Build-to-rent is increasingly being positioned as the service to Australia’s rental real estate shortage.
The concept sounds compelling: big organizations funding purpose-built rental housing, professionally handled, designed specifically for long-term tenants, and kept in single ownership rather than sold off to private purchasers.
And to be clear, in my mind build-to-rent (BTR) has a genuine function to play in Australia’s housing mix. In truth, it could end up being a fundamental part of the rental market gradually.
However we require to be practical.
Due to the fact that when you look beyond the headlines, the numbers inform an extremely different story.
The scale of build-to-rent is still tiny
In spite of the increasing pipeline of jobs, BTR will stay a very small element of total rental supply for many years to come.
According to forecasts from Charter Keck Cramer, using ABS data, and reported by Ray White, BTR is expected to comprise only:
- 0.58% of Melbourne’s rental stock in 2025
- 0.13% of Sydney’s rental stock in 2025
Even by 2028, it is anticipated to stay:
- 0.58% in Melbourne
- 0.07% in Sydney
In other words, even if the sector grows, it is still just a fraction of the overall rental supply.
To put this into context, Melbourne is predicted to have around 583,258 rented residences in 2025, rising to 621,646 by 2028.
Sydney is forecasted to have around 694,332 rented dwellings in 2025, rising to 727,698 by 2028.
Against that scale, BTR remains a rounding mistake.
Build-to-rent is slow by style
There is another difficulty that rarely gets discussed in the media: timing.
Institutional development runs on long timeframes.
BTR jobs need land acquisition, planning approvals, funding structures, design, construction, and after that stabilisation as soon as occupants relocate.
These tasks don’t appear overnight.
Even if governments fast-tracked approvals tomorrow, it would still take years for significant varieties of houses to be provided, and decades for BTR to make a genuine damage in Australia’s rental shortage.
In other words, BTR is not a quick fix. It is a long-term supplement.
Personal investors are still the foundation of the rental market
And the point most politicians conveniently appear to neglect is that Australia’s rental market is mostly provided by private investors.
Whenever a mum-and-dad financier buys a home, holds it, and rents it out, they contribute directly to the supply of housing.
Yes, not every purchase adds to brand-new construction, but financiers are a significant chauffeur of demand for new development. Without them, many apartment and townhouse tasks just do not stack up economically.
Private financiers are the flexible part of the housing system. They can react rapidly. They can increase supply quickly.
The following chart from Ray White demonstrates how private property managers have actually done the heavy lifting on rental supply over the last 25 years.
The government can’t have it both methods Here’s the contradiction we’re seeing today.
Governments state they wish to motivate more rental supply, and they talk up build-to-rent as the future.
Yet at the exact same time, they are significantly:
- increasing land taxes
- introducing tougher rental policies
- creating unpredictability around tenancy rules
- openly criticising and scapegoating financiers
- recommending changes to CGT.
So on one hand, governments are successfully saying: “We require more rental residential or commercial properties.”
But on the other hand, their actions state: “We don’t want private financiers supplying them.”
That’s not policy. That’s confusion.
And it’s making the rental crisis even worse.
If investors leave, rental supply shrinks immediately
The federal government must absolutely be motivating new housing supply, including institutional build-to-rent.
But it can refrain from doing that while at the same time taxing and preventing personal investors, who are currently the ones supplying the bulk of rental accommodation.
We require to stop dealing with real estate like a political battleground and start treating it like the economic system it is.
If we desire more rental homes, we need to encourage:
- private investors
- developers
- institutional BTR suppliers
- little and medium builders
- city infill jobs
- and higher density in the best places
Australia does not have a “build-to-rent issue.” Australia has a supply problem.
The bottom line
Build-to-rent is a useful addition to the market, and it will end up being more important in time.
However based on existing forecasts, it will remain a small proportion of rental housing in Australia’s two biggest cities for several years.
That suggests it can not be treated as a replacement for private financiers.
If governments wish to solve the rental crisis, they require to focus on something above all else: getting more homes constructed.
Which requires supporting every part of the real estate system, not punishing the most significant provider of rental accommodation we presently have.
< img alt="Ahubbard" src="https://cdn.propertyupdate.com.au/wp-content/uploads/2024/08/ahubbard-148x148.png" height="148" width="148"/ > About Adam Hubbard Adam Hubbard is a senior Wealth Strategist at Metropole and his many years of realty and wealth creation experience offers him a holistic perspective with which he assists his customers securely grow their wealth through residential or commercial property.