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Capital investors eye the growing build-to-rent sector

The state government announced a 50 per cent land tax discount on the construction of purpose-built rental units from July 1, to be managed under a unified single ownership and over a threshold of 50 units.

An exemption from foreign investor surcharges will also be provided until 2040 for build-to-rent developers.

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Property Council of Australia chief executive Ken Morrison said the NSW government incentives will help to attract institutional investment into new housing, giving the one-third of Australian households who rent their home more choice, certainty and better amenity.

Latest research from Savills Australia shows a build-to-rent or co-living asset has the potential to deliver a sense of belonging and connection through shared amenity space and resident community engagement.

Savills analysis of the Australian development pipeline at the end of the first half of calendar 2020 indicates that 2326 build-to-rent units are now complete, and a further 611 units are operating as co-living.

An additional 895 and 389 build-to-rent and co-living units respectively are under construction. This is an increase of 730 build-to-rent units at the end of the same time in 2019, equal to 38 per cent rise.

Conal Newland, director of student accommodation at Savills Australia, said investors remain confident about the long-term core investment themes of Australian residential rental accommodation.

The proposed NSW planning changes are designed to simplify planning controls to support investment in diverse and affordable housing types including build-to-rent, co-living, social and student housing.

“So far, the Australian build-to-rent and co-living market is small scale and fragmented, but development and consolidation is expected in the future,” Mr Newland said.

“A significant weight of capital is currently looking to enter the Australian build-to-rent and co-living accommodation sector, but there are limited opportunities to access the market.”

Ben Martin-Henry, CBRE’s head of build-to-rent research, said the NSW government’s decision to cut land tax on build-to-rent developments by half will be welcomed by investors and developers alike given that land tax can account for 15-25 per cent of overall operating expenses.

“This will be a real boost for the fledgling sector at a time when more Australians will have to consider the prospect of long-term renting,” Mr Martin-Henry said.

“We have seen examples overseas that when the government gets behind the sector there is a significant momentum shift, so we expect to see more projects announced over the coming months.”

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