Economists weigh in on the pros and cons of build-to-rent developments in Canberra

Given the model is in its infancy in the ACT, it's unclear what impact it will have on the rental market but some suggest it could give renters greater certainty and stability.

Build-to-rent developments are designed and built as long-term rentals and are held by a single owners, as opposed to typical developments where dwellings are sold to individual owners.

Among the benefits touted for renters is long-term leases in a building that is professionally managed, rather than by a landlord who could decide to sell up or move in. Many build-to-rent developments also come with communal amenities such as parcel storage, barbecue facilities or gyms.

Local developer Canvest opened a build-to-rent block in Braddon last year, offering 31 high-end apartments for lease.

For the most part, renting at And Apartments is no different from any other private rental property in Canberra. The typical lease is 12-months long and tenants organise their own internet and electricity.

Charlie Evans, head of property management at Verv Property which leases the apartments, said the biggest benefit to renters is stability.

"You're dealing with one owner who looks after the building, so everything is maintained by the owner, not separate owners looking after the building or a strata company," she said.

"It makes general common areas easy to be maintained, as well as knowing that their security in a property will be long-term."

Verv Property director Jason Roses said residents have been drawn to the building's location and premium offering.

"It's a brand new development, it's got all the mod cons [such as] wireless key access, you can access your letterbox remotely ... it's been finished to a very high level," he said.

Weekly rent comes in a little higher than market average, which Ms Evans said is due to the larger floorplans and premium build.

One-bedroom units at And Apartments typically rent for around $550 a week, two-bedroom units for an average $750 per week, while a three-bedroom penthouse is currently available for $1650 per week.

BIS Oxford Economics forecasts build-to-rent units will represent 10 per cent of national new apartment supply by the 2024-2025 financial year.

If a portion of new dwellings is to be held by large investors or developers, who typically own build-to-rent blocks, it means fewer new apartments available to buyers.

Apartments are arguably the only choice for first home buyers in Canberra, where median house values have risen more than 25 per cent in the last 12 months.

On whether the growth of build-to-rent apartments could limit the options for first home buyers in Canberra, Timothy Hibbert, head of property and building forecasting at BIS Oxford Economics, said the impact is likely to be minimal in the short-term.

"Build-to-rent is quite small still. So even though it's growing really strongly, even by the time we get to 2030 it's still going to be a very, very small part of the total national rental market," he said.

"That's going to be somewhere around that 3 million figure in terms of private rentals. Build-to-rent, even if it performs really, really strongly, we're talking about something that might get to more around that 100,000 mark, in terms of supply."

Hal Pawson, Professor of housing research and policy at UNSW Sydney, also isn't worried.

"Build-to-rent providers would argue that a product that provides a high-quality building, professional management and strong tenancy security will make renting more attractive. And, hence, desperation to access home ownership will be somewhat dampened," he said.

"The reality is that increasing numbers of people in their 20s and 30s are going to be renting for longer periods than, say, 20 years ago. So facilitating development of a higher quality form of rental housing makes sense."

In some cases, build-to-rent housing could offer more stability for renters trying to save for a home deposit, Professor Pawson said.

"If you have to rent a property for five or 10 years to save enough for your home deposit, in that time in the mainstream rental market ... you may well find that you have to make several moves that aren't of your choosing. Each of those, apart from being disruptive, is also costly," he said.

Mr Hibbert said while it's not a concern in Canberra currently, "clustering" of new build-to-rent apartments has been seen in Melbourne's Southbank. He said it was assumed the larger build-to-rent projects forecast for Canberra would be delivered in stages, which would reduce the risk of oversupply.

"But nonetheless, some of the [Canberra] developments will likely be adding 300-plus units in one hit, so that's a pretty sizable increment to the supply," Mr Hibbert said.

"So we can expect kind of regionalised impacts in terms of possible oversupplies, but overall, we don't believe it's going to be a huge component of that rental market for some time.

MORE PROPERTY NEWS:

"We ultimately think what happens legislatively, in terms of support from government, will really dictate that kind of long-run position that we end up in."

Professor Pawson said oversupply isn't a concern this early into the build-to-rent movement.

"If, for some reason, developers oversupply this market this would be expected to dampen rents - surely no bad thing for the consumer," he said.

Our journalists work hard to provide local, up-to-date news to the community. This is how you can continue to access our trusted content: