The investment benefits of build-to-rent
New analysis has painted the build-to-rent (BTR) sector as “an investment theme not to be ignored” over the coming years.
According to Realvantage Insights, “to the proponents of this living concept, BTR homes are a lifestyle option that provides more flexibility, mobility, financial freedom, and benefits of community living”.
Acknowledging that BTR properties “have been gaining favour with many young Millennials across Europe, the US, and UK, as well as Australia” over the past decade, Realvantage acknowledged that “in reality, the renters’ profiles of such properties can be very diverse”.
“They may include singles, married couples, or families with kids across various age groups.
“These renters come from all walks of life and may range from students to working professionals, and even retirees who are empty nesters,” it was reported.
While the demographics do point to widespread appeal, Realvantage did point out that much of the recent demand has stemmed from rising inflation.
That’s because “skyrocketing home prices and costs of borrowing have rendered homes exorbitantly out of reach for many potential home buyers”.
COVID-19 has also had an impact, having driven up demand for high-quality personal living spaces.
On the other hand, Realvantage also acknowledged that insufficient supply had also contributed to a growing renter’s market.
All in all, the report argued that the merits of investing in BTR real estate projects are “manifold” — and rapidly growing in both demand and importance.
“These properties are especially well established in Europe, Japan, the UK and US, and BTR is also currently one of the fastest-growing commercial real estate sectors in Australia,” it said.
So what makes a good quality BTR?
According to Realvantage, it’s the well-established markets that offer strong growth momentum — even during this period of economic uncertainty.
In saying that, the report did remind investors that many BTR projects are development projects, and therefore, can be “reasonably capital-intensive”.
As a result, some “may be more vulnerable to economic slowdowns, especially those with a high operating leverage in an environment of fast-rising interest rates”.
With construction risks also prominent, the report advised: “It is imperative that investors focus on the deal specifics to ensure that the project they intend to invest in has a reasonable risk-adjusted return.”