Build-to-rent apartments on the rise, as massive new complex opens in Auckland

A massive new complex of 297 apartments is the latest build-to-rent development to be completed in Auckland, and one of the country's largest.

Economists say the model is taking off with developers across the country, who see more reliable income from renters than buyers.

Judith Faithfull, 76, is one of the first tenants at Reiputa Apartments in Mount Wellington, the latest in a series of build-to-rent complexes by Kiwisaver provider Simplicity.

She said what motivated her to move was the promise of a long-term lease.

"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."

Faithfull's home was one of the now 507 rental apartments owned by Simplicity, and founder Sam Stubbs said another 1200 were under construction.

Stubbs said build-to-rent, where one developer handled everything from construction to property management, made a lot of 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.

"So to give you an example, this building will have cost $154 million and it will value up at around about $214 million."

Stubbs had ambitions for Simplicity to build, own and rent 10,000 homes across New Zealand.

He was not alone, developers around the country were eyeing build-to-rent as a new frontier for the property market.

Queenstown-based independent economist Benje Patterson said as the cost of buying became unattainable, investors were seeing growth in rentals.

"The Queenstown housing market is New Zealand's most unaffordable. The typical house in Queenstown costs approaching $2 million," Patterson said.

"So purchasing homes in Queenstown is out of reach of most households. Many people are going to be looking at the rental market."

Infometrics chief forecaster Gareth Kiernan said build-to-rent provided a new option for investors.

"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 the scale and long-term nature of the investment also gave tenants more security.

"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," Kiernan said.

As a lifelong renter, Judith Faithfull had noticed a shift in the market as more people viewed renting as a long-term option.

"I think we still maybe have that mindset, or they did when I was younger, have a 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.

A build-to-rent complex also appealed to Faithfull because everything was managed by a single entity.

"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," she said.

But wealth inequality researcher Max Rashbrooke said there would always be demand for home ownership.

"The biggest need in New Zealand is not for rental accommodation. When Renters United asks people 'do you want to be renting, or would you rather be an owner-occupier?', a lot of people, something like half, will say that they'd rather be an owner-occupier."

He said build-to-rent seemed like a good way to provide tenants with security, but would not be enough to solve the country's housing crisis.

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