A 297-apartment complex in Mount Wellington has just been launched, making it one of the largest build-to-rent developments in New Zealand. The project is called Reiputa Apartments, and it’s the latest build from KiwiSaver provider Simplicity.
Build-to-rent housing is a relatively new concept in New Zealand, and it refers to medium- or high-density housing developments exclusively for the private rental sector. Units are not for sale to individual buyers but owned by a single owner that’s typically an institutional investor.
As of 31st March, 2,255 built-to-rent units have already been built, with 1,650 units under construction and over 4,000 units down the pipeline.
Tenants Are Signing Up
Judith Faithfull, 76, is one of the first tenants at Reiputa Apartments. She said long-term security was what finally pushed her to sign up.
"Being a person of a certain age too, it's good to have the security of long-term rental," she said.
“I rather optimistically signed up for 10 years, but just to give myself that security. I’ve been in situations where I haven’t had that security with renting.”
One Developer Handles Everything
In the build-to-rent model, a single developer handles everything from construction through to property management. Founder of Simplicity, Sam Stubbs, said this made particular sense as a KiwiSaver asset.
"First of all is obviously people pay their rent, so there's reliability of income, but also because we buy the land, we build it ourselves, and then we have our own staff, there's a lot of development profit in there," he said.
"This building will have cost $154 million, and it will value up at around about $214 million," Stubbs said.
Simplicity now owns 507 rental apartments across New Zealand, with another 1,200 under construction. Stubbs’ ambition is to build, own and rent 10,000 homes across the country.
According to Judith, the one-stop-shop model is very appealing.
"They're your landlord, your maintenance man, your gardeners, it's a one-stop shop basically. I find that's very helpful, rather than dealing with three or four different people."
Investor Attention
Build-to-rent is attracting serious investor attention as purchasing property becomes harder for ordinary households. Queenstown-based economist Benje Patterson says that investors were seeing rental growth as housing becomes more unaffordable.
"The Queenstown housing market is New Zealand's most unaffordable. The typical house in Queenstown costs approaching $2 million. So, purchasing homes in Queenstown is out of reach of most households. Many people are going to be looking at the rental market," he said.
Infometrics chief forecaster Gareth Kiernan said build-to-rent provided institutional investors with something they hadn't had access to before.
"In terms of professional investors, it's been concentrated around commercial or industrial property if they're looking at having a property asset there, and [build-to-rent] adds a residential property investment option there at scale, and the returns that investors are able to get there are seen to be reasonably stable," he said.
Kiernan also highlighted security of tenure as one of the model's most important features for renters.
"Because the properties are being held for the long-term by the investor, there is more security of tenure around those for the tenants, which is something that has been held up as quite a criticism of the New Zealand rental market," he said.
Faithfull said she'd noticed change in attitudes toward renting.
"I think we still maybe have that mindset of, 'this is just temporary until we buy our home'. But more and more now people possibly can't afford to buy their homes, or maybe they don't want to," she said.
Key Takeaway
The build-to-rent scheme is a step towards addressing housing unaffordability, and a welcome addition to the market. However, a survey by Renters United shows that around half of renters indicated they would still prefer to own their own home rather than rent long-term.
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