New South Wales has continued its efforts to boost the state’s property sector, with the introduction of land tax discounts for build-to-rent developments likely to held continue the substantial momentum building in the sector.
NSW Treasurer Dominic Perrottet announced a 50 per cent reduction in la…
New South Wales has continued its efforts to boost the state’s property sector, with the introduction of land tax discounts for build-to-rent developments likely to held continue the substantial momentum building in the sector.
NSW Treasurer Dominic Perrottet announced a 50 per cent reduction in land tax for build-to-rent projects, calculated by the unimproved land value.
Projects must be at least 50 units in the Sydney metropolitan area to be eligible for the discount, while a different threshold is being considered for regional areas.
Construction must have commenced on or after July 1, while the discounts will be in place until 2040.
Exemptions from foreign investor surcharges will also be available for developers.
Mr Perrottet said the initiative was designed to remove barriers to facilitate growth in the build-to-rent sector, where developers create apartment projects with the intention of renting them out rather than selling them.
There has been a recent flurry of activity in the sector, with international firms joining some of Australia's biggest property developers in pursuing new build-to-rent projects.
“Renters benefit through greater choice and because the focus is placed on them, rather than just geared towards property owners, it has an added benefit of encouraging better-quality rental properties and much longer term leases,” Mr Perrottet said.
“This will provide further confidence, boost the housing construction industry, create more options for investors and builders of developments and ultimately more housing options and security for tenants.”
CBRE head of build to rent research Benjamin Martin-Henry said the decision would be welcomed by investors and developers alike, with land tax accounting for around 15 per cent to 25 per cent of overall build-to-rent operating expenses.
"This will be a real boost for the fledgling sector at a time when more Australians will have to consider the prospect of long-term renting,” Mr Martin-Henry said.
“We have seen examples overseas that when the government gets behind the sector there is a significant momentum shift, so we expect to see more projects announced over the coming months.”
CBRE associate director of structured transactions and advisory services, Puian Mollaian, said the NSW government’s move would help attract investment capital,
“We are working with major developers and institutions on live mandates and these changes will increase the prospects of bringing offshore investment into Australia’s BTR sector, boosting the economy and supporting employment growth,” Mr Mollaian said.
“We also see this as an important catalyst to further tax reform particularly relating to foreign managed investment trusts, as the combination of overseas and local capital will be critical to providing adequate housing options and affordability for different tenant cohorts.”
Mirvac build-to-rent general manager Adam Hirst said meaningful policy change such as the NSW initiative would be vital for the sector to scale up to its full potential.
"This strong endorsement of build to rent from the NSW Government recognises the potential of the sector, both in improving housing diversity and supporting the wider economic recovery from the impacts of COVID-19," Mr Hirst said.
The ASX-listed developers first large-scale build-to-rent property, LIV Indigo, is set to welcome its first residents in September, with Mr Hirst saying it would transform the rental experience.
"LIV Indigo offers renters a new way of living, that gives them the security of ownership with the flexibility of renting," he said
"Mirvac is aiming to extend its build to rent pipeline to 5,000 apartments in the next five years, with LIV Indigo the first in a burgeoning sector in Australia."
The Property Council of Australia also welcomed the NSW government’s stimulus package, saying it would create much needed new housing choices.
Property Council chief executive Ken Morrison said build-to-rent projects improved experiences in the rental market, through longer-term tenures, professional lease and facilities management and additional housing choice.
“This announcement is a very welcome shot in the arm for new housing construction and will support jobs and investment as we rebuild and recover from the impact of COVID-19,” Mr Morrison said.
“Build-to-rent has flourished overseas and it’s great to see the NSW government taking the steps necessary to support the growth of the sector locally by providing a clearer pathway for investors and removing tax disincentives which have held back its potential.”
The build-to-rent incentives come on the back of the NSW government announcing cuts to stamp duty for first homebuyers earlier this week, as it seeks to facilitate an economic recovery through boosting building and construction.
