Australia’s build-to-rent (BTR) sector has surged by almost 70 per cent in the last year as it continues to grow in investor appeal.
With 40 projects and a total of 15,000 BTR units, the asset class hit new heights in 2020 despite the effects of the pandemic.
The BTR market is now estimated to be worth over $10 billion, and with a further $3.5 billion worth of projects currently in the pipeline, the sector is only going in one direction.
CBRE’s Associate Director of Structured Transactions & Advisory Services, Puian Mollaian explains that offshore funding makes up for 57 per cent of the total BTR pipeline.
“Global investment in Australia’s BTR sector has been driven by the asset class’s stable cash flows in a low yield environment,” he says.
Melbourne takes up the largest chunk of Australia’s booming sector with over 50 per cent of the country’s current BTR developments with Sydney, 25 per cent, and Queensland, 15 per cent, following the Victorian capital.
“Victoria and Queensland are generally supported by greater availability of suitable development sites and lower barriers to entry, in comparison to Sydney where site values remain comparatively elevated,” Puian explains.
Pacific Managing Director of CBRE’s Debt & Structured Finance business, Andrew McCasker expects the BTR sector to continue to blossom as a wider range of investors look to get in on the action.
“We expect funding appetite to increase as the asset class, and knowledge of the industry, evolves and matures in Australia,” he says.
“It is encouraging to see new dedicated products tailored to this market, with larger allocations of capital being made by both traditional lenders, the big four Australian banks, as well as non-bank lenders such as insurance groups, private equity and private credit funds,” Andrew explains.