A development industry push for the state government to back tenants-only development in Melbourne could save thousands of jobs. But some experts fear mum and dad investors will pay for it.

Melbourne’s CBD is expected to have less development activity unless the government provides an apartment stimulus program. Picture: David CairdSource:News Corp Australia

Mum and dad property investors could get caught in the crossfire of a new building industry push to save construction jobs in Melbourne’s apartment sector.

Australian Bureau of Statistics data released last week shows apartment lending in Victoria tumbled 14.1 per cent in the year to August, and separate figures from realestate.com.au show inquiries for new apartments have halved since June.

The falls have prompted fears of significant impacts to jobs, with the Property Council of Australia’s state branch calling on the government to support developers expanding into build-to-rent construction to fill a gap left by international buyers.

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Corporate-owned rental complexes are already common in the US and Europe, particularly London, and benefit tenants as developers are happier to sign long-term leases and often add gym or rooftop deck amenities to entice them.

The New South Wales Government earlier this year created a build-to-rent support package centred around waiving land tax obligations for developers, and the Victorian Government has hinted it will also support the sector.

An emerging sector of the property market centres on developers building apartments where they will become a corporate landlord instead of selling the homes to investors or residents.Source:Supplied

Property Council Victorian executive director Cressida Wall said the support could add $3.87bn to the state’s economy and create 49,950 jobs.

“The government needs to pull every economic lever at its disposal to help the industry recover — and encouraging build-to-rent is a sensible stimulus measure that will drive apartment supply, jobs and support economic recovery,” Ms Wall said.

“Build-to-rent can play an important role in boosting housing supply and choice — especially at a time when lending and private sector investment is constrained.”

Realestate.com.au executive manager economic research Cameron Kusher said inquiry for off-the-plan units in Victoria had halved since June, driven by COVID-19 and the HomeBuilder grant pushing new-home buyers to greenfield developments.

But a build-to-rent package would be unpopular with mum and dad investors.

“Build-to-rent would definitely help keep people employed,” Mr Kusher said.

“But investment owners are already facing into headwinds and build-to-rent would create even more.”

The Union Quarter development in Spotswood is being aimed at tenants.Source:Supplied

He said smaller boutique developments would still have a place, with downsizers expected to return to that part of the market after COVID-19 had been controlled.

He forecast issues for larger towers around Fisherman’s Bend, the CBD, St Kilda Road, Southbank and potentially even in Carlton, which would have less demand from foreign students.

“The investor stock is probably going to struggle,” Mr Kusher said.

Real Estate Institute of Victoria president Leah Calnan warned supporting developers to become landlords could come at the expense of the state’s primary source of rental homes.

“A build-to-rent package might have a short-term benefit, but ultimately we need mum and dad investors to remain in the market,” Ms Calnan said.

The REIV is advocating for stamp duty concessions to increase buyers’ appetites for new apartments and units.

There are concerns about residential construction volumes in Melbourne in the coming years.Source:Supplied

Latest REIV figures show Melbourne’s property investors have already been hit by COVID-19, with the vacancy rate rising from 2.1 per cent in August 2019 to 3.7 per cent this year. The city’s median rent fell $30 a week in the same period.

By Nathan Mawby