On paper, Canberra is the ideal location for build-to-rent housing.
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Our young, transient population and high property prices should make long-term rental homes appealing to residents and, therefore, make the emerging housing model enticing to investors.
Despite this, and claims build-to-rent could be a "silver bullet" to fix housing supply issues, the territory is yet to attract the international investment other capital cities have secured.
Experts say Canberra's strict tenancy laws and uncertainty around where the housing model sits in the planning system are to blame.
What is build-to-rent?
Build-to-rent housing refers to homes, usually multi-unit buildings, that are rented long term, as opposed to being individually sold.
They are retained by one owner, traditionally an institutional investor such as a property investment fund or superannuation fund.
About 8350 build-to-rent apartments were under construction across Australia in September 2023 and more than 28,000 units were in various stages of planning, according to a report by property firm Knight Frank.
But just 4 per cent of the total build-to-rent pipeline was in the ACT, the report found.
In mid-2023, there were about 2500 rental units slated for Canberra across eight proposed build-to-rent developments, in various stages of planning.
Only one of those, TP Dynamic's Dickson Village project, has secured an investor so far.
The developer sold the retail centre and the 140 rental units above it for $157.5 million to Aware Super's real estate arm and Barings, a global investment group.
Meanwhile, Capital Estate Developments has converted some of its planned 700 rental homes into traditional build-to-sell apartments.
In Braddon, Evri Group is now selling its build-to-rent site, hoping a vacant block with development approval will be more appealing to an institutional investor than a partner arrangement.
Rent caps deter investors, expert says
Experts say the ACT's strict tenant protections are deterring major investors from choosing Canberra for their build-to-rent developments.
The ACT is the only Australian jurisdiction that limits the amount landlords can raise rents.
Luke Mackintosh, a partner at Ernst and Young (EY) who specialises in real estate and the build-to-rent sector, said Canberra's rent caps were the biggest deterrent for investors.
"Naturally Canberra should attract institutional investors," he said.
"But the groups we work with, they see that rental capping issue and they just say, 'well, it's easier to go to Melbourne, it's easier to go to Sydney'."
Mr Mackintosh said rent caps were unappealing for investors when their outgoing costs were increasing.
![Build-to-rent developments are proposed across Canberra but investment has stalled. Picture by Elesa Kurtz Build-to-rent developments are proposed across Canberra but investment has stalled. Picture by Elesa Kurtz](/images/transform/v1/crop/frm/146508744/f1d8da92-2930-4ff1-86b0-d24683ce87d4.jpg/r0_0_4256_2828_w1200_h678_fmax.jpg)
For build-to-rent owners, these costs include land tax, loan repayments, repairs and maintenance and staff wages.
Uncertainty around where build-to-rent housing fits into the ACT planning system has also concerned some investors.
Most build-to-rent developments were currently being lodged as commercial projects.
Knight Frank head of valuation and advisory, Canberra, Greg Cummins said some of the costs associated with build-to-rent developments were still unclear.
"For a build-to-rent operator their major revenue basis is net rent," he said.
"So if you're paying a million dollars more in expenses a year, well, that has a pretty big negative effect on your net rent."
Mr Cummins agreed rent caps were a deterrent, particularly because build-to-rent developments normally charged above-market rents.
This was due to the high level of amenity provided in genuine build-to-rent buildings such as concierge and maintenance services often staffed by full-time employees.
Govt yet to announce operator for Turner project
The ACT government wants to increase build-to-rent housing, saying it can provide greater access to high-quality homes and rental stability.
It has introduced initiatives to support build-to-rent developments where at least 15 per cent of the homes are affordable dwellings.
The government released a block of land in Turner for sale in late 2022 earmarked for a 270-unit rental development with 15 per cent affordable homes.
While a buyer has not yet been announced, a spokesperson for the Suburban Land Agency said "negotiations with a preferred tenderer are ongoing".
The federal government has also thrown its support behind the housing scheme.
In February, it introduced legislation that would reduce application fees for foreign investors in build-to-rent projects.
It came after changes in the 2023 federal budget to reduce the withholding tax rate for managed investment trusts on newly constructed residential build-to-rent properties from 30 to 15 per cent.
Property Council of Australia ACT and capital region executive director Shane Martin welcomed the changes and said build-to-rent in Canberra "just makes sense".
"BTR is as close to a silver bullet as we are going to get to address our housing crisis, any changes that promote investment into this asset class is a welcome step in the right direction," he said.