Commercial and residential real estate company Colliers has released insights from its recently published Residential Investment Review.
Based on its findings, Colliers has stated that it expects increased investment in 2024 within the Build to Rent sector, followed by purpose-built student accommodation (PBSA), Land Lease Communities (LLC) and co-living.
The Australian residential market has an implied market capitalisation of $10.3tn, which represents the largest asset class in the Australian investment landscape, according to the review. Long term, it has demonstrated out-performance underpinned by low volatility returns.
Australia’s residential asset class remains dominated by owner-occupier residents and small, private local investors encouraged by favourable tax regimes, whilst foreign and domestic institutional investment has been disincentivised.
Given the dynamics of declining affordability, historic-low rental vacancy, elevated population growth and headwinds to new housing supply, institutional investor interest in Australia’s residential markets is increasing. Naturally, Build to Rent has so far been the primary residential opportunity to attract global capital, with its appeal reinforced by several changes to federal and state tax settings.
“Underlying strength of market fundamentals will continue driving investment into Build to Rent as well as other emerging residential segments.”
Colliers
Australia’s demographic attributes combined with its scale of opportunity and market regulations are particularly compelling in the APAC region, where this asset type is still relatively immature. Both incumbent and new entrant international capital, alongside increasing numbers of domestic institutions, are seeking exposure to the low-risk nature of Australia’s residential real estate, the review states.
The 2024 Colliers Global Investor Outlook survey again exemplified strong interest from investors to target the Build to Rent sector, with 14% of APAC respondents highlighting this as their preferred asset class within the region.
23% of European investors selected Build to Rent as their preferred sector, which is consistent with continued strong capital flows in 2023 from this origin where the sector is now well established. Significant capital was raised in 2023 from both local funds and foreign investors for a series of new funds, project take-outs and fund recapitalisations.
Given the relatively early phase of the Australian market, capital is primarily supporting Build to Core strategies of both domestic and international managers. A high number of managers will continue seeking new capital in 2024 to activate their strategies and unlock further new projects.
