Investment into Australia’s build-to-rent segment hits record highs

Thanks to Greystar’s largest capital raising of $1.3 billion.

The past 18 months in Australia has proven to be a challenging year for nearly all real estate sectors, according to Savills. 

Despite significant headwinds, investment into Build to Rent has performed remarkably well and this year has seen record levels of investment into the Australian sector.

Paul Savitz, Director, Operational Capital Markets at Savills Australia, said this was led by Greystar securing its largest capital raising to date to support new projects in Australia. The $1.3bn raising for the Greystar Australia Build to Rent Venture I Fund backed by institutional investors Ivanhoé Cambridge and APG Asset Management is planned to deliver upwards of 5,000 dwellings.

Mr Savitz is seeing a growing demand pool as private rental was once a route to home ownership. 

“Now it is a destination for many. Ownership has been delayed, become unattainable or been “traded off” for flexibility and being able to live in desirable locations.

“Most renters are younger households who are not yet ready or able to buy a home, which is being made harder through rising house prices across major cities such as Sydney, Melbourne and Auckland in New Zealand, and stagnating wage growth.

“With household incomes expected to remain subdued and stimulus winding down, it is likely affordability will continue to be a challenge.

The current pandemic has demonstrated that cities that offer affordable and high-quality living, will be more competitive, resilient, and attractive to people and businesses.”

According to Savills Australia data, Build to Rent housing has the potential to provide long lasting community benefits, with greater housing choice for tenants who would have access to high-quality dwellings, in a stable rental environment. 

Increased rental security may also have wider social and economic benefits, with tenants better able to establish themselves in a community. 

“Since Build to Rent schemes are typically institutionally backed and owner-operated, the building must perform as an asset for both the investors and residents” said Mr Newland.

“Investors, targeting long-term income streams, have a vested interest to ensure the wider environment they create is high-quality and well-integrated into the wider community. Tenants are more likely to stay

longer and pay a premium for this quality of experience”.

Development Pipeline

Australia’s Build to Rent stock now includes 3,000 completed units with a further 4,200 units under construction. The future pipeline currently stands at 21,450 units, including those in the preapplication

stage. This brings the total size of the sector to around 28,650 units once built. The pipeline is unbalanced, dominated by developments in Melbourne, where 65% of all pipelines is proposed.

Land availability and land value are the main factors supporting the growth of the nascent sector in Melbourne, over Sydney.