BUILD-to-rent developments in Victoria have received a major shot in the arm after the state government expanded tax concessions, as the nascent sector gains traction among major developers and rising housing affordability concerns.
Build‑to‑rent developments completed and operational between the beginning of this year and the end of 2031 will receive both the 50% land tax discount and full exemption from the absentee owner surcharge (AOS) for up to 30 years from 1st January, 2022.
The government announced a 50% land tax discount from the start of next year for eligible developments in the 2020/21 budget that was originally announced to end in 2040. Last year’s announcement of the initial tax cut followed a similar announcement in New South Wales and was quickly met with Canadian group Oxford unveiling plans for a $450 million project with 700 units in the inner western suburb of Footscray.
Build‑to‑rent sees properties in a development designed to be held for rental over the long term, rather than sold off by developers, and is considered a more secure and in some cases more affordable form of renting. The Victorian government yesterday said the sector “presents an opportunity to increase rental supply, improve the diversity of housing choice and mix, and provide more long‑term rental options”.
Rental affordability improved only marginally across Australia over the June quarter, while buying is becoming tougher still as wages growth lags behind price gains.
“This will not only ensure Victorians have access to more rental homes and a greater range of housing options – it will create thousands of jobs as we rebuild from the coronavirus pandemic,” State Treasurer Tim Pallas said.
Build-to-rent has been gaining traction in Victoria, which has the bulk of major developments in the sector. Most recently, US giant Greystar revealed plans for the country’s largest build-to-rent development in South Yarra, having raised $1.3 billion for a build-to-rent venture from Ivanhoé Cambridge, APG Asset Management and Ilmarinen.
Hines paid $16.5 million for a Brunswick site that will house 250 units, representing a further international presence in a sector that the federal government has not yet given any tax breaks to.
Also in Brunswick, ASX-listed Mirvac and local developer Milieu are partnering on Albert Fields, spanning a one hectare site that will be have 527 apartments. Mirvac also has major projects next Queen Victoria Market and at Spencer Street in the CBD.
Benjamin Martin Henry of Real Capital Analytics told Australian Property Journal’s Talking Property podcast series there are 45 build-to-rent projects in play across Australia, with a total pipeline of 15,000 to 20,000 units.
Queensland is currently running a $70 million build-to-rent program. Mirvac, Lendlease, Greystar and Australian Unity are among the groups shortlisted for the next projects.