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29 October, 2025 / Category: Blog
Build-to-Rent (BTR) continues to gain momentum in Australia, but right now we’re seeing a worrying trend — high vacancy rates in projects asking well above market rents. The assumption is that these inflated rents are being driven by finance requirements, but this approach can backfire if the product is priced out of the market.
If you’re a financier backing BTR, here are some key insights and strategies to ensure projects stay both profitable and occupiable.
Right now, many Melbourne BTR projects are pushing price points that sit well above market rates — in some cases, uncomfortably so.
We’re seeing one-bedroom BTR apartments in middle-ring suburbs listed at $730 per week, when the market will only sustain $550 per week for that product type.
The general rule of thumb in BTR is simple: rents can stretch about 10 per cent above standard market rates if — and only if — the additional services and amenities justify the premium.
Anything beyond that, and even the most beautiful product will struggle to lease, resulting in high vacancy, longer lease-up periods and a weaker overall return.
Most BTR financial models still rely on the traditional square metre rate approach. But that’s not how renters think — or how they’re willing to pay.
In rental markets, floor plans matter more than square metres. Renters will pay extra for an apartment with better natural light, a corner aspect, or a more functional layout — even if it’s the same size as the apartment next door.
By using a blanket sqm rate, developers risk leaving money on the table. In some cases, we’ve seen this approach miss out on an average $150 per apartment across an entire building.
One of the most effective ways to take pressure off rental pricing is by incorporating retail or commercial space into the scheme.
Done well, these inclusions can generate passive income that offsets some of the building’s operating costs — meaning you don’t have to load all of that recovery into rents.
Think local cafés, co-working hubs, convenience stores or wellness operators — the kinds of tenants that not only pay rent but add real value to residents’ experience.
This strategy can improve both financial performance (through additional income) and occupancy rates (through enhanced amenity that drives retention).
In some cases, external leasing teams can be more cost-effective and better equipped to hit lease-up targets quickly. They often have sharper insights into local rental markets and can adjust campaigns, pricing and incentives in real time.
This approach can be particularly valuable in early stages of a project, where leasing momentum is critical to stabilising the asset and proving the financial model.
The Bottom Line
BTR is a long game — and financial models must reflect both market realities and renter behaviour. By taking a more nuanced approach to pricing, leveraging retail income, and engaging the right specialists early, financiers can help ensure projects are positioned for strong occupancy, healthy yields and long-term success.
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