Build-to-rent changes welcomed

Industry says the Federal Government’s halving of the managed investment trust tax rate for build-to-rent housing projects help address the state’s housing shortage.

The Federal Government today announced it would lower the managed investment withholding tax rate from 30 per cent to 15 per cent for BTR projects.

This followed calls from industry to lower the rate, including from multinational accounting group EY.

At a recent Property Council of Australia WA Division event, EY partner Luke Mackintosh said the tax was deterring investment in BTR developments.

“It gives incentives for foreigners to invest in a structure, so if they invest in commercial [developments] their tax is 15 cents in a dollar, whereas if they invest in MIT for build-to-rent, their tax is 30 cents in the dollar,” he said.

“If you bring in 15 cents in a dollar, that’ll bring more groups in.”

He pointed out that Western Australia made up 2.1 per cent of the country’s $16.97 billion BTR sector but had potential to grow to 10 per cent.

He said that growth depended on making the BTR business proposition attractive to institutional investors, which relied on a lot of international capital.

A recent study by EY showed that levelling the managed investment trust tax rate for BTR developments could create an extra 150,000 homes nationally within the next 10 years.

The Federal Government’s recent move followed the state government’s measure to provide 50 per cent land tax concessions for BTR developments, in line with several other states, in its recent state budget.

Property Council of Australia WA Division executive director Sandra Brewer welcomed the changes to managed investment trust taxes.

"With Western Australia experiencing a housing shortage and rising rents, removing investment barriers to creating more homes is essential,” she said.

"Investors in build-to-rent are attracted to the long-term, stable returns. Matching tax rates to other property asset classes like shopping centres and commercial office buildings will provide the level playing field needed for future investment. 

"Western Australia desperately needs more homes to rent, and these tax changes will assist in unlocking future housing supply.”

Sentinel Real Estate’s Element 27 project in Subiaco was the nation’s first BTR development, and the US-based developer has also flagged a BTR project in Scarborough.

Sydney-based investment manager EG Funds Management has flagged a $135 million apartment project in Leederville, with a significant BTR component.

Real Estate Institute of Western Australia figures pegged Perth’s rental vacancy rate at 0.7 per cent in March this year, well below a normalised market of between 2.5 and 3 per cent.