Build-to-rent sector picks up steam to help alleviate housing crisis

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Melbourne also accounts for 72 percent of the 2,200 completions expected this year, Sydney 13 percent and Brisbane another 15 percent.

Colliers national BTR director Robert Papaleo said the sector could play a significant role in alleviating expected housing shortages when migration resumes.

Data shows that Sydney housing starts in 2021/22 fell to a decade low of 7700.

Charter Keck Cramer data shows that housing starts in Sydney fell to a decade low of 7,700 in 2021 and 2022, compared to a peak of 31,000 in 2013. Housing starts in Melbourne fell from a peak of 24,300 in the year Year 2015 to 5900 .

Mr Papaleo said that while there is no shortage of BTR demand, there is a shortage of locations that fit the criteria of discerning investors.

“Some suburbs in Melbourne and Sydney may have approved plans, but at this stage in the market, investors are not comfortable getting involved.”

He said while BTR had previously focused on CBD, site selection has evolved towards suburbs with the right demographic mix, as well as hybrid retail-residential developments.

Regarding Sentinel, the first $700 million tranche of the PGGM venture will consist of approximately 2500 units, with the first two development sites already confirmed. Sentinel has been interested in the Australian market for a decade and in 2019 completed the first BTR complex – the eco-friendly Element 27 in Perth’s Subiaco.

“The usual reaction from the start has been that Australians don’t rent, the yields aren’t high enough,” said Michael Streicker, president of Sentinel Real Estate Corporation. “We thought there were enough supportive factors to move forward in Australia, first with our balance sheet and then with institutional capital.”

Mirvac’s first build-to-rent, the Pavilions at Sydney Olympic ParkRecognition:

Developer Novus, a spin-off from Mirvac, expects to complete its first local BTR project, Novus on Sturt, in 2024 – air spout and dog washing stations.

Novus is seeking planning permission for Novus on Harris, a 200-unit site in Parramatta’s Sydney satellite. Construction is expected to start in mid-2023.

The company is also eyeing at least two other locations in Melbourne and Sydney, and is also interested in the Brisbane and Canberra markets.

“There is certainly a BTR undersupply from a developer perspective, and it will only get worse as borders open and visas are enabled for skilled workers,” said Novus co-founder Jason Goldsworthy.

Blackstone property director Tom McDonald said Realm Australia’s first project – the 300-unit Kangaroo Point in Brisbane – has been fully leased 12 months after opening a year ago, “and we expect Realm Caulfield to meet similar demand will be exposed”.

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