The “build-to-rent” (BTR) industry in Australia is expected to do well this year, as more and more projects were either finished or started at the end of 2018.
BTR is spreading to almost every part of Australia, from small towns like Nowra to the national capital. Mirvac’s project in Melbourne, Sentinel’s BTR projects all over the country, a CFMEU joint venture in Bowen Hills, and more are on the list.
People have also thought of the structure as a way to get big projects off the ground. In September 2022, a Savills study pointed out that BTR could be put on the market without needing to be sold first and could help make housing and rentals more affordable.
It has also been a good choice for one company. Matt Royal of Development Finance Partners (DFP) said that DFP arranged the change from built-to-sell in August 2022 for a 50-apartment project in Chermside, Brisbane.
“As it was, the project was going to fail, so we called in our development management partners, Highgate Management, who are experts in saving troubled projects,” said Royal.
Highgate Management worked closely with DFP to figure out the best way to use the site. Together with BNTO, a Sydney-based co-living rental expert, they got development approval for a fully redesigned build-to-rent project with 138 micro-rentals (furnished co-living apartments) spread out over 11 floors.
“Under the new BTR configuration, which is aimed at young, professional tenants, the project will bring in a lot more money than the 50 apartments that had been approved before, and most importantly, as a BTR, it is now a good investment for its investors,” said Royal.
He also said, “The appeal of build-to-rent is that the finished project can be sold in one line or kept in whole or in part as a rental pool to generate cash flow and add to the developer’s balance sheet to make it easier for them to borrow money for future projects.”
The best places to build to rent in Australia
- Paddington-Moore Park
- Balgowlah-Clontarf-Seaforth
- Balmain
- East Melbourne
- Drummoyne-Rodd Point
- Crows Nest-Waverton
- Cremorne Cammeray
- Bondi Beach-North Bondi
- Bondi-Tamaram-Bronte
Suburbtrends did some unique new research and made a list of the best places to build-to-rent in Australia. The list is ranked by how affordable the rents are, with the best places having rents that take up 18% of the average family income. Suburbtrends said, “This is a good thing for a BTR business because renters have cash.”
Using the power of artificial intelligence (AI) and ChatGPT4, the study combined data on people, places, how they get around, and how they live. Data from Suburbtrends, the Australian Bureau of Statistics (ABS), and observations from ChatGPT were used in the study.
Using AI has greatly sped up the process. Suburbtrends said that what used to take months now only takes minutes, and the only way to go is up.
The analysis looked at a variety of Suburbtrends data, such as market inventory levels, median rents, vacancy rates, and the cost of renting. It also looked at creating a public transport score, which took into account the location, frequency, availability, and travel time and distance of public transportation, and a lifestyle score, which looked at parks, green spaces, the number and quality of local clubs and community centers, and the range and quality of retail outlets.
The Property Tribune was told by Suburbtrends:
“In the next ten years, we need the build-to-rent business in Australia to reach the same level of maturity as it has in the United States. If you want to start a build-to-rent business in Australia, the market conditions could not be better. It comes down to choosing the best neighbourhood and property spot.”
The best places to build-to-rent in Australia usually had a high quality of life (at least a score of 7) and easy access to public transportation. (minimum score of six).
Favorable market conditions in these places included a maximum vacancy rate of 1.5%, a minimum rental tenure rate of 20%, a maximum unemployment rate of 2%, a high socioeconomic ranking (top 10%), a maximum inventory of five months with an average of less than two months, and less than 2% new pipeline supply based on total approvals over the past two years.
Paddington-Moore Park
The area is only one train stop from Martin Place and has great access to the fairly new light rail line that goes down to UNSW. It also has great access to the cultural institutions along Oxford Street and the SCG, Allianz Stadium, Moore Park Golf, and Centennial Park.
Census data shows that there are a lot of condos (3,438) and units (2,577) but only 454 houses, which is a good sign for the area as a BTR. Building permits are given for 1.1% of the homes that are already there, but none are given for condos or units. The number of units in stock is also low, with less than a month’s worth.
Balgowlah-Clontarf-Seaforth
The area has low building approvals for units and a low amount of inventory for the BTR format. It is close to Manly, which makes it a good place for a BTR. The suburbs also have a low jobless rate of 1.9% and a high socioeconomic ranking of 10.
Over 20% of the people who live in the area rent, and there are only 1.05% of empty homes.
Balmain
In the inner west, it has great access to and views of Sydney Harbour, Cockatoo Island, its own hospital, and the Dawn Fraser Baths.
No new units will be built for the next two years, and there are only 1.36 months’ worth of units on hand. The rent for a one-bedroom flat is about $650, which is thought to be a very good price.
East Melbourne, Australia
Most of the 1,762 flats in the area are in Parliament, Fitzroy Gardens, and the Melbourne Cricket Ground. There are only 77 houses in the area.
Over half of the people in the area rent, and only 1.4% of the rentals are empty. The median rent for a flat is $500, and 21% of renters can afford it.
Drumoyne-Rodd Point
On the other side of the water, west of Balmain, these areas are a good bet for BTR because 32% of the people who live there rent and there are only 0.8% of empty homes.
The area got a score of 7 for both transportation and way of life.
The Crows Nest-Waverton
Census data shows that this area, which is also in Sydney, has only 822 houses but 5,815 flats, making it a good place to build-to-rent.
With a top socioeconomic score of 10 and a low jobless rate of 2%, the area is a good place to live. At 1.12%, the turnover rate is also low, and half of the people living there rent.
Cremorne-Cammeray
Also in the north of Sydney, this area has a vacancy rate of 1.12% and is home to 43% of the city’s renters. Units in the area rent for $650 per month, and there are 1.31 months’ worth of units on the market.
The area has a good score of seven for transportation and an eight for living.
Bondi Beach-North
More than half of the people who live near the famous Sydney beach, 57%, rent. Units in the area rent for about $775 per month. With only 848 houses, 1,447 townhouses, and 6,222 units, this type of property makes up the vast majority of the homes in the area.
Bondi-Tamarama-Bronte
Census records show that there are 5,208 units in these nearby areas, while there are only 1,225 houses and 1,118 townhouses. One in two people live in rental homes, which are a little cheaper to rent at $770. Both transportation and lifestyle got a nine, which is a high number.
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