The opportunity of residential property investment vehicles in enhancing affordable rental housing supply

Institutional investors currently play a negligible role in the private rental market in Australia. Their lack of involvement in the private rental sector has been described as a structural weakness in the Australian rental market, and is at variance with institutional investment in residential property in international jurisdictions such as the United Kingdom (UK), Scandinavia and United States (US). This research study investigates the effectiveness of residential investment vehicles in enhancing the supply of private rental properties in Australia and elsewhere. It explores the current opportunity to develop an effective residential investment vehicle to expand the supply of private rental housing in Australia, and to contribute to meeting Australia’s housing needs in the future. This Positioning Paper utilises both international and local evidence, including an AHURI survey of Australian institutional investors, to identify the broad context to residential property investment in Australia and the current and future role of property investment vehicles and institutional investors such as superannuation funds. The implications for housing supply in Australia are discussed in this context. The report finds that while Australian superannuation funds have significant commercial property portfolios, they typically lack exposure to residential property investment. This reflects in the main funds’ concerns over the role of residential property in their investment portfolios and the general lack of listed and unlisted residential property investment vehicles suited to Australian superannuation funds. This finding contrasts with the experience of the US and UK, where there exists both increasing investor interest in, and an increasing range of, listed and unlisted residential investment vehicles which are available to pension funds and other institutional investors