Build to Rent

Transforming living in Aotearoa New Zealand

Industry Resources

New Zealand’s Build to Rent asset class

Build to Rent is a new asset class in New Zealand, established in legislation in March 2023.

Build to Rent properties are eligible for interest deductibility in perpetuity, and an advocacy campaign by Property Council New Zealand is underway to overcome further issues associated with the Overseas Investment Act and to secure access to depreciation akin to other commercial property assets.

Traditionally, institutional investment in New Zealand has focused on commercial property assets such as office, industrial and retail properties. However, various economic and market forces have converged to make investment in Build to Rent an increasingly attractive proposition for institutional investors.

These include positive long-term residential rental growth with low annual volatility, declining commercial property yields that have narrowed the gap between residential and commercial yields and the ability to diversify an existing commercial investment portfolio.

Build to Rent: A definition

The New Zealand Government define Build to Rent under the Taxation (Annual Rates for 2022-23, Platform Economy, and Remedial Matters) Act 2023 (Tax Amendment Act) , enacted on 31 March 2023.

build-to-rent land –

(a) means land to the extent to which, together with any other contiguous land owned by the same person, has 20 or more dwellings used, available for use, or being prepared or restored for use, as dwellings occupied under a residential tenancy to which the Residential Tenancies Act 1986 applies or would apply, if —

(i) in the case of a dwelling completely built before 1 July 2023, —

(A) the landlord or manager for the dwelling has offered any current tenants before 1 July 2023 a fixed term tenancy of no less than 10 years, and always offers prospective tenants such a tenancy; and

(B) the tenancy allows, without penalty, tenant personalisations for the dwelling; and

(ii) in the case of a dwelling completely built on or after 1 July 2023,—

(A) the landlord or manager for the dwelling always offers prospective tenants a fixed term tenancy of no less than 10 years; and

(B) the tenancy allows, without penalty, tenant personalisations for the dwelling; and

(b) does not include land that at any time after it first meets the requirements of paragraph

(a) fails to meet those requirements.

What are institutional investors?

Institutional investors come in a variety of structures, such as listed corporations, pension funds and real estate investment trusts (REITs). Some of these structures enable retail investors the opportunity to directly invest in Build to Rent developments, through the purchase of shares in Build to Rent focused institutional investors.