Vertical Communities

AUSTRALIAN PROPERTY INSIGHTS

VERTICAL COMMUNITIES

Image: Novus on Sturt

KEY TAKEAWAYS

Demand outpaces supply Record population growth and housing undersupply are driving sustained rental demand, with vacancy near historic lows. This will help underpin rental growth and absorption rates.

BTR is gaining traction Over 20,000 approved units in the national pipeline with another 12,000 under construction, showing growing institutional investment and tenant acceptance. An improving macroeconomic environment and policy backdrop should help projects progress from approval to construction.

Yields are competitive Stabilised BTR assets are pricing in the 4.25–4.75% yield range, on par with PBSA and tightening over time. As more stabilised assets trade, pricing confidence will improve and unlock more activity. Improving cost of debt will help bring capital into the market. Unlevered IRR can provide a more nuanced picture of returns, with BTR looking attractive compared to other sectors.

Policy reform is a turning point

2024 MIT concession and state-based incentives have removed key barriers to capital – improving feasibility and scaling potential. There is scope for further policy support to accelerate delivery.

Platforms are forming at scale Major owner-operators

ESG credentials Supplying an underserved market with professionally managed, high quality rental homes that are operationally efficient and environmentally resilient aligns investor and occupier interests.

Risks centre on delivery Planning bottlenecks, high construction costs, and policy inconsistencies remain the main friction points to watch.

building long-term strategies include Mirvac, GIC, Aware Super, and Oxford. There is plenty of scope for new entrants which we expect to see as global capital increases allocations toward Living sectors.

CUSHMAN & WAKEFIELD