Australia’s “living sector” – spanning build-to-rent (BTR), co-living, and other institutionally owned rental housing – is rapidly evolving from niche idea to structural force in the housing market, according to fresh Ray White insights.
Long established in markets such as the US and UK but still in its infancy here, it is being positioned as both a response to, and a potential solution for, the country’s chronic rental undersupply.
“At its core, BTR is about professionalising renting,” said Nerida Conisbee (pictured), chief economist at Ray White.
Rather than individual landlords, entire buildings are owned and managed by institutions, offering consistent service, longer leases and high-quality amenities.
“For renters, that means stability and better experiences; for investors, it provides steady yields in a market starved of large-scale, income-producing residential assets,” Conisbee said.
It is also raising the bar on quality and design.
“BTR projects often include well-located, well-built apartments with high energy efficiency, communal spaces, and on-site management, features that set a new benchmark for quality in Australian rental housing,” Conisbee said.
So far, most projects are firmly at the upper end of the market.
“Most projects to date are aimed squarely at the upper end of the market, with rents typically sitting well above the local median,” Conisbee said.
As a result, the benefits of better-managed, higher-quality rental stock are largely flowing to higher-income tenants.
Scale remains the other major limitation. Even with a strong pipeline of developments underway, BTR still accounts for well under 1% of Australia’s total rental housing and will remain small for years.
“It will be impossible for it to replace even a small proportion of the current dominant form of rental supply, with more than 83% of renters leasing from a small-scale investor,” Conisbee said. “The living sector will add depth and choice to that landscape, but it will remain a complement, not a substitute.”
Australia’s build-to-rent pipeline is now valued at more than $30 billion – up 35% in just 12 months – with Knight Frank estimating 6,000 new units will complete in 2025 after 4,660 in 2024, although concerns are already emerging about a thinner pipeline beyond next year.
Melbourne and Sydney dominate the living sector’s early growth, accounting for around two-thirds of completed and pipeline BTR projects. Even with rapid expansion, BTR is set to remain only a sliver of the national rental pool for the foreseeable future.
By contrast, institutional rental ownership in markets such as the UK and US is more than ten times Australia’s share, underscoring how early the local market still is – and how much headroom remains if policy and capital settings stay supportive.
“The attraction for capital is clear: stable cash flow, professional management, and strong demand fundamentals,” Conisbee said.
Those fundamentals remain firmly in place, with SQM Research reporting a national vacancy rate of just 1.2% in October and national advertised rents still 4.6% higher year-on-year despite a recent stabilisation in monthly growth.
Most existing BTR projects report occupancy rates of 95–98%, leasing up at 30–40 apartments a month, with annual rental growth around 5%. Offshore interest remains particularly strong from Japan, Singapore, South Korea, North America and the Middle East, as global investors seek exposure to a mature economy with a structural rental shortage.
Tax and planning reforms have played a crucial enabling role. Changes to managed investment trust (MIT) rules have made large-scale residential investment more feasible, while formal recognition of BTR as a distinct asset class has helped unlock finance. As construction costs stabilise after several volatile years, returns are expected to improve further.
“The expansion of the living sector is ultimately a positive development for Australia’s housing market, bringing new capital, consistency, and scale to a system long reliant on fragmented private landlords,” Conisbee said.
For now, BTR remains niche – “small in scale but big in potential”. Governments see it as part of the housing-supply solution, while investors view it as a market at the beginning of a long growth cycle.
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