Build-to-Rent (BtR) is a hot topic in Australia’s housing sector, and for good reason. But can it fix the housing shortage?
BtR is commonplace internationally (known as multifamily in US) but is starting to get traction in Australia. Traditionally Australian apartments have been built and sold individually. ie. Built to Sell. But BtR projects are designed, owned and managed by a single group enabling a more immersive rental experience.
That experience however does not come cheap. How much extra rent would you pay for an apartment with access to a podcasting room, an infrared sauna, an ice bath, a roof top plunge pool, a wellness centre, co-working space, lounges, a library, friendly concierge, and more?
Some one-bedroom furnished BtR apartments rent for $800 – $850/wk. Remember the median rent for a 1-bedroom apartment in Melbourne is $550/wk. While that is a massive gap, as pressure mounts on the rental market and housing generally, BtR is stepping up as a modern, well-managed, high amenity option. It’s playing an increasingly important part in the housing solution. While its influence is growing, it’s still early days. BtR has a long way to go before it can truly shift the dial on our housing shortage.
At The Urban Developer’s Build-to-Rent Summit last week, experts from investment, development, operations and design disciplines, met to discuss BtR in Australia. It’s clear that the sector is maturing quickly, both in scale and sophistication. From high-quality projects already delivered, to a promising development pipeline, BtR is no longer just a concept on investor pitch decks. It is now a real and growing force in the market but the financial return offered to capital investors is tight.
Robert Papaleo – Head of Living at Colliers delivered a snapshot of BtR’s national footprint, highlighting how the sector has established itself in major capital cities, particularly Melbourne. With 60% of all BtR projects located within five kilometres of CBDs, it’s evident that developers are targeting areas with strong tenant demand, employment hubs, and public transport access. This strategy has created a dense and desirable cluster of projects that appeal to renters looking for security, convenience, and lifestyle.
The appeal of BtR is more than just location. FK Architects Partner Nicky Drobis – Head of Design, showcased the evolution of common amenity in Melbourne BtR developments. These have moved on from basic pools and gyms to include more integrated spaces that bring the community together and add value like co-working space, fitness and wellness studios, cinema rooms, roof top plunge pools, bookable dining rooms etc. These aren’t just apartment blocks. They’re vertical neighbourhoods designed with the resident in mind. For tenants, it means high quality facilities, community activities and integrated building services. Three things in short supply in much of the private rental market.
While the design encourages communal activity, true cohesion and lasting communities can be a challenge if residents turn over frequently. People are less likely to invest real time in each other if they are not going to be neighbours for long. Renters are transient by nature. There is a risk, that renters paying super premium rents will turn over even more often making sticky communities challenging.
But activities of convenience with a purpose like a gym session or book club, or dog walking could work. It is reported people in co-working spaces are getting to know each other more and fostering connections.
So the question is how long will people stay and keep life in the buildings social fabric when they are paying such high rent. Does the extra amenity and services justify the cost.
BtR is attracting some big investors. Edward Quinn – Principal at Franklin St. pointed out, BtR developments are attracting everything from private domestic capital to offshore institutional money. However Australian institutional capital remains the dominant player. With many developments now professionally managed and offering 24/7 support, renters benefit from a level of service that’s rare in traditional rental housing.
Despite all this, BtR is still a small player. Plus, it is expensive to build and occupy making new projects a challenge.
Despite its growing presence, BtR accounts for a fraction of Australia’s total rental housing stock. While 6,000 units are set for delivery in 2025, it is forecast to fall to just over 2,000 by 2028. It is also dwarfed by the scale of total supply and the ever-increasing demand. Melbourne alone welcomed just over 140,000 new residents last year, with most new arrivals funnelling into an already tight rental market.
Affordability is another major limitation. Many BtR projects are pitched at the upper end of the market. They must achieve high rent to justify the cost of development and construction. One-bedroom apartments in BtR buildings such as LIV Aston and Home Docklands, are renting for as much as $800 – $850 per week. That’s significantly higher than Melbourne’s median one-bedroom rent of around $550. While these premium offerings attract higher-income renters, they remain out of reach for a large portion of the market.
So where does this leave us?
BtR is clearly playing an important and growing role in reshaping the rental market. It is lifting the standard of amenity and services and attracting new capital into a sector. In doing so, it is alleviating pressure on parts of the rental market by catering to renters who might otherwise compete for traditional rental stock.
In broader terms BtR is not just inner-city apartment buildings. It is increasing evolving to include dedicated student accommodation housing, co-living, land lease communities and more specialised accommodation servicing key workers or NDIS / SDA.
As the BtR market matures it will hopefully diversify to support a broader market. This includes delivering more projects in middle and outer suburbs, incorporating generally affordable housing, and tailoring developments to suit a broader demographic. Encouragingly, some of this is already happening. But to make a real dent in the housing crisis, BtR will need support from governments, planners, and financiers to build at scale and across multiple price points.
BtR won’t fix the housing shortage on its own. But it’s quickly proving it has a valuable role to play that could become much bigger.
