Property consultancy Knight Frank has released insights from its Australian Q4 2024 Build to Rent market update, noting that the rental market remains tight despite positive Build to Rent delivery.
Knight Frank reports that 2024 saw a gradual return to a more stable rental growth market following the unprecedented levels of growth seen in the post-pandemic bounce. Build to Rent rental growth forecasts currently remain ‘weighted’.
The challenging development environment will restrict supply in the short term across the entire residential sector, helping to sustain robust rental performance.
A record number of 3,227 units launched in Melbourne last year. Some Melbourne-based operators are utilising incentives, typically in the form of a one month rent free period (although structures vary), as a tool to accelerate let up rates during the mobilisation period. Once stabilised, Knight Frank expects the use of these incentives to be phased out.
Historically, this number of units is substantial for the Build to Rent sector. However, when compared to the wider private rental sector (PRS), this only represents a small fraction in the city.
According to Knight Frank, existing Build to Rent supply in Victoria accounts for just 0.8% of the rental market (by number of households). When combined with Build to Rent units that are under construction, this remains sub 1%.
At this early stage of the Build to Rent market evolution, any concerns around over-supply are short-sighted and there is significant room for growth across all key cities.
The rental market is highly seasonal in nature and there is a considerable uptick in tenant activity during the peak months of January and February.
Operators will be looking to capitalise on this increased tenant demand throughout 2025, especially for those schemes still in the lease up phase that have come online during quieter periods.
