Property consultancy Charter Keck Cramer has released insights from its Sydney State of the Market report on the Build to Rent and Build to Sell apartment markets for H2 2023.
The research has made clear that throughout 2023, the conditions across the Build to Rent and Build to Sell apartment markets remained difficult and continued to challenge the industry.
The supply and demand imbalance continues to widen and although recent Federal and State Government initiatives are seeking to drive new supply, bringing new stock to market remains a challenge.
For many there is difficulty and confusion reading the current property market given extensive new Government Policies along with distorted fundamentals, which are not behaving in accordance with long-term averages or pre-pandemic trends.
The market fundamentals necessary to support a Build to Rent living sector ‘of scale’ are somewhat in place across Australia. Charter Keck Cramer however reaffirms that the Build to Rent market is realistically only anticipated to emerge at scale after one to two market cycles – 10 to 15 years. This is in line with the emergence of the Australian purpose-built student accommodation (PBSA) sector and the UK Build to Rent sector.
The investment landscape is also very different compared to 12 months ago. Investor’s weighted average cost of capital (WACC) requirements have increased due to rate rises, construction costs continue to increase, and there is also a reduced desire to take on development risk (especially planning and now construction risk) in current market conditions, according to the summary.
Charter Keck Cramer also notes that several developers have failed to raise capital to proceed, and various projects are now even being repositioned back to Build to Sell apartment schemes. However, strong rental growth and Government policy changes are both in favour of the Build to Rent market.
