High Taxes Limit Global Landlord's Rental Ambitions in Australia

Blackstone is looking to expand its role in rental housing across Australia to help ease the housing shortage, but high property taxes are making that goal more difficult to achieve.

Globally, Blackstone is one of the largest real estate investors, managing around $1.8 trillion. About a quarter of that is invested in rental housing. In Australia, however, the company owns just two build-to-rent residential buildings. This stands in sharp contrast to its presence in places like the US and UK, a difference largely driven by Australia's less favourable tax treatment for foreign investment.

Several tax-related barriers have been cited by the company. Federal rules now require build-to-rent projects to meet affordability standards to receive a reduced withholding tax for foreign investors. Even with that change, state taxes and surcharges continue to drive up costs. When Blackstone compares investment returns across global markets, Australia tends to fall short, especially against countries like Japan where tax burdens are lower.

This investment hesitance comes at a time when Australia is aiming to build 1.2 million new homes by 2029. States such as NSW and Victoria have set bold construction targets, but the actual supply remains far below what is needed. Build-to-rent is being championed by government leaders as a way to support long-term leasing and improve tenant experiences, but participation from institutional investors is key to delivering these large-scale projects.

Unless there are further tax changes or policy reforms, Australia risks losing out on billions in potential investment. Blackstone has stated it is ready to play a bigger role in addressing the housing shortage, just as it has done in the UK, but only if the financial environment is competitive.

Source: Australian Financial Review, Adelaide Now, The Australian