What is build-to-rent?
The build-to-rent model sees a developer building an apartment complex and retaining ownership of the building once it’s complete. The apartments are then rented out by the developer, which manages and maintains the complex.
This represents a contrast to the traditional ‘build to own’ model, where a property developer builds a complex with the intent of selling units off to individuals, who can choose to live in them or rent them out as investment properties.
Because build-to-rent properties are, well, built to rent out, the developer will generally provide attractive rental terms and inclusions for tenants. That said, rent prices are typically higher than on the general market.
What are the benefits of build-to-rent properties?
Build-to-rent developments offer many potential benefits to tenants, including:
Flexible lease arrangements
Build-to-rent properties typically offer more flexible leases than a traditional rental scenario.
This could include longer lease terms, low or no rental bonds, furnished and unfurnished options, the ability to decorate however the tenant chooses, and the option to have pets without pre-approval.
Some developers also allow tenants to renew leases as often as they wish and offer capped-price rent increases.
Included amenities
Build-to-rent properties are designed to attract and keep tenants. As the focus is on the renter, the buildings typically include a number of amenities that other types of complexes might not feature.
These can range from pools, shared outdoor spaces, BBQ areas through to gyms, car charging stations, yoga studios, communal working spaces, community gardens, cinemas, and even doggy daycare services.
Cleaning and maintenance services may also be included or available at extra cost.
Affordable housing options
Some build-to-rent projects have requirements to include lower-cost housing to those people who might not otherwise afford it.
Though, these rents may still be higher than those on similar properties on the broader rental market.
Greener housing developments
According to the Green Building Council of Australia, because developers plan to hold build-to-rent projects long after construction, many are keen to lean into sustainability.
Over a third of build-to-rent developments currently in the pipeline are set to receive Green Star ratings, meaning they will be sustainably designed and fitted out with eco-friendly materials.
An average Green Star apartment could save tenants $871 a year in energy costs, a 2026 Green Building Council of Australia report found.
What are the downsides to build-to-rent properties?
There are several potential downsides to the build-to-rent model:
Affordability
As build-to-rent developments generally offer high-quality, or even luxury, apartments with additional perks, rents tend to be higher on average than other properties in their respective markets.
Though, the sector is still in its infancy in Australia, and an increase in the number of developments, as well as initiatives taken by state governments, could bring more competitive prices.
Buying a home vs renting
The housing market in many Australian cities is competitive, and young people often find that renting is easier and cheaper than buying.
While build-to-rent developments can offer stability for renters, the ownership of the homes themselves remains in the hands of developers and investors, meaning that those aspiring to own a home remain shut out.
Doesn’t remove all risk faced by renters
Developers behind build-to-rent apartments overseas, sometimes called large corporate landlords, have spurred complaints about significant rent increases and en masse evictions. The Australian Housing and Urban Research Institute suggests that more regulation is needed for the successful implementation of the ‘build to rent’ model in Australia.
How big is the build-to-rent sector in Australia?
Build-to-rent is a long-established phenomenon in Europe and the USA.
Here in Australia, the sector is still relatively small, but looks set to grow in years to come.
This growth will most likely come from inner city developments taking place in Sydney, Melbourne, and Brisbane.
What does the future hold for build-to-rent in Australia?
While build-to-rent is a small part of Australia’s property market, it appears likely to grow further, thanks to plenty of government support.
The Federal Government is providing certain tax incentives for developers leaning into build-to-rent, while various state governments are offering stamp duty and land tax discounts.
Perhaps unsurprisingly, given the country has been battling a rental crisis in recent years, build-to-rent developments have been springing up in most major cities. Quite a few are now open for business in Melbourne, Sydney, Brisbane, and Perth, with more on the way around the nation.
