Developer Kanebridge Property is pledging to become the leading provider of build-to-rent apartments in NSW by 2024 announcing plans to build 1,500 units in Sydney’s north west corridor.
Kanbridge has launched their build-to-rent housing model across three major developments located at Marsden Park, Schofields and Kellyville.
Across the 1,500, apartments the developer will be offering long-term rental leases up to five years.
The model will also include options for tenants to upgrade or downgrade to apartments in other developments within Kanebridge’s build-to-rent portfolio without incurring punitive charges.
The developer has also invested in creating a build-to-rent management and services division called Kanebridge Lifestyle Services (KLS).
KLS provides residents an app with capabilities including booking facilities, paying rent, booking childcare, sharing cars and organising cleaning.
After three years tenants will be given the opportunity to qualify for vendor finance through Kanebridge Finance and purchase an apartment.
For long-term tenants who have rented for five years, the option is given to invest into a KLS property trust and become an investor in Kanbridge’s build-to-rent portfolio.
Build-to-rent has been incredibly slow to take off in Australia compared to the US market which has been well established for over 20 years.
According to Kanebridge’s head of property and investment Michael Martin, this is due largely to restrictive tax laws skewed in favour of owner-occupiers and individual residential property investors.
“The Property Council of Australia and several large developers, including Kanebridge, are talking to the NSW and Victorian Governments – lobbying for change in current Land Tax and GST legislation,” Martin said.
Outside of addressing tax laws Martin states delivering a sustainable build-to-rent market depends strongly on first understanding the changing needs of the demographics it will appeal to.
“This cannot simply be a response to a cooling residential market.”
“Our research has indicated that millennials are not ready to commit to something that might lock them into 20 to 30 years of incumbency.”
“The prospect to rent and/or to invest in other opportunities that may be more short term is much more appealing, outside of the obvious point that it is becoming more and more difficult for this group to find enough funds to own their own property.”
Martin adds that having the flexibility to adapt to changing needs is also incredibly important, whether that is the size of an apartment, location, or the multitude of amenities.
Kanebridge has also identified the older 55 plus bracket as a demographic who would benefit most from a flourishing build-to-rent market in Australia.
“They do not want to deal with ongoing maintenance of a single dwelling and prefer the convenience of apartment living, knowing they have a place to live that they can lock and leave without worrying if they choose to travel,” Martin said.
According to Martin, build-to-rent will not only help in alleviating housing affordability issues yet also provide new opportunities for investors in the property market.
“Mum and dad investors are only really able to deal with single dwellings, and the potential nightmares of dealing with upkeep and maintenance delivered by multiple suppliers.”
“Our build-to-rent model will allow investors to take advantage of an efficient business model and single point of contact, whilst also enjoying the upside they may gain with single-dwelling investments.”
Martin added that comparative to the US, Australia has a significantly lower proportion of institutional real estate portfolios invested in residential property, less than one per cent versus around 25 per cent in the US.
“Commercial is subject to potentially significant periods of underutilisation, whereas we anticipate the build-to-rent model will provide a smoother stream of returns for investors, with good potential uplift in yields from the upselling of amenity and lifestyle options.”
Kanebridge has a five-year plan in place to roll out the model across the state, starting in Greater Western Sydney.