Build-to-rent insufficient to meet government’s 1.2 million homes target, REIA report finds

The Real Estate Institute of Australia (REIA) has released its Build to Rent Report, revealing that despite growing momentum, build-to-rent (BTR) developments represent only 3.0% of the existing rental stock within Australia’s eastern cities and will fall well short of Budget 2023 projections.

REIA President Leanne Pilkington said the report delivered mixed results for the outlook of the asset class. “BTR currently only accounts for 3,800 completed units and of the 44,139 combined BTR units proposed, only 43% have approval. A whopping 55% are planned for Melbourne while the bulk of BTR pipeline will be owned and managed by foreign investors,” she said.

Ms Pilkington noted that the Budget 2023 factored in up to 150,000 units of supply being unlocked by the BTR sector, but the current pipeline will not come close to meeting this ambitious supply statement, which represents more than 10% of the government’s 1.2 million homes target.

In major metropolitan areas like Greater Sydney, Melbourne, and Brisbane, the rental landscape is a crucial component of the housing market, with approximately 1.5 million dwellings currently under lease agreements. While BTR developments are expected to increasingly supplement the private rental sector, private residential investors will continue to dominate the rental market landscape for the foreseeable future.

The Australian rental market is grappling with unprecedented tightness in supply, particularly in Sydney, Melbourne, and Brisbane, with escalating demand and persistent supply constraints driving up rental prices. Over the past decade, the number of rented dwellings has surged significantly in these key cities, outpacing the growth rate of owner-occupied housing.

Ms Pilkington emphasised the pressing need for new rental supply to meet burgeoning demand, noting that the scarcity of available rental properties has been exacerbated by high interest rates and maintenance costs. She also highlighted the pivotal role played by private investors in catering to the housing needs of both owner-occupiers and renters alike, as the burden of constructing housing units has largely shifted to the private rental market due to diminishing public ownership of new dwelling stock over the past four decades.

Looking ahead, with Australia’s ongoing international migration program and historically low vacancy rates across major cities, the demand for rental properties is poised to remain robust. Ms Pilkington stressed the importance of fostering collaboration between public and private stakeholders in addressing the pressing housing supply challenges facing the nation.