Australia needs $115 billion in capital to build enough new homes over the next four years to simply keep vacancy rates steady and not worsen, as the country’s chronic undersupply and rising population drive the next development boom, non-bank lender Qualitas says.
With the country needing an estimated 300,000 new homes – or 75,000 a year – over the next four years just to keep vacancy rates constant, that was the required capital, based on a median unit value of $638,000 and a loan-to-value ratio of 60 per cent, Qualitas boss Andrew Schwartz said.
Australia’s housing demand, driven by both population growth and structural changes towards more, smaller, households was attracting investors, many of whom were looking at the sector for the first time, Schwartz said last week as his company reported $2.1 billion in new funding commitments in the six months ended December 31 – more than in any six-month period in Qualitas’ 15-year history.
It’s clear the new development cycle has started. Over the six months to December Qualitas started funding 1180 new apartments, up by more than two-thirds from 700 in the same period a year earlier.
The pick-up in private funding puts pressure on the federal government to clarify the rules for institutions, particularly around withholding tax rates and mandates to include affordable rental housing in new developments.
The Property Council of Australia is lobbying for a 10 per cent withholding tax rate that locks in a 5 per cent inclusion of below-market-rate affordable housing in commercial build-to-rent developments.
Community Housing Industry Association chief executive Wendy Hayhurst said it wasn’t clear if the council was modelling discounted rents to other units in the same building or whether to median rents in the same area.
The council said the discount was relative to other apartments in the same project, using the same methodology applied to apartments in the now-defunct National Affordability Rental Scheme.
Affordable housing advocates such as the not-for-profit The Constellation Project have said the minimum should be 10 per cent under state-imposed so-called mandatory inclusionary zoning requirements.
Qualitas’ residential exposure – including build-to-rent –rose to 75 per cent in the first half from 70 per cent. As of December 31, the group, which invests funds from local wealthy investors and global institutional investors, had 3500 apartments under construction, up from 2100 in CY22. As much as 85 per cent of the capital it deployed in the six months to December was in residential projects.
