- BTR is touted as an option for those wanting to avoid presales challenges
- The industry is a mature, multi-trillion dollar category in Europe and the USA
- Many of these suburbs have overwhelming numbers of renters
Australia’s build-to-rent (BTR) sector has been touted to flourish this year, with a growing list of projects either reaching completion across the end of last year or commencing.
BTR is cropping up in literally every corner of Australia, including regional locations like Nowra to the national capital. The list continues, including Mirvac’s Melbourne project, Sentinel with BTR projects across the nation, a CFMEU joint venture in Bowen Hills and more.
The format has also been viewed as one solution to get major developments off the ground. A Savills report in September 2022 highlighted the fact BTR could be delivered to market with no presale requirement for construction and play a role in improving housing and rental affordability.
It has also been a good option for one company – Development Finance Partners’ (DFP) Matt Royal said DFP negotiated the change from built-to-sell in August 2022 for a 50-apartment project in Chermside, Brisbane.
“The project was heading towards failure in its current format, so we brought in our development management partners, Highgate Management, which specialises in distressed project work-outs,” said Royal.
Highgate Management worked closely with DFP to determine the best use for the site and together with Sydney-based co-living rental specialist, BNTO, they gained development approval for a fully reconfigured build-to-rent project featuring 138-micro-rental (co-living furnished apartments) over 11-levels.
“Under the new BTR configuration – targeting young, professional tenants – the project will deliver substantially higher returns than the 50-apartments previously approved and most importantly, as a BTR, it now stacks up as financially viable for its investors,” said Royal.
He also noted that “The appeal of build-to-rent is that the end project can either be sold in one line or it can be retained in whole or in part as a rental pool, to create cash flow and added to the balance sheet to give the developer greater borrowing strength for future projects.”
Australia’s best places for Build-To-Rent
- Paddington-Moore Park
- Balgowlah-Clontarf-Seaforth
- Balmain
- East Melbourne
- Drummoyne-Rodd Point
- Crows Nest-Waverton
- Cremorne Cammeray
- Bondi Beach-North Bondi
- Bondi-Tamaram-Bronte
A unique new piece of research has been conducted by Suburbtrends, developing a list of the best locations for build-to-rent in Australia, ranked by affordability with the top having 18% of average household income allocated to rents. Suburbtrends said: “For a BTR business, this offers plenty of upside as renters have cash.”
Calling on the power of artificial intelligence (AI) and ChatGPT4, the analysis combined demographic, property data, and transport and lifestyle scores. The research included data from Suburbtrends, the Australian Bureau of Statistics (ABS) and insights developed by ChatGPT.
Using AI has sped up the process considerably, Suburbtrends said what would have taken months, now takes minutes, with the only way being up.
The analysis considered a suite of Suburbtrends data including market inventory levels, median rents, vacancy rates, and rental affordability, as well as looking at developing a public transport score, that took into account proximity, frequency, availability, and travel time and distance for public transport, and lifestyle score, that took into account parks, green spaces, quality and quantity of local clubs and community centres, range and quality of retail outlets and services such as supermarkets, cafes, restaurants, and healthcare.
Suburbtrends told The Property Tribune:
“The maturity of the multifamily industry (build-to-rent) in the United States is something we definitely need to see occur in Australia in the coming decade. For any build-to-rent operator starting out in Australia, the market conditions could hardly be any better. It really comes down to selecting the best suburb and property site.”
Suburbtrends
Australia’s best places for build-to-rent were typically characterised by having an enviable quality of lifestyle (minimum score of seven) and good access to public transport (minimum score of six).
These locations were also typified by favourable market conditions including a maximum vacancy rate of 1.5%, minimum rental tenure rate of 20%, maximum unemployment rate of 2%, a high socioeconomic ranking (top 10%), maximum of five months inventory with an average of fewer than two months, and less than 2% new pipeline supply based on two-year approval totals.
Paddington-Moore Park
Located merely a train stop away from Martin Place, and with excellent access to the reasonably new light rail line heading down to UNSW, the area has superb access to cultural institutions along Oxford Street, and the sporting mecca of the SCG, Allianz Stadium, Moore Park Golf, and close to Centennial Park.
Among the factors for showing promise as a BTR location, Census data shows there are an abundance of townhouses (3,438) and units (2,577), and only 454 houses. Building approvals are 1.1% of established housing stock for houses and no approvals for townhouses and units. Inventory levels are also low, with less than a month for units.
Balgowlah-Clontarf-Seaforth
Located close to Manly, the area shows promise as a BTR location owing to its low building approvals for units and a low inventory level for the format. The suburbs also have a top a top socio-economic ranking of 10, and a low unemployment rate of 1.9%.
Over one in five (21%) residents rent in the area, with a vacancy rate recording a vacancy rate of 1.05%.
Asking rents for 2093
Balmain
Located in the inner west, with enviable access and views to the Sydney Harbour, Cockatoo Island, its own hospital, and the Dawn Fraser Baths.
No units are approved for the next two years, with inventory for units sitting at 1.36 months. Rents for units are around $650 with rental affordability considered excellent: 21% of income allocated to rent.
Rental yields for 2041
East Melbourne
Mostly comprised of Parliament, Fitzroy Gardens, and the Melbourne Cricket Ground, the locale is home to an overwhelming majority of units (1,762), with only 77 houses.
Over half of the locale (53%) are renters, with a rental vacancy rate of 1.41%. Median rent for units is $500 with rental affordability similarly excellent at 21%.
Drummoyne-Rodd Point
On the other side of the water to the west of Balmain, these suburbs are an attractive prospect for BTR with 32% of residents being renters and recording a vacancy rate of 0.87%.
The locale achieved a transport and lifestyle score of seven each.
Crows Nest-Waverton
Yet another Sydney location, the locale presents an attractive proposition for build-to-rent with only 822 houses but 5,815 units, according to Census data.
Demographics are conducive in the area, with a top socioeconomic score of 10 and low unemployment at 2%. Half of the residents are renters, with vacancy rates also low at 1.12%
Cremorne-Cammeray
Also located in Sydney’s north, 43% of residents here rent, with a similarly low vacancy rate of 1.12%. Renting in the locale will set you back $650 for units with the inventory for units at 1.31 months.
The locale has a good transport score of seven with a score of eight for lifestyle.
Rental yields for 2090
Bondi Beach-North Bondi
The iconic Sydney beach sees well over half of its residents renting at 57%, with renting in the area setting you back around $775 for units. The property type comprises the overwhelming majority of the dwellings in the locale, with only 848 houses, 1,447 townhomes, and 6,222 units.
Bondi-Tamarama-Bronte
These locales close by are likewise largely comprised of units with Census data showing 5,208 units, compared to 1,225 houses and 1,118 townhouses. One in two residents are renters, with units marginally less expensive to rent at $770. Transport and lifestyle are both highly scored, both nine.
