rent computer sign
Photo – Canva.
  • The pandemic has boosted the desire for BTR on the east coast
  • BTR could assist with the housing affordability crisis
  • Market not currently conducive but changes are underway in NSW and VIC

A salesperson might spruik build-to-rent (BTR) as that one thing that will magic away the housing affordability crisis.

The Property Tribune recently reported a majority of low to middle income earners will become long-term renters, that “Great Australian Dream” of homeownership nothing more than a fever dream.

A pandemic drive

The pandemic of 2020 seems to have driven the BTR market, with a number of new developments across the east coast exclusively doing just that: built to rent.

Western Australia has also seen some interest, The Property Tribune spoke to architects in Perth who noted previously halted developments in the Western Suburbs designated as build to rent would likely pick up momentum.

In a Westpac report on the recent buoyed interest in build to rent, Westpac’s Elizabeth Fry said that the move to BTR is one of the positives to come out of the pandemic, providing Australians with more options in the market.

In a recent PWC report, it was also noted that during the pandemic, the state of New South Wales changed taxation laws, providing “land tax relief for certain build-to-rent properties”. Victoria also provided tax reliefs for BTR.

The market and the consumer

It goes without saying renting has never been a major part of Australian life, homeownership is a key part of our DNA.

No wonder then, the rental market, laws, and other elements are underprepared for long term renting, all heavily skewed instead towards short term renting.

Australians have always seen rentals as short term, said Ms Fry, the properties usually owned by individual investors rather than large bodies or corporates.

Furthermore, the legal framework behind the scenes was referred to by a PWC report as “weak”. This isn’t new news either, The Wire National Current Affairs radio programme aired a piece on rental law reforms back in 2018, academics calling for an overhaul of renting legislation as rentals become more common and long term; current laws generally cater to a short term rental market and ignore what it means to call a place home in the long term.

BTR isn’t particularly conducive to investing either, a report by Allens Linklaters said taxation is a big hurdle, MIT, or managed investment trusts, considered a “conundrum”.

Changes to the way negative gearing works could be needed too, Allens Linklaters also noted there were at least five other hurdles too, including yields, tenure, Australian dream culture, financing constraints and GST.

PWC listed 6 barriers included: current tax laws, construction costs, cost of land, yields and preference for capital gain, lack of appropriate financing, unclear planning policy around BTR.

There seemed to be some overlap between the issues too, yield could be affected by issues like high turnover of tenants, and significantly shorter WALE or low WALE.

In the report by PWC, the BTR format for renting could also be good news for renting more broadly, providing significant levels of security for both the lessor and lessee. With institutional investors leasing, there’s likely more certainty in what the lease could look like, and with a wider spectrum of options and tenants, it lowers the risk for lessors significantly – suffice to say mom and dad no longer need to worry about squatters.

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This is article does not contain legal advice nor does it purport to represent legal advice. Any mentions about law and changes to the law are general only. For details, please seek your own, independent, professional legal advice.

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