Most analysts agree that there is a housing affordability crisis brewing in Australia as the value of houses and, to a lesser extent, units continue to rise and with them the cost of renting.



One answer to the problem may be a relatively new concept in the Australian market, build-to-rent.



Build-to-rent is common in countries such as the Netherlands, Switzerland, the US, UK and Japan, where the proportion of the population who rent is much higher than in Australia.



KR Peters Director Peter Nicolls says there is no reason the concept can't become an important part of the property mix in Australia too.



"Build-to-rent is the new shift in real estate ownership where an owner or developer retains all of the units or dwellings and leases them out as opposed to selling them," Mr Nicolls explained.



The model benefits both the investor and the tenant. The investor gets a reliable, steady income and the occupant has the peace of mind knowing a long term lease is in place.



For the owner or investor there are considerable financial benefits.



Mr Nicolls said from 2022 until at least 2040 the owner or developer will receive a 50% reduction in their annual land tax assessment. Land tax is assessed on the council valuation that appears on the owner's rates notice.



The initiative was announced by the State Government as part of its Big Housing Build package in the 2020 budget. Authorities hope to stimulate the build-to-rent sector in Victoria and in turn boost construction activity, create jobs and support Victoria's economic recovery.



Mr Nicolls welcomed the government's support for build-to-rent in Victoria.



"This is a great cost saving to the owner or developer as it reduces the land tax liability and over an 18 year period the saving will be significant, on average close to $5,000 per year."



Mr Nicolls explained that with build-to-rent the owner or developer will not be able to claim the 10% GST payment. However, when they eventually sell the property, provided it is held for more than 5 years, there will be no GST paid on the sale price.



The owner or developer will also be able to claim depreciation benefits on the construction and the fixtures.



"They will obtain capital appreciation which will provide a nest egg in retirement. In the event that the property is negatively geared, they will also enjoy those tax benefits," Mr Nicolls explained.



Mr Nicolls said the Coronavirus crisis and the popularity of renting among Millennials, who don't necessarily want to be tied down to home ownership, had the potential to accelerate the popularity of build-to-rent in Australia.



He noted developers would have to offer up attractive properties to the market which included all the latest technology such as smart wiring, air conditioning/heating and state-of-the-art alarm systems.

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