A new report finds that Build to Rent (BTR) is set to take the limelight in the property sector in 2025 to relieve the housing shortage, after finding about 8900 dedicated BTR apartments under construction across the nation. Another 20,000 are in the pipeline, approved for development starts over the next five years.
According to commercial real estate agent Knight Frank’s Australia Build to Rent Update Q4 2024, the “Big 3” cities of Melbourne, Brisbane and Sydney remain the focus for most BTR investments.
The pipeline remains most advanced in Victoria, however, the market preference for Brisbane over Sydney late last year shifted to the latter, with Sydney now expected to take the lion’s share 2025.
The agency said that “activity [in BTR] will accelerate as Australia enters a rate-cutting cycle” and that the “investment case for BTR has arguably never been stronger.”
BTR numbers amongst the “Big 3” Aussie cities
| State | Completed or in construction | In the pipeline | Total |
| Victoria | 11,098 | 14,440 | 25,538 |
| NSW | 3584 | 11,505 | 15,089 |
| Queensland | 4157 | 10,233 | 14,390 |
Meanwhile, in other states, the ACT has 1723 completed or under construction, Western Australia has 1568 and South Australia has 1191.
Knight Frank partner, living sectors, valuation and advisory John Paul Stichbury said that Victorian investors who had built up their Melbourne portfolios were now moving across the eastern seaboard.
“Sydney has been slower out of the starting blocks compared to its Victorian counterpart, but BTR development activity is now accelerating as investors look to gain a foothold in the city.
“Development challenges are most acute in Brisbane, and we therefore expect new-build supply in this market to lag Melbourne and Sydney in the short term, despite also facing a chronic lack of rental accommodation.”
Stichbury said that over time, the top end of property will start moving to “tier two locations” after development matures in the “Big 3” cities.
Also on the horizon is more capital after federal policy passes
With the amount of BTR commitments and plans on the rapid increase over the past two years, Knight Frank partner, head of alternatives, Australia, Tim Holtsbaum said he was expecting the new availability of rental and operational data to attract new capital to the sector.
“In recent investor surveys, ‘beds’ are often vying with ‘sheds’ for the top spot in preferred sector rankings,” Holtbaum said.
“The investment case for BTR has arguably never been stronger and this year activity will accelerate as we enter a rate-cutting cycle.”
“However short-term challenges in the BTR sector persist, with investment volumes in 2024 impacted by the wider macroeconomic environment and uncertainty around government policy, as well as a challenging development market, with the persistent build cost inflation putting pressure on feasibilities.”
According to Holtbaum, conditions were improving after the BTR tax policy passed parliament last year. “This signals to foreign investors that the Australian government supports and recognises BTR as an important component of future housing supply.”
He added that foreign investors were essential as domestic funds were “largely still sitting on the fence” on BTR.
Trends indicate that investors were now “gravitating toward living sectors partly because of [their] defensive characteristics” in that rental income streams can be adjusted more quickly than other sectors during high inflation.
“This year we expect strong demand for operational BTR schemes driven by a scarcity factor and appetite for income-producing assets. On the development side, stabilising construction costs will help feasibilities and perception around development risk.”
As an example of the booming sector, student house developer and one of the biggest BTR developers in the industry Scape has announced a $6 billion open-ended fund to bolster investments into its shares and attract a wider pool of investors – saying it is expecting a strong growth in the next decade.