As renting remains a preference for many young Australians (11.76 million according to the latest census), the property market welcomes a demand driven alternative to the traditional ‘build to sell’ format geared towards individual investment goals. Build to Rent (BTR) centralises the ownership of units within a development to a single owner prompting a mutually beneficial living arrangement between renters and the landlord.
BTR developments with greater traction, tend to mirror the socio-economic values of their prospective tenants with greater emphasis on star facilities, quality refurbishment, customer driven community and stability. The census also illustrates the aforementioned renters are Millennials and Gen Z who prefer to rent in aid of spending their disposable income on lifestyle. Being able to pack up and pursue career opportunities at a winks notice is a preference amongst many as is the need for higher value rent options in gentrified, inner-city Suburbs. This trend is also on the rise overseas, and particularly in the US.
Most notably, Mirvac is Melbourne’s most prominent developer in the BTR space with three projects underway across from the Queen Victoria Market, Brunswick and Northbank. A closer look at one of their completed developments- the LIV Indigo, which includes 315 apartments across two towers in Sydney’s Olympic Park, show’s a complex littered with new amenities ranging from theatre rooms to working spaces. Lease renewal after 12 months is also flexible with tenants nominating their preferred lease duration after their initial term. Andrew Hansen, Mirvac’s Nation Director of Operations cites the benefits of a centralised and institutionally owned building – “they’re cleaned and well maintained, they have amenities, and they’re community driven. It’s about attracting good tenants and retaining them”. The enthusiasm in NSW echoed on August 10, 2020 with enactment of the State’s Revenue Legislation Amendment (COVID-19 Housing Response) Bill 2020 (NSW) that reduced land tax by 50 per cent for the next 20 years for new BTR developments.
New South Wales is the first state to include land tax reductions pertaining to BTR projects. A recent PwC report (published September 2020) outlines “while some states (e.g., Victoria and Queensland) have ex gratia relief available for certain stamp duty and land tax foreign surcharges, these are not specific to just BTR projects, and do not extend to land tax in general (it only applies to surcharge stamp duty and surcharge land tax). The Victorian Treasurer issued guidelines on 1 October 2018 outlining the general principles and circumstances which will be considered in deciding whether an exemption should be granted. It is a requirement that “commercial activities of the developer or trust significantly add to the supply of housing stock in Victoria, either through new developments or redevelopment”.
BTR projects are geared towards rectifying societal problems such as unemployment in response to the recent pandemic. The same PwC report states that The Chief Commissioner must be satisfied that a significant amount of labour spent on the construction of the building involves contribution from: “the long-term unemployed, workers who are graduates, Aboriginal Jobseekers and workers with barriers to employment (such as persons with a disability)”. This suggests the growing popularity of BTR can be attributed to their holistic response to social needs whether it’s an emerging trend in the rent market or the need to upskill the labour force. This particular trend is also seeing a decrease in developers just developing in order to sell, as they have now realised that they can create wealth by building and holding the development, providing a secure income stream. Its appeal is that it’s a mutually beneficial arrangement between renter and developer as one party is solely responsible for high-grade living conditions while the other is happy to receive these for higher rent premiums.