn about new developments in this sector.
