Property Strategies and Social Trends: Build to Sell vs Build To Rent Melbourne

11 Jun 2024

As Australia continues to face demographic shifts, affordability concerns, and urbanisation pressures, its real estate market is also undergoing a transformative change. One of the biggest examples of this is the growing balance between build to sell and build to rent developments. Years back, build to sell developments dominated the Australian real estate market, driven by high home ownership desires of individuals and families. Now, projects like build to rent Melbourne developments are gaining traction and earning more interest as a suitable alternative, as a growing proportion of our working force atomises to a smaller, younger size – finding their needs better met by high quality rent amenities over an extended period as a result. 

As urban centres continue to expand, and the demand for flexible and sustainable living options increases, understanding the nuances between these two becomes ever more critical for all stakeholders involved including investors, developers, and homeowners. This article will explore the benefits, challenges, and the roles these two sectors play in the nation’s housing needs.


Build to Sell Sector Experiences Resilient, But Slower Growth Trajectory

Despite economic fluctuations and challenges such as affordability concerns, the build for sale segment maintains a resilient growth trajectory. Compared to the home sales of 2023, there has been a 7.3% increase in 2024. New home building activities are also still spreading across various regions of Australia. 

One of the biggest driving forces behind this is the enduring appeal of homeownership among Australians. Owning a home is still a dream that many people work towards. However, very few A-grade homes or investment grade properties are going on the market right now. Owners of these homes are still holding on to them. 

Because of this scarcity in housing inventory, interested homebuyers are turning to new builds. Builders and developers, on the other hand, are capitalising on this demand and marketing to a diverse range of buyers from first time purchasers to move-up buyers. 

The Australian government also provides initiatives and incentives like the Home Guarantee Scheme (HGS) promoting homeownership. These programs include tax incentives and down payment assistance at various levels to interested home buyers. 


Benefits of build to sell strategy

  • Immediate ownership: Upon purchase completion, buyers receive full ownership of the home. This provides investors or homeowners security and stability with a closed and done deal.
  • Equity building: Homes build equity over time providing homeowners a significant financial asset and an opportunity to sell at a profit or refinance.
  • No rental restrictions: Owners have full freedom to use and customise their property as they see fit. 


Build for Rent Emerges as a Viable Housing Alternative

The build to rent strategy is a well-established concept in Europe and America. In the UK, the total number of completed build for rent units has reached the milestone of 100,000, with another 54,000 under construction and 112,000 more in the planning stages. By contrast, the sector is still at its infancy in Australia – but it’s growing fast. 

According to the Australian Bureau of Statistics, 31% of Australian households are renting their homes. And according to research, more people are looking into renting longer due to increasing property prices and changing lifestyle needs and wants. However, there is also an ongoing rental shortage across the country, especially in metropolitan areas. These make an increasingly appealing case for build to rent properties. 

Now, the sector is steadily increasing its presence in the country, with Build to Rent Melbourne developments taking up more than half of the build to rent projects in the nation in 2022. Brisbane comes in at a close second, as a build to rent hotspot. 

A report by Colliers International states international investors are driving 85% of the build to rent developments in Australia. These investors are partnering up with local developers to build high-quality rental properties in prime cities and locations. With that, build to rent properties are poised to boost the housing supply and aid affordability in the Australian real estate market. 


Benefits of a Build to Rent Strategy

  • No market risk: With build to rent properties, renters can avoid property value fluctuations and the financial uncertainties associated with real estate markets. 
  • Lower upfront costs: Renters can avoid costs usually associated with home purchases, such as down payments, closing costs, and property taxes. 
  • Professional leasing: The leasing processes of build to rent developments are often streamlined and professional ensuring a smooth and transparent rental experience.
  • Predictable costs: Renters benefit from predictable monthly expenses making it easier to budget and maintain their home in the long term. 

If you’re considering investing in a build to rent property in Melbourne, reach out to us to learn more about how we can help you achieve your goals. PDG has 39 years of field expertise and we’re ready to share our knowledge with you.