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Build to Rent in NSW: Can Onshore Non-Institutional Developers Achieve Financial Returns?

Madison Marcus attended the Build to Rent Property Council Australia event in Sydney last Wednesday, and there were some key takeaways from the discussion.

One of the biggest questions on everyone’s mind was whether build-to-rent (BTR) can work in NSW for onshore non-institutional developers. The answer is, unfortunately, not at present.

There are a number of factors that make it difficult for onshore non-institutional developers to achieve financial returns from BTR in NSW.

These include:
  • The current tax laws, which do not allow BTR developers to claim GST credits on the land, construction costs, or operational costs of their projects.
  • Stamp duty, which is a significant upfront cost for BTR developers.
  • The high cost of land in NSW.
  • Planning consent issues and uncertainty of approvals, as BTR is not yet a well-established development type in NSW.
  • The inability to pass land tax on to tenants, despite a 50% reduction in land tax for the next 20 years on “eligible” projects.

Despite these challenges, there are a number of things that onshore non-institutional developers can do to improve their chances of success in the BTR market in NSW.

These include:

  • Partnering with institutional investors who have the financial resources and expertise to overcome the challenges of BTR development.
  • Focusing on smaller, more affordable projects that are less capital-intensive.
  • Targeting tenants who are willing to pay a premium for the flexibility and convenience of BTR.
  • Working with the government to lobby for changes to the tax laws and other regulations that make it more difficult for BTR developers to succeed.

If you have any questions, please don’t hesitate to reach out to Denis Hall, Special Advisor in Real Estate & Development division.

Thank you to the Property Council Australia and our clients for attending the event. It was a great opportunity to learn more about the challenges and opportunities of BTR in NSW.


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