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Vellum and Urban Property Group launch the first Build-to-Rent Fund in NSW

Vellum Funds Management, part of financial corporation Vellum Group, and leading developer Urban Property Group (UPG) today launched The Places Build to Rent Fund(Places BTRF), a property fund focused on the new fast-growing property class, build-to-rent. The fund is the very first build-to-rent fund based in NSW.

The first stage for Places BTRF is a $132 million capital raising with $66 million already committed, and is now open to investors to participate in the remaining subscription. The fund will have subsequent opportunities for investment and with further stages the fund is expected to reach $1 billion in the next 5 years.

The fund gives institutional investors access to an Australian asset class that is set to grow significantly in the coming years, particularly in NSW where the state government halved land tax for such developments.

Places BTRF is targeting minimum 5% gross return for its investors.  Focused on Sydney developments, the fund provides an opportunity for investors, including superannuation funds, to back property developments with a social purpose, as well as a healthy and stable return, with lowest possible risk.

The fund’s proof-of-concept is the Highland apartment building located in Penrith, the heart of Sydney’s fast-growing western corridor. Completed in 2019, the purpose built for rent property is fully tenanted (since early 2019) and features amenities such as a concierge service and assisted living spaces for NDIS recipients.

Vellum Managing Partner Binuo Erth, who has over 15 years’ experience in major M&A, capital raising and equity transactions in Asia and Australia, says the Places BTR is about a long-term vision for the company’s investments in the Sydney property market.

“The Places BTRF is about giving investors, including super funds, access to the rapidly growing build-to-rent market, while developing high-quality rental properties with affordable living spaces.  Highland, our first completed purpose build-to-rent building is likely to serve as a model to the entire Australian build-to-rent sector in terms of community focused design and social responsibility.”

UPG’s excellent track record in Sydney with land ownership, property development, and construction was one of the most important factors for Vellum in choosing a suitable developer for its build-to-rent projects, according to Ms Erth. “UPG’s foresight, particularly at an early planning stage, and their design philosophy, led to the completion of what is a world class example of what the build-to-rent sector should be striving to achieve.”

Patrick Elias, CEO of UPG, said: “We are proud to be part of this fund and to be the developer behind one of the first, if not the first, purpose-designed build-to-rent development.  UPG is backing the Places BTRF because it will encourage the growth of much needed build-to-rent developments in Australia.  The NSW government should be applauded for putting in place policy mechanisms that support this kind of development. We are focused on high quality build-to-rent properties that deliver the flexible accommodation people increasingly desire.  We are also committed to developing properties that provide affordable living or tailored solutions for people living with disability.”

The purpose of Places BTRF is to acquire and develop property in various areas of Sydney suitable for build-to-rent apartments. In addition to Highland, the investment management team have established a strong pipeline of projects, including a future project located in Sydney’s eastern suburb of Little Bay (Randwick City Council) and are keen to explore future opportunities working with local and state governments.

“Build-to-rent ensures a degree of affordable housing in well-located, accessible suburbs such as this project in Penrith, a major centre in Sydney’s fast-growing western corridor,” said Ms Erth.

 

 

 

 

 

 

 

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Land tax cut to drive build-to-rent revolution

The NSW Government will introduce a land tax discount for new build-to-rent housing projects until 2040 and a new Housing Diversity SEPP to provide more housing options, greater surety for renters, boost construction and support jobs during the COVID-19 recovery.

NSW Treasurer Dominic Perrottet and Planning and Public Spaces Minister Rob Stokes said the tax cut would encourage build-to-rent developments by ensuring they were subject to similar overall amounts of State tax as comparable build-to-sell developments.

“Build-to-rent is popular overseas but still in its infancy in Australia, and we want to remove barriers and allow this segment of the market to grow,” Mr Perrottet said.

“Renters benefit through greater choice and because the focus is placed on them, rather than just geared towards property owners, it has an added benefit of encouraging better quality rental properties and much longer-term leases.

“This will provide further confidence, boost the housing construction industry, create more options for investors and builders of developments and ultimately more housing options and security for tenants.”

The discount will be equivalent to at least a 50 per cent reduction in land tax, dependent on the unimproved land value. To be eligible for the discount, a build‑to‑rent development in metropolitan areas must be at least 50 units, with a different threshold for regional areas to be considered.

Construction must have commenced on or after 1 July 2020 and the projects must provide purpose built rental units, be managed under unified ownership, and include options for longer leases.

An exemption from foreign investor surcharges will also be provided until 2040 for Build‑to‑Rent developers, and integrity measures will be included to ensure that these discounts are not used for tax avoidance.

Full eligibility criteria for build-to-rent projects will be set-out in guidelines for the industry in coming weeks.

The NSW Government is also exhibiting a new streamlined Housing Diversity State Environmental Planning Policy (SEPP) that includes proposed development standards for build-to-rent housing across the state and design guidance on built form, context and character, sustainability and amenity to ensure good outcomes for surrounding communities and future residents.

Planning and Public Spaces Minister Rob Stokes said the proposed changes will simplify planning controls to support investment in diverse and affordable housing types including built-to-rent, co-living, social housing, and student housing.

“Not only do we need different types of housing – such as detached, high-rise and missing-middle types, we need different tenures of housing – such as affordable and social housing, short and long-term rentals and owner-occupiers,” Mr Stokes said.

“Build‑to‑rent provides a more direct route for investment in housing diversity, and provides the certainty needed to build in uncertain times.

“These proposed changes will help support the State’s future housing needs while contributing to NSW’s economic recovery from COVID-19 by boosting residential construction and supporting jobs.”

The new SEPP also includes new state-wide definitions and provisions to support co-living developments and student housing, and new measures to assist the NSW Land and Housing Corporation to deliver more social housing on government owned land.

“The Housing Diversity SEPP delivers on our commitment to simplify the planning system, reduce complexity, and support a strategic-led planning system that delivers a broad range of housing needs for the community.”

The Housing Diversity SEPP is on exhibition for feedback until 9 September 2020.

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Affordable Housing in Sydney – Target for 2030

Shelter for all

Affordable rental housing is a basic requirement and essential component of an inclusive, dynamic and sustainable city. Affordable housing (sometimes called 'community housing') refers to 'reasonable' housing costs in relation to income. A common benchmark is that affordable housing is housing that does not absorb more than 30% of a very low, low or moderate household's income.

The City of Sydney is committed to working with other governments to address the chronic shortage of affordable housing in the local area.

Short and long-term homelessness, combined with affordable housing shortages, are serious issues for central Sydney and its surrounding areas. Local governments must advocate to state and federal governments to act on affordable housing shortages and help facilitate planning permissions to make way for different types of housing.

Target for 2030

Sustainable Sydney 2030 establishes an ambitious target that by 2030, 7.5% of all housing in the local area will be social housing provided by government and community providers and 7.5% will be affordable housing delivered by not-for-profit or other providers.

Affordable rental housing strategy

In 2009, the City adopted an affordable rental housing strategy that was developed in collaboration with private and not-for-profit organisations.

The key objectives of the strategy are to:
• increase the amount of affordable rental housing in the local area for very low, low and moderate income households
• protect existing stock of low cost rental accommodation (such as boarding houses)
• encourage a diverse range of housing in the local area
• work with other inner Sydney councils to address affordable rental housing at a regional level.

The strategy identifies the need to increase the supply of affordable rental housing stock by nearly 8,000 by 2030.

Our broader housing policy work

The City recognises the need for leadership on the issue of housing affordability and hosted a stakeholder summit on 12 March 2015 to consider solutions. The event brought together 140 stakeholders, including key experts from wide-ranging sectors to workshop the critical issues impacting housing diversity and affordability in the city. The summit was followed by a public CityTalk: Solving Sydney's Housing Affordability Crisis, which brought together a panel of housing experts.

The stakeholder feedback from these events, research and internal consultation was used to develop the City's housing issues paper. The paper was on public exhibition from 4 May to 31 July 2015.

Feedback received from key stakeholders and the wider community through the public exhibition period will inform the City's new housing policy responses in 2016. This will include our strategic responses to delivering an increased supply of affordable rental housing.

Delivering affordable rental housing

The affordable housing levy program in Green Square has seen more than 100 affordable rental housing units built. The program target is 330 affordable rental housing units in this area. A similar program in Ultimo and Pyrmont has seen more than 450 affordable rental housing units built.

The City has changed its planning controls to enable affordable rental housing development. The Harold Park urban renewal scheme has seen land set aside for delivery of nearly 80 affordable rental housing apartments by late 2018 for low and moderate income earners. The Glebe Affordable Housing Project (Housing NSW) will see 20 new social housing dwellings and 90 new affordable housing dwellings built.

The City has sold property in Zetland to allow over 100 new affordable rental housing apartments to be built. We are constantly reviewing our properties for appropriate affordable rental housing opportunities.

In October 2015 the Salvation Army was awarded a $250,000 cultural and community grant from the City to help it build more than 160 new homes in central Sydney for low income workers and people needing crisis accommodation. Construction is expected to be completed by the end of 2020.

Overall, by June 2015 there were 753 affordable rental housing dwellings in the city, with more than 500 further dwellings in the development pipeline. Research has been undertaken with neighbouring councils looking at economic and planning barriers to affordable rental housing in inner Sydney.

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RBA Rate March 2020 Updates

The coronavirus is first and foremost a public health issue, but it is also having a very major impact on the economy and the financial system. As the virus has spread, countries have restricted the movement of people across borders and have implemented social distancing measures, including restricting movements within countries and within cities. The result has been major disruptions to economic activity across the world. This is likely to remain the case for some time yet as efforts continue to contain the virus.

Financial market volatility has been very high. Equity prices have experienced large declines. Government bond yields have declined to historic lows. However, the functioning of major government bond markets has been impaired, which has disrupted other markets given their important role as a financial benchmark. Funding markets are open to only the highest quality borrowers.

The primary response to the virus is to manage the health of the population, but other arms of policy, including monetary and fiscal policy, play an important role in reducing the economic and financial disruption resulting from the virus.

At some point, the virus will be contained and the Australian economy will recover. In the interim, a priority for the Reserve Bank is to support jobs, incomes and businesses, so that when the health crisis recedes, the country is well placed to recover strongly.

At a meeting yesterday, the Reserve Bank Board agreed to the following comprehensive package to support the Australian economy through this challenging period:

1. A reduction in the cash rate target to 0.25 per cent.
The Board will not increase the cash rate target until progress is being made towards full employment and it is confident that inflation will be sustainably within the 2–3 per cent target band.

2. A target for the yield on 3-year Australian Government bonds of around 0.25 per cent.

This will be achieved through purchases of Government bonds in the secondary market. Purchases of Government bonds and semi-government securities across the yield curve will be conducted to help achieve this target as well as to address market dislocations. These purchases will commence tomorrow. The Bank will work closely with the Australian Office of Financial Management (AOFM) and state government borrowing authorities to ensure the efficacy of its actions. Further details about the implementation of this are provided in the accompanying notice.

3. A term funding facility for the banking system, with particular support for credit to small and medium-sized businesses.
The Reserve Bank will provide a three-year funding facility to authorised deposit-taking institutions (ADIs) at a fixed rate of 0.25 per cent. ADIs will be able to obtain initial funding of up to 3 per cent of their existing outstanding credit. They will have access to additional funding if they increase lending to business, especially to small and medium-sized businesses. This facility is for at least $90 billion. Further details are available in the accompanying notice.

The Australian Government has also developed a complementary program of support for the non-bank financial sector, small lenders and the securitisation market, which will be implemented by the AOFM.

4. Exchange settlement balances at the Reserve Bank will be remunerated at 10 basis points, rather than zero as would have been the case under the previous arrangements.

This will mitigate the cost to the banking system associated with the large increase in banks’ settlement balances at the Reserve Bank that will occur following these policy actions.

The Reserve Bank will also continue to provide liquidity to Australian financial markets by conducting one-month and three-month repo operations in its daily market operations until further notice. In addition, the Bank will conduct longer-term repo operations of six-month maturity or longer at least weekly, as long as market conditions warrant.

The various elements of this package reinforce one another and will help to lower funding costs across the economy and support the provision of credit, especially to small and medium-sized businesses.

Australia’s financial system is resilient and well placed to deal with the effects of the coronavirus. The banking system is well capitalised and is in a strong liquidity position. Substantial financial buffers are available to be drawn down if required to support the economy. The Reserve Bank is working closely with the other financial regulators and the Australian Government to help ensure that Australia’s financial markets continue to operate effectively and that credit is available to households and businesses.

Today’s policy package from the Reserve Bank complements the welcome fiscal response from governments in Australia. Together, these measures will support jobs, incomes and businesses through this difficult period and they will also assist the Australian economy in the recovery.

There will be a press conference with further details at 4.00pm AEDT today.

Source Link: https://www.rba.gov.au/media-releases/2020/mr-20-08.html

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