Overseas property trend growing in Australia
A property trend, which is popular overseas, is gaining momentum in Australia.
“Build to rent,” as it is known overseas, is popular in major cities in the UK, US, Japan and parts of Europe because they offer a more secure and better rental experience. In the UK, for example, there are now an estimated 170,000 build-to-rent apartments in the planning, construction and operational phases in London, Birmingham, Manchester and other major cities
The “build to rent” concept means individual builders and property developers are retaining 100% ownership of the unit/apartment block development, rather than selling some or all of the units on completion or registering it for strata title.
As one of Australia’s leading strata insurance specialist, CHU is also seeing a trend towards 100% ownership by an individual or a company that negates the need for registration as a strata scheme under the state-based strata title legislation.
The “build to rent” concept was accelerated here in recent times after state governments and international investors got behind the idea.
THE NSW government announced in February a number of planning and tax reforms, including a minimum 50% discount on land tax and exemption on foreign investor surcharges, to spur “build to rent” developments.
International investors are increasingly showing greater appetite for the asset class in Australia. Institutional investors, such as the bigger superannuation funds, are also showing an interest.
Global investment manager Greystar Real Estate Partners raising $1.3 billion from European investors to development build to rent housing here, planning to deliver some 5,000 new homes. Canadian developer Oxford Properties is planning a $450 million Melbourne development following the Victorian government announcing it would reduce land tax by 50% for “build to rent”.
In Queensland it’s also gathering pace with “build to rent” forming part of the government’s $1.8 billion Queensland Housing Strategy.
The asset class could contribute $2.9 billion annual to the construction sector, according property experts Allens and Urbis.
This trend is also a golden opportunity for insurance brokers.
There’s a gap in the insurance market for these non-registered strata style units. The risks seem to fall between the cracks for insurance, as they are neither a registered strata plan nor a residential home building. In reality, these properties have the risk profile of a strata unit block but the absence of a registered strata plan number which has in the past prevented some strata insurers from insuring them.
However, CHU has launched the first product, Build to Rent – Residential Insurance, specifically designed to provide cover for these properties. CHU’s Build to Rent insures the property, provides liability insurance, machinery breakdown cover and catastrophe insurance.
The affordability of housing is still, despite the pandemic, a major issue in Australia. It’s continuing to drive many to consider rental as a long-term option. As a result, the “build to rent” trend is likely to grow exponentially to cater for the rental market in our major cities.