Fri. Sep 22nd, 2023
    Build-to-Rent Sector Faces Challenges in Sydney

    Experts suggest that the build-to-rent (BTR) housing sector in Sydney is facing obstacles due to the high cost of land and a lack of viable sites. Despite a growing pipeline of projects indicating a potential build-to-rent revolution in the city, experts believe that the scarcity of suitable sites hinders the sector’s growth.

    Build-to-rent involves developers constructing apartment blocks, retaining ownership, and leasing them to tenants. The property industry considers BTR as a crucial solution to the housing crisis in the country. Recent data from KPMG reveals that Melbourne dominates build-to-rent activity in Australia, with projects primarily concentrated near the CBD. On the other hand, Sydney has only a few scattered sites in secondary centers like Parramatta and Macquarie Park.

    Kylee Anastasi, a partner at KPMG, stated that although BTR has the potential to disrupt the rental market positively, it remains less attractive to foreign investors due to their expected rates of return. Additionally, BTR might suffer from an image problem, with tenants typically paying above-market rent and the industry positioning it as a “premium” product.

    Experts argue that the perception of BTR as a luxury option needs to change. Angela Buckley, head of build-to-rent at Mirvac, emphasized that these properties are aimed at everyday people and should not be seen as exclusive to the wealthy.

    An analysis by EY for the Property Council indicates that BTR accounted for only 0.2% of Australia’s residential property market in 2022, compared to 12% in the US. Sydney has shown potential for BTR sales activity, overtaking Melbourne in 2022 and 2023. Private developers and institutional investors are increasingly acquiring larger land sites in Sydney, considering BTR as a more viable option due to the high land prices.

    While the New South Wales (NSW) government has 25 active BTR proposals in various stages, many of them face opposition from local councils. The high cost of land in Sydney and uncertainty regarding federal government policy changes are cited as reasons for the limited confidence investors and developers have in committing to BTR projects.

    In conclusion, the build-to-rent sector in Sydney is facing challenges due to the expensive land prices and insufficient viable sites. Experts believe that addressing these issues and changing the perception of BTR as a luxury product are crucial to the sector’s growth in the city.

    – KPMG
    – The Sydney Morning Herald
    – EY for the Property Council