The ‘Big 3’ cities of Melbourne, Brisbane and Sydney remain the core focus for build-to-rent  (BTR) investors in the current market, with Sydney expected to take the limelight for the sector in 2025,  according to the latest research from Knight Frank. 

Knight Frank’s Australia Build to Rent Update Q4 2024 report found around 8,900 dedicated BTR  apartments are under construction in Australia and a further 20,000 units are approved for  development over the next five years.  

Since 2018, 19,308 BTR units have been delivered or are under construction nationally, while another  40,191 units are planned but not necessarily yet approved, with the total coming to just under 60,000. 

The BTR pipeline is most advanced in Victoria, followed by New South Wales and Queensland. To date  Victoria has seen 11,098 BTR units either completed or under construction, with another 14,440 in the  pipeline totalling 25,538. 

In Queensland, 4,157 units have been completed or are under construction, with another 10,233 in the  pipeline to total 14,390. 

New South Wales has 3,584 completed or under construction and 11,505 in the pipeline, with the total  number of BTR units totalling 15,089, which has seen the state recently overtake Queensland. 

The ACT has just 1,723 either completed, under construction or planned, while Western Australia has  1,568 and South Australia has 1,191. 

Knight Frank Partner, Living Sectors, Valuation & Advisory John Paul Stichbury said Sydney  was expected to move into the limelight in 2025, as investors who have built up a Melbourne-centric  portfolio look to build a presence across the Eastern Seaboard. 

“Sydney has been slower out of the starting blocks compared to its Victorian counterpart, but BTR  development activity is now accelerating as investors look to gain a foothold in the city,” he said. 

“Development challenges are most acute in Brisbane and we therefore expect new-build supply in this  market to lag Melbourne and Sydney in the short term, despite also facing a chronic lack of rental  accommodation. 

“In time larger platforms will look to diversify their portfolios with tier two locations, however the “Big 3”  cities remain the core focus for investors in the current climate.” 

Knight Frank Partner, Head of Alternatives, Australia Tim Holtsbaum said the quantum of  committed and planned BTR development in Australia was increasing fast, and the growing availability  of rental and operational data would help to attract new capital into the sector. 

“The investment case for BTR has arguably never been stronger and this year activity will accelerate  as we enter a rate-cutting cycle,” he said. 

“In recent investor surveys, "beds" are often vying with "sheds" for the top spot in preferred sector  rankings. 

“Investors are gravitating toward living sectors partly because of its defensive characteristics - specifically the ability to adjust rental income streams more quickly than other sectors in response to  high inflation. 

“However short-term challenges in the BTR sector persist, with investment volumes in 2024 impacted  by the wider macroeconomic environment and uncertainty around government policy, as well as a  challenging development market, with the persistent build cost inflation putting pressure on  feasibilities. 

“Despite these headwinds, there have been some good wins for the sector recently.  

“After a long delay, critical legislative reform of BTR tax policy has been passed by parliament. This  signals to foreign investors that the Australian government supports and recognises BTR as an  important component of future housing supply. A more favourable policy/investment setting will help to  accelerate inwards investment from established global investors. This is important as domestic funds  continue to largely sit on the fence when it comes to BTR. 

“This year we expect strong demand for operational BTR schemes driven by a scarcity factor and  appetite for income-producing assets. On the development side, stabilising constructions costs will  help feasibilities and perception around development risk.” 

Related Readings 

$50 million in co-living sites sold in Sydney over 2024, with demand set to continue in 2025 

Tasmania’s largest build-to-rent project for lease as project nears completion - Knight Frank  

Investa and Oxford celebrate topping out of its largest BTR project, Indi Footscray in Melbourne

Greystar celebrates grand opening of first Australian build-to-rent development