The Loxley’s Mortgagee Sale: A Glimpse into Auckland’s Build-to-Rent Future
The recent mortgagee sale of The Loxley apartment block in Takapuna, Auckland, is more than just a property transaction. It’s a bellwether, signaling the evolving dynamics of the build-to-rent (BTR) market and highlighting the critical need for regulatory adjustments to fuel its growth.
What’s Happening at The Loxley?
Colliers agents Shoneet Chand and Josh Coburn are tasked with finding a buyer for The Loxley, a 46-apartment complex. The property, formerly owned by Tennyson GCO and now under the control of WFT Finance, offers a unique opportunity – a fully completed and vacant development, free from the usual construction risks. The asking price could be up to $60 million, making it a significant purchase.
This situation underscores a key question: Who in the market has the available capital to take on such a large-scale project? The answer is increasingly pointing towards institutional investors and build-to-rent operators, particularly those with a focus on the lucrative Build-to-Rent model.
The Rise of Build-to-Rent in Aotearoa
The build-to-rent model, already well-established in markets like the UK and the US, is gaining momentum in New Zealand. It involves developers constructing properties specifically for long-term rental, offering tenants security of tenure and often, a higher standard of amenities.
While nearly 2,000 completed BTR units exist in New Zealand, and another 3,500 are in the pipeline, the sector is still maturing. Alain McKinney of Colliers highlights the fact that the number of BTR units per project are still low in New Zealand, and are not at the minimum of 100 units that many investors seek.
Did you know? Build-to-rent properties are often seen as a more stable investment than traditional residential rentals, attracting institutional investors seeking reliable returns.
Attracting Overseas Capital
The Loxley’s sale has piqued the interest of overseas funds. The recent changes to New Zealand’s overseas investment rules have, according to McKinney, helped raise New Zealand’s profile as an attractive investment location for the real estate market.
Investors from markets like Singapore and Australia are keen to diversify their portfolios, looking for steady income streams and healthy occupancy rates. This interest is a testament to the growing appeal of New Zealand’s property market, and its perceived stability.
The Key to BTR Growth: Tax Law Changes
One of the biggest hurdles for the build-to-rent sector in New Zealand is the current tax treatment of these assets. They’re taxed similarly to traditional residential investments, not as commercial properties. McKinney emphasizes that these changes will stimulate the market. The Property Council is strongly advocating for reform.
Pro tip: Keep an eye on policy changes related to GST and depreciation. They can significantly impact the viability and profitability of BTR projects.
What Makes a Successful BTR Project?
Successful BTR developments often offer a range of amenities to attract and retain tenants. These can include shared spaces, co-working areas, gyms, and rooftop terraces. Amenities are key for BTR projects to thrive.
In mature BTR markets, apartments are designed for efficient living with communal amenities, and long-term tenants. This is a concept that’s gaining traction in New Zealand, creating more competitive offerings.
Looking Ahead: Trends in the BTR Market
The future of build-to-rent in New Zealand hinges on a number of factors:
- Tax law reform: As discussed, changing how BTR assets are taxed is critical.
- Increased institutional investment: Greater participation from large-scale investors is crucial.
- Focus on amenities and tenant experience: Providing high-quality living spaces and services to attract long-term renters will be a priority.
By embracing these trends, New Zealand’s build-to-rent sector can flourish, offering a viable solution for both investors and renters.
Frequently Asked Questions (FAQ)
What is build-to-rent?
Build-to-rent involves constructing properties specifically for long-term rental.
Why is the tax treatment of BTR important?
Tax changes could help stimulate the market.
Who is investing in BTR?
Institutional investors and overseas funds are showing interest.
What amenities are common in BTR projects?
Shared spaces, co-working areas, gyms, and rooftop terraces are common.
What are the benefits of build-to-rent for renters?
Build-to-rent can provide greater security of tenure and a higher standard of living.
Do you want to know more about the build to rent sector in Auckland?
Explore more articles on the website and subscribe to our newsletter for exclusive insights and market updates.
Keep reading