Knight Frank’s latest report, ‘Breaking the Shackles – the rise of BTR’, highlights that after a long gestation period, the Build to Rent sector in Australia is thriving and the development pipeline is quickly increasing.
Although successful, a combination of cyclical and structural supply-side impediments have, until recently, held back development, according to the report.
However, many of these constraints have either abated or been removed and the sector appears set to expand rapidly over the next decade.
After a difficult period of elevated construction costs, a wave of construction activity is now underway, with an estimated 8,350 apartments under construction nationally (August 2023) and a further 12,900 apartments approved for development in the near term.
Currently, the Build to Rent market is most advanced in Melbourne, which leads the way among the major cities with 4,920 units under construction and 8,250 approved.
Brisbane is next with 1,743 units under construction and 2,567 approved, followed by Sydney with 1,529 and 965 apartments respectively.
To date, development has focussed on one- and two-bedroom apartments, representing 38% and 44% of overall apartments respectively.
While activity has naturally coalesced around the largest cities in the first instance, many of the drivers of Build to Rent apply equally to smaller cities.
Contrary to popular perception that the market is largely confined to Melbourne and Sydney, cities like Perth and Canberra are also seeing signs of growing interest, partly owing to relatively low land values and strong rental yields.
Knight Frank has found that whilst the sector offers large-scale capital deployment opportunities for investors and developers, it is also providing much needed housing and additional support to Australia’s undersupply.
The report indicates that the pipeline of potential developments is likely to expand further as developers seek to position themselves to benefit from the current surge in rental growth.
