Treasurer Jim Chalmers announcing last night’s 2023 Federal Budget. Screenshot: Parliament of Australia
  • Build to rent a winner in the budget
  • Doubts raised, whether the construction industry can cope
  • 150,000 rentals may not be sufficient to move the dial

The Federal Budget was released on Tuesday evening, with wins recorded for affordable housing and cities.

Migration was also set to grow substantially, with the revised projection up from 235,000 to 400,000.

Investments into energy efficiency were broadly welcomed, but many advocates for some of Australia’s most vulnerable said the measures announced were still not enough, with significant pressure remaining on homelessness services.

Western Australia also recently released its State Budget.

Where are the builders to rent?

Build-to-rent was one of the big winners in this year’s Budget, seeing Managed Investment Trust (MIT) Withholding Tax reduced from 30% to 15%.

It is welcome news for investors, with Colliers‘ National Director for BTR and Residential, Robert Papaleo noting the move will align the BTR sector’s tax rate with other commercial real estate asset classes.

“Newly introduced incentives will begin to address housing shortage issues by boosting the development pipeline from 2026-27, for a sector which now has a competitive income tax associated with foreign investment,” Papaleo said.

The move has seen swift response from global investors, CBRE‘s Andrew Purdon, Regional Director of Living Sectors – Capital Markets business, said:

“The reduction to 15% MIT withholding tax for eligible BTR projects is a very positive move from Federal Government and will undoubtedly unlock global institutional investment in the sector.

“Since the Prime Minister’s initial announcement of the tax change on 28 April, CBRE has received a notable increase in enquiries from investors across APAC, Europe and North America requesting market intelligence and guidance on how they can access the Australian BTR market.

Andrew Purdon, Regional Director of CBRE’s Living Sectors – Capital Markets business

“However, some of the finer details of the new BTR policies need to be carefully considered but quickly resolved by Government to provide clarity to investors and enable them to commit to new projects ASAP.”

A pertinent question is whether Australia will be able to build the apartments in the first place, with much of the construction industry still feeling the pandemic pain.

RSM Australia‘s Adam Crowley said,” This budget was a missed opportunity – while there was a flurry of announcements around affordable housing and build-to-rent initiatives, the Budget did not address how the construction sector, with so many facing financial difficulty, would be able to build what is being funded.”

He said money put towards skills and workforce improvement and TAFE will hopefully provide much-needed skilled labour to the property and construction sector.

“The Government acknowledges that material and labour constraints affecting the residential construction sector have limited the capacity for housing supply to keep up with growing demand. Greater support for the construction sector is needed, whether that be access to grants, offsets or other financial assistance to builders”.

“Without greater assistance, rents will continue to increase and housing affordability will continue to deteriorate.”

The demand is set to grow substantially, with CBRE’s Pacific Head of Research, Sameer Chopra, noting, “Post budget, we will need to bump-up our demand curves by 115,000 apartments, by 1.2 million square metres of warehouse space and by 500,000 square metres of office in light of the government’s revised figures on net overseas migration.

“Let’s hope the private sector can get some respite from construction costs to meet this demand,” added Chopra.

Demand on the rental sector will continue to be strong, with CBRE’s Purdon noting that, “The headline of 1.5 million net migration during the next five years is a huge number of people to accommodate.”

“Data shows us that the majority of new migrants start their lives in Australia in inner cities and approximately 70% are renters. These rental markets are trending below 1.0% vacancy rate, which is a record low in Australia and some of the tightest vacancy rates in the world.”

Andrew Purdon, Regional Director of CBRE’s Living Sectors – Capital Markets business

PropTrack‘s Senior Economist, Eleanor Creagh posed the question of whether the BTR measures were “enough to move the dial”.

She recalled that the Budget stated industry estimates of some 150,000 new rentals to appear over the next decade as a result of the BTR tax cuts. Creagh noted the addition would be small: “150,000 additional rental properties would be a just over 6% increase to our current total rental stock over the next decade.”

Australia’s population is also set to grow substantially, with the boosted levels of rentals to only cover a mere tenth of the forecasted growth in households.

“Based on ABS household projections out to 2033, 150,000 new rentals will cover just 9.6% of the forecast increase in the number of households,” said Creagh.

“Meaning with the faster than expected return of immigration and strongly rebounding population growth, 150,000 additional rental properties in a decade will aid rental supply shortages but probably won’t provide enough of an increase.”


PropTrack’s Creagh expects strong rent growth to continue this year, with Hobart and Canberra potential exceptions.

Creagh said that “Unfortunately, incentivising investors to return to the market is a missing ingredient in the budget.”

Renters likewise feel like they have missed out, with a survey of 2,500 renters by finding that more than one in two Australians feel they have been ignored by the latest Federal Budget.


According to Ian Sanders, the Head of Healthcare and Retirement Living Transaction Services at Colliers, the Australian Government’s funding for medical innovation, research, development, and local vaccine manufacturing has highlighted the significance of security and resilience in the healthcare system.

“While we saw a shift in cap rates for premium hospital and healthcare assets from 4% to the mid 4-5% range over Q1 2023 due to broader market fluctuations, the Budget allocation and strong reputation of Australia’s healthcare sector will drive investment flows when interest rates moderate mid-year.” Sanders said.

“Budget support for the aged care sector is also most welcome, but moderation of interest rates will also likely prove most powerful in supporting both aged care and specialist disability accommodation, with top tier operators witnessing a movement of cap rates by 25 and 75 basis points over Q1 2023, respectively.

“As demand for aged care facilities is destined to increase due to Australia’s ageing population, asset owners are facing crucial strategic decisions, with several choosing to future-proof by consolidating and enhancing scale.

“While cap rates for land lease communities currently range from 4.5%- 5.50%, this remains the most resilient home and retirement living asset class, which is tightly held due to multiple income streams and strong demand at value driven price points.”

Regarding the industrial and logistics sector, the Budget is conservative compared to recent years, and the Australian Government have announced a review of their Infrastructure Investment Program.

However, the investment in defence, energy, and renewables, together with strong population growth and the sector’s key fundamental drivers, will ensure it continues to outperform this year, according to Colliers’ Head of Industrial Capital Markets Gavin Bishop.

“We continue to witness soaring demand for industrial assets, with the highest performing market nationally – Western Sydney, experiencing land take-up by occupiers 54% above the five-year average, establishing a record at almost 290 hectares last year.” Bishop said.

“The national weighted average prime rent index accelerated by 7.3% in Q1 2023, up from 5.2% in Q4 2022, as tenants continue to compete for space.”

Overall, the Budget bolsters Australia’s strong economic platform, further propelling business investment and activity, providing greater confidence in the long-term outlook for Australian property, according to Colliers’ National Director of Research Joanne Henderson.

“The Australian property sector presents greater growth potential globally, due to our ability to weather market fluctuations, ensuring values and pricing certainty attract increased investment when interest rates are due to moderate mid-year.” Henderson said.

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