BtR Ready for Lift-Off as Settings Close in on Perfection

A decade into embracing the build-to-rent asset class, Australian property is catching up at pace, while putting a uniquely Antipodean spin on the sector. Developers and stakeholders say that the class is spreading across the eastern seaboard as tenants and investors catch on, but perennial complaints over taxation settings are holding back a wave of international capital. And more transactions are needed before valuations can be fairly assessed, which will help unlock the investment eager to help the sector solve the housing crisis. BDO real estate partner Luke Mackintosh told The Urban Developer that, with almost 10 years experience since build-to-rent launched at scale and with institutional backing in Australia, “the concept has been proven”. Mackintosh was lead author on BDO’s 2026 Build to Rent report, which found that the build-to-rent sector is not just growing in volume, but maturing as capital seeks to deliver specific products and targets particular markets. “There’s slightly different capital pushing into Sydney, with the likes of Coronation and Conquest … but we’ve also seen a number of factors going into those better planning regimes, which make it a little bit faster,” Mackintosh says. “Those holding costs associated with getting planning permits were really prohibitive in New South Wales, but that’s come back a little bit as well. “Insto build-to-rent doesn’t need to pre-close. You can go and build it without a lot of those holding costs associated with trying to get to financial close.” According to BDO research, Melbourne currently has $8 billion of build-to-rent assets operational compared to Sydney’s $1.9 billion. However, the development pipeline out to 2032 sees 740 per cent growth in Sydney, compared to Melbourne’s relatively humble 132 per cent. ▲ Scape’s PBSA business was the foundation of The Living Company’s build-to-rent portfolio. Urbis partner Stephen White says that Sydney is seeing “some pivoting from build-to-sell projects under construction to build-to-rent, to get some tax benefits and reduce the outgoing as well as holding onto the asset long-term”. “It does take out a big deal of planning risk when there’s some approval in place,” White says. “Similar things are happening in Victoria, but they do have some new development assessment guidelines that are hampering build-to-rent a little bit more.” Planning structures are broadly supportive of built-to-rent, and proposals are “not encountering philosophical issues, particularly in this affordability crisis,” according to White. “Consent authorities are understanding that it’s about diversity and choice”. More sales needed to embed values, but FPAD biting Kio founder Sam Bisla was formerly head of living at Hines, which acquired two Arklife built-to-rent assets in 2024. The sale of 28 Robertson Street ( pictured at top) , overseen by Jessie Zhuang, was “the only stabilised asset to transact” in Australia to date, Bisla says. “It’s pretty thin on the ground. There’s been a few sales prior to the end of construction or before leasing completed, but this was a proper on-market transaction. “We still have a decent amount of education to do in valuations. Everyone’s trying to understand how to quantify and price.” Those transactions are particularly important to help valuers build a case, and international investors understand the risks and returns in the sector. But the Foreign Purchaser Additional Duty taxes at state level are making purchases unviable while reducing state revenues, Mackintosh says. ▲ Assemble broke ground on a 435-home build-to-rent project in the ACT in March. “FPAD was only ever brought in to discourage foreigners from buying mum and dad housing, but the governments not getting anything on those transactions because they’re not transacting. “The key is to own them long-term. But you need to have a liquid market in order to show the valuation.” Across BDO’s valuation of 35 projects, average initial yield sits at 4.4 per cent, and average development margin 6.72 per cent. “They need to be able to trade,” Mackintosh says. “If they can’t trade, they’re not worth anything. Capital’s not flowing up, and the next one’s not getting built.” According to Mackintosh, treatment of build-to-rent as a residential asset under GST rules, instead of a commercial asset, is also a major problem for the sector. ▲ Greystar’s has a 1300-home build-to-rent portfolio in Melbourne and topped out its first Sydney project in May. Absentee owner surcharges and classification of residential stamp duty as a fee for superannuation investors are other changes that need to be made. “Investors don’t want any incentives. They want build-to-rent to be treated the same as other institutional grade assets,” Mackintosh says. However, Bisla says that tax “is blamed for a lot of sins... we say things like the FPAD is punitive, but tax is a hurdle, and everything’s solvable”. “Kio has projects in three states. We’ve secured five sites in less than two years, with four under construction. I’m guessing we’re proof that it can work,” Bisla says. “The sector’s had a couple of impediments to it getting going. Covid, debt escalation, it’s taken us back a few years. But we’re getting to a stage where tenants, investors, and valuers are getting around the concepts.” Brisbane next in line for build-to-rent Bisla says a shortage of builders was the sticking point for build-to-rent in Brisbane, as well as residential construction in general. However, Bisla says, “each city has unique attractions and unique hurdles. This is market-driven”. “If you go granular, on demographics, affordability et cetera it’s actually quite surprising. Sydney isn’t as dominant as you’d expect, and Brisbane is much higher up the curve than you would expect.” White says that tenants and investors were starting to understand the proposition, with momentum building. “We’re starting to see stock in Australia. The touch and feel of it, it’s not just a proposal,” White says. “That’s going to continue to help drive more uptake in it… it will grow and work in Queensland, no question.” ▲ Coronation was approved to more than double yield at its St Peters build-to-rent precinct. Australian build-to-rent is generally targeted at premium segments. But a suburb-level understanding of demographics and target market will help developers build an appropriate proposition, according to White. Some cultural backgrounds have an aversion to communal bathing, for example, and won’t benefit from a swimming pool in an asset. While international investors are more keen than domestic funds, Mackintosh said that build-to-rent is taking its own path in Australia. “There’s not many Australian super funds that are investing in this asset class, because it’s nascent, they don’t really understand it. But there’s a lot of foreign institutional capital investing in it and delivering it. “Multi-family housing is very much associated with the regimes around tax for each state and the incentives around for each country. “Australia is learning lessons from Australia”.

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Patrick Lau
Fri 05 Jun 26

BtR Ready for Lift-Off as Settings Close in on Perfection

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