The BTR(Build-to-rent) model may not yet be a well-known concept in Singapore, but its emergence and subsequent appeal spans decades. In delving into how this asset class with its underlying investment opportunity is becoming relevant to our home ground, we will need to first uncover how the nation’s rapid economic and infrastructural growth influenced the population’s sociocultural makeup, and deep-rooted desire for homeownership be it private property, or in Singapore’s public housing system.
Of course, this sentiment is not unique to Singaporeans alone, but to understand the country, we need to understand how the need for public housing arose. When Singapore first became independent, living conditions were mostly squalid for the rapidly growing population, consisting of slums and overcrowded squatter settlements as few were able to afford proper housing. The solution to this problem became known as HDB flats, which are synonymous with affordable, sanitary, and safe public housing in Singapore. This resulted in 90% of Singaporeans realising their life-long dream of being homeowners, with 80% residing in them sometimes over generations in the same flat. ’
It’s no surprise that over the Covid-19 pandemic, people find themselves with opportunities for inward reflection and for putting family dynamics to the test. With many discovering themselves, needs have evolved amongst those of age to acquire an abode of their own. As the millennial generation matures, natural progression dictates that this generation slowly dominates the property market.
According to Property Guru’s latest Consumer Sentiment Study H1 2022, there is a strong preference to buy instead of rent amongst Singaporean millennials. However, those who rent cite these as their top 3 reasons:
1. Insufficient savings
2. No urgency to buy right away
3. Government regulations making it unfavourable to buy
Conversely, the UK and the US are no strangers to the BTR model, and the popularity of these housing options is a boon to many institutional investors. They not only tackle the housing shortages within cities where young professionals have been flocking towards due to a profusion of job opportunities, these builds are also tailored to the needs of tenants with amenities that enhance its residents’ standard of living— improving their overall quality of life.
With housing prices outpacing income in industrialized countries, there has been growth in a category of housing called “Build to Rent”. —
ome private rental sector (PRS) schemes are owned by “buy-to-let” landlords with a handful of properties
Experience has shown that consumer economics is driving the BTR sector: US Home Prices increased by 20.6% (Mar 21 to Mar 22 – according to Zillow), while household income only increased by 2.4% (2021 over 2020 – US Department of Housing and Urban Redevelopment). Cash-strapped millennials who can’t afford mortgage down-payments are driving the BTR sector. They are saddled with student debt, and BTR suits their stage in life.
Statistics from Hunter Housing Economics also show that BTR homes are now 6% of new home builds, and USD $85 billion will be put into US BTR projects, showing a steady demand for rental homes to address economic limitations as was reported by Bloomberg (28 January 2022).
As the statistic and trends suggests, this shift in focus towards rental accommodation is prominent in the consumer market. Monthly mortgage payments that would usually be residents mortgages are now yield income for real-estate companies. (Savills Spotlight: Suburban Build to Rent, 14 Sep 2021).
he general BTR sector in US, UK and Japan have proved resilient during the pandemic: Both Invitation Homes and American Homes 4 Rent reporting occupancy levels in excess of 97% through 2020.
In summary, BTR can be a scalable proposition to investors, benefiting them in the following number of ways: