build-to-rent grows and draws international investment as viability improves

build-to-rent grows and draws international investment as viability improves

February 2019
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Build-to-rent grows and draws international investment as viability improves

The dip in land-prices across Australia’s east coast has presented some new opportunities for investors and developers in the form of the build-to-rent sector.

The emerging asset class, which currently has just 3,500 units in the national pipeline, is predicted to receive a boost as the viability of such projects is enhanced. CBRE’s Australia Real Estate Market Outlook 2019 report predicts that the adjustment inland prices may just be what the sector needs to combat the 30% withholding tax and other hurdles.

This is a welcomed change for an asset-class that has an arguably premature reputation for providing less favourable returns than other sectors.

In spite of this reputation, some developers are steaming right along, securing their place with a long-term vision. Global affordable housing operator Habitat, is set to transition 176 apartments from its new Sunshine Coast development to their existing 650 build-to-rent homes.

The build-to-rent philosophy has also been taken a step further by Assemble. The Assemble Model focuses on social responsibility delivering accessible and affordable urban housing in a convivial, community-minded manner. Their pilot project in Kensington, Victoria, received widespread attention and quickly became fully allocated.

Build-to-rent is also drawing the attention of large global players too. Oxford Properties, the real estate arm of Canadian pension fund giant OMERS, have recently acquired a $3.4 billion Investa Office Fund platform and have indicated that they will “spending some time looking at” the build-to-rent sector.

The company currently manages AUD$61 billon worth of assets world-wide and locally owns the rights to develop the office component of the $2 billion Central Barangaroo project.

Backed by big capital strength, Oxford will be seeking multiple development and asset management strategies within Australia, which it believes still has “plenty of value left.”

"We entered via offices, we will stay in offices, but being here (Australia) gives us the opportunity to look at other asset classes.” Oxford's head of Europe and Asia Pacific, Paul Brundage said.

"Our challenge is to grow. If we go with one-off buildings in Sydney and Melbourne which are fully let, we cannot generate the returns we want.

"We are going to build relationships with the local authorities and try to find some development sites."

Mr Brundage has indicated that there is potential to overcome low yields in multifamily or build-to-rent apartments through ground-up development. "We have a growing multifamily build-to-rent business in the UK and North America... those are the kinds of things we could significantly increase the amount of capital invested already."

Mr Brundage also indicated the potential for opportunities to present themselves through the dip in the housing market.


* Photo of Assemble's Pilot Project in Kensington