The Build-to-Rent (BTR)apartment model has gained popularity among investors in Australia in recent years. Unlike traditional residential developments, BTR projects are purpose-built for rental from the outset and managed by the owner or operator. According to a 2022 Ernst and Young (EY) report, the BTR sector in Australia is valued at $16.87 billion, constituting approximately 0.2% of the total residential housing sector. This value encompasses 23,000 apartments, comprising 3,900 units already completed and over 19,000 units in various stages of development.
Recently introduced BTR legislation in the Federal Parliament, part of the Treasury Laws Amendment(Responsible Buy Now Pay Later and Other Measures) Bill 2024, aims to enhance the attractiveness of BTR investments. Proposed changes include reducing the Managed Investment Trusts (MIT) withholding tax rate from 30% to 15% and increasing the capital works deduction from 2.5% to 4%. While these amendments are expected to make the BTR model more appealing to Australian investors, there remains a need for further alignment with other property investment models.
Originating from the UK, where the concept has seen significant growth, the BTR sector in Australia is still evolving. By the end of 2023, the UK had completed 100,000 BTR units with an additional 54,000 under construction, whereas Australia had completed only5,398 units with 11,582 under construction and 21,627 in the planning stage.
The design and cost implications of BTR developments are substantial. Key considerations include ongoing operational and maintenance costs, which are borne by the owner. Therefore, durable and low-maintenance materials are preferred for external building fabric and common area finishes. Design decisions also focus on implementing efficient maintenance systems and high-end amenities such as swimming pools, yoga studios, co-working spaces, and communal gardens to foster community and resident well-being.
These design requirements significantly impact construction costs. For instance, higher costs are anticipated for durable finishes in general corridor spaces, luxurious communal amenities, and apartment interiors equipped with robust materials and energy-efficient systems. Detailed cost planning is essential, incorporating factors like energy consumption analysis, maintenance access, and life cycle costing to inform both capital expenditures and ongoing operational costs.
While the BTR model shows promise in Australia's property market, continued legislative support and strategic design considerations are crucial for its growth and competitiveness alongside other investment options.
