Are corporate rentals the answer to the rental crisis?

Company or investment vehicles which own multi-unit buildings are being touted as the next housing solution. They offer a secure tenancy for prospective tenants to remove the fear of being evicted out of signing a lease. This is a great option for those tenants who have suffered this fate, sometimes more than once. Companies also benefit from longer term tenure. Companies like the security of long term leases just as much as tenants.

What about the price?

So far there are limited numbers of properties but generally they fall into two categories. First, government subsidised properties which have strict conditions, usually income tests similar to social housing. The second type, often owned as unlisted equity vehicles achieve a high rate of return through higher rents.

So far it is this second type which is getting the most excitement. Large developers are offering new ‘experiences’ and ‘lifestyles’ through their communities, including yoga studios, on-site dining, office spaces and wellness centres. All of these facilities require constant cleaning and maintenance to match the ‘highest standards’ set out in the marketing material. Also offered are ‘bolt on’ services which don’t require dedicated spaces. Laundry services, dog grooming, walking, baby sitting, handyman services beauty services, car hire, along with many others.

Clearly, these lifestyle communities are desirable for those seeking convenience but at what cost? So far the corporates are offering these communities are high but competitive prices for such apartments, in the range of $750p.w. – $850p.w for 2 bedroom apartments $1,000 p.w.+ for 3 bedrooms. A 1 br property is slightly more affordable in the range $600-$650 p.w. Even for a couple earning $200,000, a 2 br apartment will absorb 30% of your take-home salary, the threshold that is broadly considered affordable.

What about the future?

The more important question people need to ask is, ‘What happens if we stop earning $200,000?’ and, ‘What will I do in retirement?’. Using your super probably won’t cut it. A lifetime annuity for a 65 y.o female to cover the rent will set you back more than $950,000 – just for the rent. This is assuming the rent doesn’t increase between now and when you retire. Visit Our Leg Up to find out more.