Attention Millenials…Experts predict build-to-rent revolution coming to Australia.

5th December 2017

The number of homes built explicitly to rent out is set to take off in Australia over the next five years, housing industry experts have predicted.

They’ll be nothing like we’ve seen before, either, with building managers looking after apartments, staff to look after leases and run “community” events, and onsite cafes, shops and work spaces. There will also be long-term rolling leases with the potential for tenants to transfer to other allied blocks in different areas if their jobs or circumstances change.

It’s a lifestyle choice of millennials, young families and downsizers, and the choice of a growing number of people. There are currently 2.5 million rental homes in Australia and we see that growing in the next few years with purpose-built apartment buildings for the rental market. It’s well-established overseas but, in Australia, it’s a new form of housing and there’s a lot of excitement around it.

Such homes will also create a new asset class, often for large institutional investors like super funds, as well as for overseas capital, with some degree of government involvement and support paving the way forward.

As the rate of capital growth slows from softening property prices, those rental yields will become more and more important, the Australian Housing and Urban Research Institute conference heard.

Currently 31 per cent of households in Australia rent, of whom nearly 30 per cent are millennials, aged between 16 and 35, 24 per cent are Baby Boomers, 21 per cent are Generation X (aged 35 to 51) and 20 per cent Generation Z – the under 16s. Of those Millennials, Ernst & Young Australia research has found that 66 per cent believe they will never own their own home.

The real driver for build to rent in 2017 is those millennials. They are very different in their wants and needs.

They want to be near services and jobs and entertainment facilities, and they are looking for on-site flexibility and having places to work within their buildings.

The time has never been riper for an expansion of build to rent with unaffordable house prices, people staying in education longer, a more mobile labour market and the Millennial embrace of the sharing economy. As a result, build-to-rent homes can increasingly be seen as a tradeable asset like building a hotel or retirement village, with a rent roll attached.

The new class of tenants attracted to build-to-rent housing will be happy to hear it’s likely to be of a similar standard to build-to-sell, as the finishes and fittings will have to survive various moves, and the white goods installed will need to be more durable and long-lasting.