Mirvac to Launch Australia's First Build-To-Rent Development

Mirvac Group will soon be bringing Australia’s first major build-to-rent apartment development to market with the backing of major superannuation funds in an attempt to tackle housing affordability issues.

According to a report in The Australian  Mirvac has earmarked a potential site in Sydney for the build-to-rent scheme as it looks to draw institutional investors into a business that could ease stress on the housing market.

Mirvac would build and hold units in capital cities supported by major superannuation funds that get returns from rentals paid by residents.

“Mirvac believes that the time has come for an institutional build-to-rent sector in Australia to provide better certainty and quality to tenants,” Mirvac Group CEO Susan Lloyd-Hurwitz said in The Australian.

The build-to-rent sector has grown in size in the USA and it’s hoped it could take-off in Australia, too. Governments in Australia have been closely re-looking at generous tax concessions like negative gearing and depreciation of second-hand household items. Curbing of tax breaks in this area could open the door for more investment by large funds as returns on traditional property assets for super funds are producing lower returns.

[Related reading: Australia's housing affordability crisis and private investment: What can be done?]

The Property Council of Australia’s chief of housing, Glenn Byres, had said previously that allowing managed investment trusts to develop or acquire affordable housing sends a positive signal to the industry but that it was still early days for build-to-rent.

The Federal Government is encouraging investment in new and existing affordable rental housing like the build-to-rent by increasing the capital gains tax discount from 50 per cent to 60 per cent for affordable housing from 1 January 2018.

And from 1 July 2017, managed investment trusts (MITs) are allowed to develop or acquire affordable housing to hold for rent.

The PCA said that these reforms offer foreign and domestic investors, including superannuation funds, new long-term, stable investment opportunities in the property sector and may direct more investment into affordable housing.

“These are good first steps – and we see this as a sign the government understands it will need to progressively re-gear the policy settings to encourage more investment in new rental market product,” Byres said.

“But the Federal Government will need to go a lot further to get the scale of institutional investment required for build-to-rent product.”

Apart from Mirvac other major property players like Lendlease are also looking with interest at the sector.