Nearly 70% of local government areas across Australia’s five major capital cities are in need of rental homes, according to new research.
New Savills research found that 2021 annual new apartment completions were down 30% compared to September 2017 with falls expected to continue into 2022 and 2023.
Savills Head of Operational Capital Markets Conal Newland said a number of factors had led to the shortage of rental supply including ‘mum and dad’ investors exiting the market to take advantage of aggressive capital growth, the significant decline in demand from offshore investors, and a subsequent fall in construction activity.
“With new rental supply not plugging the current supply gap, there is considerable scope for investors to deliver [build-to-rent] across all locations and price points,” Newland said.
More than 5,000 build-to-rent (BTR) apartments were currently under construction, with 2,300 forecast to complete in 2022.
Savills analysis predicted that there would be more than 10,500 BTR apartments delivered in 2024, the largest annual delivery of BTR homes to date.
The 2024 BTR stock delivery would coincide with forecast record highs in immigration, while new completions of residential stock would be at its lowest point since 2014.
Net overseas migration was expected to climb 25% above pre-pandemic levels by 2024/25.
Savills Director of Operational Capital Markets Paul Savitz said investors were seeking to scale quickly despite the small and fragmented size of the Australian BTR market.
“We look to more established BTR markets such as the UK and US for an indication on how the Australian market will progress, and we expect consolidation in the future, as has happened in BTR markets globally,” Savitz said.
“As BTR continues to mature as an asset class, we expect greater liquidity and economies of scale will put downward pressure on the sector’s risk premium.”
The research comes after Oxford Properties and Indi acquired a new Build-to-Rent (BTR) development in Melbourne’s Southbank last December, while Gurner and Qualitas unveiled a new BTR project in St Kilda.
Last November, Macquarie Asset Management announced that it was funding Local’s first BTR asset, a 500-apartment project at Kensington in Melbourne’s inner north-west.