Apartment supply peaked in Melbourne in 2017, when 19,136 new homes were added to the market. Since then, supply has declined significantly, with only 5,872 units added to the market in 2023-2024 and 3,830 currently scheduled to open in 2025-2026.

The rise in build-to-rent is expected to continue for at least the next four years.

Data compiled by Charter Keck Cramer projects that between 2024-25 and 2027-28, 16,837 apartments built for rental will enter the market. During the same period, 14,812 apartments for sale will be available, a deviation of 12 percent from the planned supply.

But the rise of build-to-rent projects is unlikely to ease Melbourne’s housing affordability crisis, at least in the short term. The market is dominated by expensive apartments offered to well-paid professionals.

Fitzroy and Co, which opened in Fitzroy North last month, is a good example.

The building has only 94 apartments for rent and around 2,000 square meters of common and outdoor spaces. Tenants share amenities such as a coworking space, gym and yoga room, private dining room, vinyl-filled record lounge, rooftop dog park and pet laundry. The entrance hall even has its own scent.

One-bedroom apartments start at $650 per week.

Fitzroy and Co is the build-to-rent pilot project of Salta Properties, one of Australia’s largest privately owned property companies.

Sam Tarascio, managing director of Salta Properties, said Melbourne’s build-to-rent market is dominated by high-end developments because they are the only projects that add up financially at a time when construction costs , property taxes and interest rates are all high and rental yields are high. are weak.

“The same cost pressures that a building developer goes through to sell, we go through as well,” he said.

Tarascio said investors were turning away from the apartment market in Victoria.

“And the problem is once people stop buying, you stop getting volume, you stop delivering housing, you create a housing shortage. And that’s really the situation we find ourselves in right now.

“Build-to-rent appears to have intensified. And while it’s nowhere near enough to cover the decline of the traditional market, it’s certainly starting to make a dent.

Salta has a portfolio of around 1,500 rental apartments expected to open in Richmond with another 600 in the pipeline in Docklands. Other market entrants include US build-to-rent provider Greystar, Aware Super and Melbourne operation Local Residential.

Prime Minister Jacinta Allan visited the Fitzroy and Co project last month when she announced the state government’s plan to improve housing affordability by reducing stamp duty for off-plan homes.

Temlett said Melbourne’s build-to-rent boom would do little to make housing affordable.

“But that doesn’t mean it has to stop. We must continue because we must have as much housing as possible on the ground. We have a very serious rent crisis; vacancy rates are almost less than 1 percent.

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Development Victoria is also pursuing several build-to-rent projects in Melbourne. Its Fitzroy Gasworks development will include around 400 homes for rent, while its proposed eight-storey building on a former TAFE site in Coburg has also been subject to fast-track planning as it will include 10 per cent affordable housing.

Joanne Wandel, acting chief executive of Development Victoria, said Victoria “is Australia’s build-to-rent capital, providing more opportunities for Victorians, particularly younger Victorians, to find housing to rent in areas where they wish to live.”

Wandel said there is particularly strong demand for long-term rentals and build-to-rent can help meet that.

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