The recent tax reforms announced by the Australian Government in support of Build-To-Rent (BTR) housing are a game changer for the real estate industry.
The reduction of the Managed Investment Trust (MIT) withholding tax rate from 30 to 15 per cent, along with the increase in depreciation benefits from 2.5 per cent to 4 per cent per year for new BTR projects, will make it easier for foreign capital, particularly from Global Institutional Pension Funds, to invest in the Australian BTR market.
According to Marcus Neill, Cushman & Wakefield’s Director of Development Sites & Build-To-Rent, Victoria, this will be crucial in meeting the demand for rental accommodation in Melbourne, where almost 65% of BTR activity is currently concentrated.
"As a member of the Cushman & Wakefield – Melbco BTR team, we welcome this development, which will significantly benefit the 50+ BTR groups we work with, both in terms of capital and operators.
The current shortage of traditional BTR apartments in Melbourne is alarming, with only 6,500* completed in 2022 - the lowest in over 10 years. This falls far short of the 13,500* apartments needed annually to keep up with demand and forecast immigration. Moreover, vacancy rates are at an historical low of almost 1.00%*, a trend that is likely to continue for the next 2 years. This creates an urgent need for more rental accommodation in Melbourne.
The scarcity of land within 15km of the Melbourne CBD has meant that demand for BTR housing has continued to rise. The right sites offering between 200-400 apartments within 1km of a train station are in high demand, making it necessary for the BTR industry to keep up with this trend.
We forecast that rents will continue to rise between 3.50% per annum to up to 5.50%* over the next 3-5 years in some areas, even though some inner suburbs have already witnessed rent increases of almost 35%* since early 2021. The new tax reforms announced by the government will provide a much-needed boost to the BTR industry, enabling us to meet the increasing demand for rental accommodation in Melbourne”.
Mr Neill believes the Australian Government's recent tax reforms in support of BTR housing are a positive development for the industry and looks forward to working with Cushman & Wakefield’s clients to capitalise on this opportunity and meet the growing demand for rental accommodation in Melbourne.
