‘Game-changer’ law opens build-to-rent sector up to overseas investors

Monday, 24 February 2025

New legislation will enable more build-to-rent developments, like Kiwi Property’s Resido in Auckland’s Sylvia Park.

Overseas investors can now put their money into build-to-rent developments more easily, and the Government says it will help boost the supply of rental housing.

Associate Minister of Finance Chris Bishop has announced Parliament has passed legislation providing a streamlined consent pathway for overseas investors interested in build-to-rent developments.

These developments are large scale multi-unit residential buildings which offer long-term rental agreements and are professionally managed.

They are usually financed and operated by institutional investors and developers, such as pension funds, and homes in the building are for renters, and are not sold to individual owners.

The model is popular overseas, but it has been slow to take off in New Zealand due to legislative barriers, which have been progressively removed in recent years.

Associate Minister of Finance Chris Bishop says the build-to-rent model has real potential for growth in New Zealand.

Bishop said the model had real potential for growth in New Zealand, but Overseas Investment Act settings had been holding the sector back as it was difficult for overseas investors to invest in existing build-to-rent assets.

“There are a limited number of domestic investors with the capital and expertise to run these developments and, as a result, developers have been uncertain whether they would be able to sell their assets when they choose to exit their investment.”

Now, overseas investors could apply to purchase existing build-to-rent developments of at least 20 dwellings, provided they intended to continue to rent them, the minister said.

“These changes mean build-to-rent developers will have confidence in their ability to eventually exit their investment, meaning they’re more likely to build in the first place.

“Build-to-rent developments offer an opportunity to increase the supply of secure, affordable and quality rental developments, placing downward pressure on rents.”

The Property Council partners with Bayleys, Colliers, Savills, CBRE, and JLL on a tracker which records the progress of build-to-rent projects.

It shows that at the end of December, there had been 1841 build-to-rent homes built, while 2961 were on the way, with 736 currently being built.

The new legislation will be a “game changer” for the build-to-rent sector, the Property Council’s Leonie Freeman says.

But Property Council chief executive Leonie Freeman said the new legislation was a game changer for the sector, and would unlock opportunities to deliver more secure, high-quality rental housing.

That was because it provided certainty and clarity to overseas inventors interested in getting into the build-to-rent space in New Zealand, she said.

“It is a strong signal that this country really is open to, and wants this type of investment.

“For years, we have seen the sector struggle to gain momentum due to regulatory uncertainty and barriers to international capital. This legislation changes that.”

Freeman said that currently it was a challenging time for any sort of development, but the council was taking a long-term view and expected the sector to continue to grow.

Providing more access to capital and more opportunities meant more people would look to invest in build-to-rent developments, she said.

“Big inroads into the barriers holding back the sector here have been made in recent years, and importantly that’s been due to both of the big political parties.

An artist’s impression of Simplicity Living's planned build-to-rent development on former Ellerslie Racecourse land.

“Much of what needed to be done to open the sector up has been done, but some minor tweaks, such as clarifying GST rules around service levels and amenities, and ensuring tenancy law is appropriate for build-to-rent tenancies would be good to see.”

But there was clarity and a framework in place now, and that would create the confidence needed to pursue large-scale developments in the space as the economy improved, Freeman said.

“We are already starting to see more build-to-rent projects, particularly in Auckland, with companies like Simplicity Living and Kiwi Property Group.

“And as more capital becomes available, and the model becomes more accepted, there will be opportunities for the community housing sector to move into these developments at scale too.”

The council’s research indicated that, with supportive legislation, developers could deliver 25,000 build-to-rent homes in the next decade, she said.

Kiwi Property opened the country’s largest build-to-rent development to date in Auckland last year. Resido, a 295 apartment complex at Sylvia Park, was the NZX-listed company’s first such development, but it was planning more.

Simplicity Living, which is owned by non-profit KiwiSaver provider Simplicity, has completed three build-to rent developments in Auckland, with a combined 210 homes fully rented.

It currently has two developments under way, in Mount Wellington and Remuera respectively, and recently announced it would be starting work on one in Morningside in the middle of the year.

Once the company started work at Morningside, it would have 891 build-to-rent homes in construction.