2 min read 1 Dec 21
An expanding younger population, combined with the growth of single-family households, is driving strong demand for housing in global cities like Sydney and Melbourne, where people can often share apartments into their 30s. Culturally, this has become increasingly normalised thanks to the rise of sharing economies. Attitudes to home ownership have also changed. With younger generations more likely to place emphasis on experiences like travel than their parents might have, renting offers the benefit of flexibility. More than half of Australians aged between 25 and 34 rent their homes, according to the Australian Bureau of Statistics1.
Even if they wanted to, many people couldn’t necessarily afford to buy their own home. House prices have soared in Tokyo and Hong Kong, for example, fuelled by the availability of cheap credit. This has been compounded by a slowdown in housebuilding throughout the pandemic. Nowhere is the affordability crisis more jarring than in Australia, where Sydney and Melbourne continue to rank among the least affordable cities globally2. Gaining access to an apartment can be a further minefield for tenants, often complicated by multiple letting agents and strong competition.
Though Australia’s BTR sector is still young, the pipeline of professionally managed housing is growing, with a focus on suburbs just beyond Central Business Districts. In contrast to Japan, where multifamily housing units are typically more functional, tenants often seek leisure facilities including fitness areas and swimming pools. For investors, however, access to potential scale is paramount, in order to keep property management costs down and rental rates competitive.
Though APAC markets are at different stages in their evolution, the region overall is in continued need of more housing, and professionally managed apartments for rent are in demand. Particularly in Australia, market fundamentals appear robust, with tenants accustomed to renting, and a supportive legislative environment for development. As such, we believe that early movers could benefit from higher risk-adjusted, long-term returns. Working with developers and operators that can provide high quality apartments with ongoing management, will be essential, in our view.
1 Australian Bureau of Statistics survey 2019
2 Median house price to median household income. Urban Reform Institute and the Frontier Centre for Public Policy, Q3 2020
The value and income from a fund’s assets will go down as well as up. This will cause the value of your investment to fall as well as rise and you may get back less than you originally invested. The views expressed in this document should not be taken as a recommendation, advice or forecast.