No longer just a property buzzword, build-to-rent is emerging as a new housing model in Canberra with more than 2500 rental apartments in the pipeline.
Local developers say the Canberra market is primed for the housing model and a change to the tax system announced in the federal budget will only help boost the sector.
But as they race to secure the first major build-to-rent investment deal for Canberra, developers are coming up against new challenges.
What's with all the fuss?
While most residential developments are built with the intention to sell each home to an individual buyer, the term build-to-rent refers to a building owned by one company or investor that rents out all the homes.
The benefits for renters can include stability through long-term leases and access to resident-only amenities, from fitness classes to concierge services or communal work spaces.
For investors, the housing model is seen as a low-risk, stable stream of income.
Mirvac is currently one of Australia's key build-to-rent operators with several projects operating or in planning across Melbourne, Sydney and Brisbane.
Renters at Mirvac developments are allowed to paint the walls and have pets in their homes. Residents are also not required to pay a bond and appliances are included in their home.
While it may be thought of as an affordable housing model, most build-to-rent developments are not designed as low-cost housing. In fact, some operators may look to charge higher than market rent, depending on the inclusions and amenities for residents.
More than 2000 build-to-rent units planned for Canberra
At least nine build-to-rent developments have been proposed for Canberra, with the potential for more than 2500 rental units combined.
Developer JWLand has two projects in the works. The first is 325 build-to-rent units as part of the proposed 875-unit Belconnen Central complex.
The developer is amending its plans for the project after an application was knocked back in April by the ACT planning authority.
JWLand is also proposing 128 build-to-rent units within its 730-unit Braddon Place complex and is hoping for development approval mid-year.
Developer Evri Group is also proposing a rental tower at 220 Northbourne Avenue, Braddon.
Former government offices were demolished earlier this year and now the developer is waiting for approval to get started on a mixed-used precinct with 430 build-to-rent apartments.
Other projects have been proposed for Denman Prospect, Dickson, Lawson and Gungahlin.
The ACT government is also leading the charge, releasing a block in Turner for sale last year designated for a build-to-rent complex with at least 270 dwellings. The territory government will subsidise 15 per cent of the development for affordable rentals.
Government pledges support for the sector
While there is plenty of build-to-rent infrastructure planned for Canberra, none of the developments appear to have secured an investment partner yet.
Investment firms and superannuation companies are among the traditional types of investors in the sector.
In the recent budget, the federal government announced tax changes in a bid to attract more foreign investment into the sector.
The government announced it would reduce the withholding tax rate for managed investment trusts on newly constructed residential build-to-rent properties from 30 to 15 per cent.
The homes must be held under single ownership for at least 10 years to qualify and owners must offer leases of at least three years for each dwelling.
The change brings the tax rate in line with other commercial property assets, such as offices.
Michael Dyer, economic analyst at Oxford Economics Australia, has tracked the build-to-rent pipeline across the country.
He said construction began on a little more than 5000 rental units nationally this financial year, and similar numbers are expected over the next two financial years.
"That's a pipeline we were locking in before we saw all of these policy changes," he said.
"So these taxation policy changes are very positive for the industry, and we expect it to really help boost that pipeline and boost supply."
Evri Group development manager Rob Speight agreed and said the changes would do "very positive things" to the sector.
"Build-to-rent in practical terms is a residential product, but in business terms is more akin to a commercial product," he said.
"By making these tax changes it aligns the build-to-rent product in a place where it belongs, as a commercial enterprise under single ownership."
More challenges could lie ahead
The relatively new housing concept brings with it new challenges for developers and investors.
The territory's robust rental legislation compared to other jurisdictions and site suitability are among the biggest hurdles.
JWLand head of development Michael Prendergast said investors were looking for sites located close to CBDs and public amenity.
"There's only so many sites available that fit that brief and they're harder and harder to get," he said.
Despite some challenges, there is a solid future for build-to-rent in Canberra, Mr Prendergast said.
"We've seen the queues of people lining up on a Saturday morning at these [rental] houses," he said.
"If build-to-rent really does take off, I think it will solve a component of the housing crisis that we have because more dwellings could theoretically be delivered at the same point for different purposes.
"If they're not all for build-to-sell and there's a portion [designated] for build-to-rent and they're not competing, it would obviously have a positive impact."
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