Concerns about returns from Australia's burgeoning rent-to-build sector

Concerns about returns from Australia's burgeoning rent-to-build sector have been put forward by the fund manager of the $120 billion AustralianSuper’s property division, according to reports in The Australian.

The Australian said the superannuation firm had some doubts about the potential performance of the assets.

AustralianSuper senior investment manager for property Christine Phillips was reported as saying demand for build-to-rent properties in Australia was clear, and their supply was under consideration by large developers, such as Lendlease and Mirvac, but returns were in question.

“I don’t dispute the demand side of it. I think that there is definitely a market for institutional owned rental — professionally run rental accommodation that treats its tenants with respect,” she said.

“They’re able to not take the development profit, they’ve probably got land that’s sitting there at a cost that makes the numbers stack up better, they’ve got the end operation that can operate it once it’s up.

“The question for everyone is what return do we need to invest in Australia, and that’s proving difficult.”