By Tim Johansen, Managing Director, Capital & Debt
While we all digest the Federal Budget, which was mostly silent on housing policy, it’s timely to consider what the Opposition has in store for the sector.
In particular, Qualitas welcomes the ALP proposal, announced last week, to lower the managed investment trust withholding tax rate attributable to investments in build-to-rent housing. This will encourage offshore investors and therefore housing supply.
While we aren’t supportive of all the housing policies announced by Labor, it’s encouraging to see political leaders giving consideration to policies that boost housing investment and help to provide stable accommodation for the 2.7m renters in this country.
We don’t believe housing policy should be a partisan issue. Investors – especially offshore institutions – look at the broader thesis of Australian real estate. They see the macro factors: a healthy economy, low unemployment, and a growing population, as the drivers of housing demand over time. Any government of the day would hopefully be focused on maintaining these strengths.
The policies that are specific to housing certainly play a role. Regulatory and fiscal settings are part of a complex patchwork that impact the property cycle. They shape sentiment, development costs and land availability. So, it’s also important not to see one single idea as the saviour – or otherwise – of property.
With electoral uncertainty having shaped the market for months now, one of the greatest boosts to the sector will be a newly-sworn-in government. Whichever way the Australian public votes, it will be a positive outcome to know which policy settings we’re working within.
Against this background, we continue to explore the build-to-rent sector in detail. We look forward to a time when governments see this as a genuine part of affordable and stable housing policy, as well as an asset class that’s attractive to investors. As such, we hope they will adopt policies like those in the US and UK, that make it a more compelling asset class for domestic and global investors.
We have a strong interest in this sector in Australia and believe it will grow over time. Qualitas spent a lot of time educating ourselves on the sector in the US, which ultimately ended up in our investment in a multi-family project in New York city. This live experience is assisting our review of the local market.
We particularly like the debt angle for build-to-rent in Australia, as we think this is also a challenging component of the funding to work through. Providing a financing structure that accommodates both the build and rent components is critical.
Overall, we see build-to-rent as one way to address the challenge of housing a growing population in an affordable, stable and sustainable way.
Making it work for all stakeholders – investors, developers/owners and tenants – requires good policy at local, state and federal government levels.