Weekend Edition: Build to Rent – the way of the future?
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Why are Australian house prices and rents soaring and what does it mean for renters?
The average property price in Australia is now somewhere around $920,000 and over $1 million. If you look across all capital cities, or $1.3 million for New South Wales, or $1.5 million for Sydney. Now the government is guaranteeing 95% mortgages. They're talking of cutting back on capital gains. Will that bring down house prices and rent? Many now are just giving up on buying a place and renting almost a third of all of Australian households are now renters and that proportion is growing each year. So is there a way of increasing capacity and helping out with this growing community of renters? That's this weekend.
The weekend edition.
Now there's been a lot of discussion over many decades in this country about housing affordability. Uh we have the dubious honor of being one of the least affordable countries on earth for housing, and the debate often focuses on the need to build more and increase assistance for first time buyers so that they can get on on the ladder. Now that might be part of the answer, certainly on the supply side, obviously it is. But uh a recent startup, local, also has got part of the answer. It's founded by By Matt Berger and Dan McClennan. Their approach is to build to rent. And we've got Matt on the podcast today, also uh Bill Hammer Halmerick, who's uh NABS head of real estate. So, Matt, this build to rent approach, how does that differ from traditional developers?
I mean, basically you're hanging on to the customer rather than just making a sale, aren't you?
Yeah, Phil, so if there's sort of simply three ways to supply housing in a particular uh real estate market, and that isn't just Australia, that's also in other markets. Um, you know, one of them will would be the government supplying that housing. And there's a number of ways the government can supply that, but effectively it's putting its hand in its own pocket to an extent and and funding that, and that's common in, say, public housing, social housing, some affordable housing as well. The other alternative is is what we call build to sell. In the US, it's called condo development, for example, which is effectively off the plan sales as we commonly know it. So investor or an owner occupier will put down 10% usually up front.
And uh developer will free sell a number of units, apartments, houses, whatever it may be off the plan, and then go to someone like NAB to get standing debt financing and then effectively tip in their own equity. And then once the project is completed, the apartment purchaser will settle. And that has been sort of traditionally the main method of sort of call it bulk support. supply in Australia to date and has fueled a lot of the sort of supply side over the last sort of ten years. That's at the moment turned off you know, in any real scale, which is what a lot of the discussions around supply revolve around. The other alternative that we do is build to rent. So it's effectively um one way to put it is speculative housing insofar as we build without pre-sales.
But you know, the clue is in the name. We built to rent. We're not building to sell. We're not going to be selling them to owner occupiers or investors. We effectively own the entire call it apartment block or title in one line. And we're mainly interested in holding for very long periods of time, which allows you to do some cool things. So I guess those traditional build-to-sell developers, of which I've been part of that world in a previous career, you know, d those developers are focused on margin and effectively selling and then moving on to the next project and and obviously leaving leaving the investor or the owner occupied to occupy. We're concerned with long-term ownership and and we're more attracted to the stability of the asset class in terms of
of its returns and potential.
How does the build‑to‑rent model differ from traditional ‘mom‑and‑dad’ or build‑to‑sell developments?
Right, but you get a lo it takes you longer to get that return. Obviously it's a fairly quick return if you can sell the property quickly you you're getting your money back fairly swiftly, whereas in in your model you're getting a perhaps a better return ultimately, but it's over a much longer time period.
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Chapters
8 chapters
1
Why are Australian house prices and rents soaring and what does it mean for renters?
0:01–3:37
2
How does the build‑to‑rent model differ from traditional ‘mom‑and‑dad’ or build‑to‑sell developments?
3:37–7:37
3
What are the financial benefits for institutional investors in long‑term rental assets?
7:37–10:54
4
How does Local Residential integrate impact‑housing and social‑affordable units into its projects?
10:54–14:30
5
What role is NAB playing in financing and scaling the build‑to‑rent sector?
14:30–18:24
6
How can modular and faster construction methods lower costs for rent‑focused housing?
18:24–22:50
7
Will a larger build‑to‑rent market help curb house‑price growth and rental stress in Australia?
22:50–27:28
8
What are the next steps and challenges for expanding build‑to‑rent across the country?
27:28–30:30