Over the past year there has been a surge of enthusiasm for the creation of a build-to-rent sector in Australia, as people pushed out of unaffordable housing markets face insecure tenancies and unpredictable rent increases.
Sydney-based developer Fortis Development Group has quietly launched a build-to-rent development in Double Bay, after originally trialling the concept in Sydney’s inner-south back in 2015.
The developer, working with architect MHNDU, interior designers Lawless & Meyerson and landscape architects Wyer & Co on the boutique long-term rental development, will offer leases of up to five years.
Fortis director Dan Gallen said that housing affordability in Sydney has forced buyers to consider long-term rentals as an alternative to home ownership.
“We are providing tenants surety and stability by offering long-term lease agreements which allow tenants to still live in their ‘dream home’ and location of choice. There is minimal vacancy risk to the developer and you have good tenant diversification.”
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Fortis’ Double Bay development, “Brentwood”, offers 17 one- and two-bedroom residences at 319 New South Head Road, near the Double Bay Village and Edgecliffe Station.
“The market is full of very small apartments that don’t feel like a home,” Fortis director Charles Mellick said.
“With the pent-up demand on low maintenance homes with a sense of luxury, Brentwood appeals to a very wide market, and it is essential that we provide a sense of home.”
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Despite the high costs associated with developing in Sydney, Mellick explained to The Urban Developer that there is a lot of opportunity for this type of investment.
“Not having tax concessions will have a diluting effect on the BTR sector, [however] many developers and investors will be able to self-fund or use private equity financing companies,” Mellick said.
“We will also see large institutional investors like superannuation funds taking advantage of the strong property market in Australia as a long-term investment option.”
Build-to-rent is not yet popular in Australia, and the viability of the sector often hinges on the argument for government tax concessions or land donations. Mellick points out that while they are not tailored for build-to-rent schemes, there already are GST and capital gains tax concessions that exist.
“Although additional financial incentives would certainly aid the emergence of BTR in Australia, there are also timing and financial gains since we do not require marketing, advertising or agents’ commissions to reach a pre-sale target which typically adds 2-3 months to the program.”
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Along with Brentwood, Fortis has developed seven residential developments across Melbourne and Sydney with a focus on downsizer demand. Mellick says the developer is looking out for downsizers also going into build-to-rent developments.
“Today, something like 43 per cent of Australians aged 50-59 have chosen to downsize, compared with 3 per cent in 2000.”
“We think that the benefits of stability and surety on future rental prices plus the ability to free up any equity otherwise used in property will assist in retirement.”
Construction of Brentwood will commence mid-year, with completion anticipated for August 2019.