Build-to-rent sector tipped to develop 10,000 apartments a year by 2023

25 September 2020

The success of the build-to-rent sector is set to continue with predictions that 10,000 apartments could be developed each year by 2023.

A UBS report says the forecasts can become reality if companies like Mirvac continue to grow and governments throw in their support with tax and planning policy.

UBS analysts Tom Bodor and Grant McCasker spoke to the Australian Financial Review.

“There are five large operators scaling up fast and the potential for a range of additional large and small operators considering entry to the BTR market,” they said.

“Both debt and equity capital is supportive and we see 10,000 units per annum as possible, provided government policy is supportive.”

Mr Bodor told AFR that rental demand was strong and especially so among younger demographics.

“Over the very long term…residential growth has been strong and there have been low levels of rental vacancy.”

“Build-to-rent should outperform the average in our view, reflecting professional management and better quality stock.”

The BTR sector is currently being helped along by ongoing record-low interest rates, less supply from the alternative build-to-sell market and capital demand for low-risk rental income streams.

“We think the BTR sector is currently underestimated by the listed market, with many investors remaining cautious around the perceived low returns and limited potential for the sector to scale quickly,’ Mr Bodor told AFR.

“Global private capital is already entering the Australian BTR market and we expect this to continue, fuelled by low interest rates and positive experiences in the sector in offshore markets.”

There are currently over 11,000 BTR units being developed currently across 30 projects with nine major players developing and committing significant resources to the sector.


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