BTR evolving into a robust asset class

Europe’s Build-to-Rent (BTR) housing sector has gained significant traction in recent years. It has presented innovative solutions to housing shortages and affordability challenges. As of 2025, European BTR has evolved into a robust asset class. Attracting substantial investment and reshaping urban living. This article examines the current state of European BTR and contrasts that with Australia’s position.

The European Build-to-Rent Landscape in 2025

European BTR has transitioned from a niche market to a mainstream segment over the last two decades. Countries like the UK, Germany, and the Netherlands have been at the forefront of this evolution. With institutional investors recognising the sector's potential for stable, long-term returns. Governments understand BTR’s role in providing better quality, and more affordable homes for a growing number of renters.

UK BTR, for instance, has experienced major growth. In the first quarter of 2025, the UK had over 127,000 operational BTR dwellings. Representing a 16% rise on the first quarter of 2024¹. 17,600 units were completed in the first three months of this year alone. There are a further 160,000 units at various stages of the planning pipeline. This expansion is supported by government policies favouring rental housing development. But also a cultural shift towards renting among younger households. BTR accounts for 2% of total privately rented stock in the UK today. With stock significantly larger in cities. For instance, 25% of rental stock in Manchester is BTR².  

Germany's BTR market is characterised by a strong rental culture and a supportive regulatory environment. Over half of German households rent, the highest proportion of any EU member. The country's emphasis on tenant rights has fostered a stable rental market. But recent rent control measures have deterred some investors.

The Netherlands has embraced BTR as a solution to housing shortages in urban centres. Dutch municipalities have collaborated with private investors to develop BTR projects that cater to diverse income groups, seeking to support inclusivity and social cohesion.

Key Drivers of BTR Growth in Europe

Several factors have contributed to the expansion of BTR in Europe:

1. ‍Affordability Crisis: A lack of homes has led to rapidly rising prices and a larger share of households priced out of homeownership. Including for more young professionals and families. This has led to rising demand for more and better-quality rental accommodation with good customer service. ‍
2. Urbanisation: The influx of people into urban areas, including younger age cohorts, has increased demand for urban rental housing. In the decade to 2023 Europe’s urban population rose from 72% to 75% according to Trading Economics, an increase of 15 million. ‍
3. Institutional Investment: Pension funds and insurance companies have invested sizeable capital into Europe BTR. A given by its potential to provide steady, long-term returns and its social benefits. Investment allocations to the sector have risen significantly, funding an active development pipeline.  
4. ‍Government Support: Policies promoting rental housing development and providing incentives for BTR projects have been instrumental in the sector's European growth.

Australian BTR in the context of Europe

Australia's housing market faces many of the same challenges as Europe's. Australia has upped its game significantly in recent years to support BTR. This increased support has been a key component in increasing the development pipeline. Australia though is playing catch-up. So having stronger support would be beneficial in creating a fledgling BTR sector. Australia is also competing for BTR investment in a global marketplace. Foreign investors will be key to unlocking the sector’s full potential. They will have significantly more experience in developing and managing BTR developments than local investors, developers and operators.

We think there are three areas that are particularly important in the context of Europe:  

1. Policy Support and Incentives:

European governments have implemented policies that encourage BTR development. Examples include tax incentives and streamlined planning processes, such as the UK’s National Planning Policy Framework (NPPF). In Ireland they have a reduced tax rate for large BTR developments. At the end of last year, the Australian government passed new laws offering tax incentives for BTR development. This included an accelerated capital works reduction and a reduced tax rate on certain payments for foreign investors. Many States now have planning frameworks to encourage BTR. With some also providing tax incentives such as land tax discounts. This support is valuable. In comparison to Europe though, tax concessions could go further. And policy approaches between States could be harmonised to underpin more foreign investment. ‍

2. Embracing Co-operative Housing Models:

In cities like Copenhagen, Vienna, and Zurich, co-operative housing constitutes a significant portion of the housing stock. Providing affordable rental options and fostering community engagement. Co-operative housing represents only 0.5% of Australia's total housing stock according to the Business Council of Co-operatives and Mutuals (BCCM)³. Increasing public awareness about the benefits of co-operative housing through educational campaigns could help garner more support. So could a clear and supportive regulatory framework that outlines the formation, operation, and governance of housing co-operatives. ‍

3. Regulatory Framework:

Australia has emulated Europe by strengthening the regulatory environment to better balance tenant and investor interests. Much like the Scandinavians have done for decades. The Australian government has introduced new BTR regulations. They require operators to offer longer 5-year leases, and to end no fault evictions. They also ensure at least 10% of dwellings are affordable for lower income Australians. However, there remains discrepancies between local jurisdictions. Public rhetoric on potential rent controls, which are proven to act contrary to solving affordability pressures, is unhelpful as these alarm investors. There is also a general lack of clarity and consistency in long-term regulatory frameworks.  

Conclusion

The growth of European BTR underscores the importance of supportive policies, innovative construction methods, and diverse housing models. Australia has made great strides recently to provide stronger support for the BTR sector. But because we are playing catch-up more could be done to attract investment.

References

¹ Savills. 2024. “UK Build to Rent Market Update – Q1 2025”. Accessible from: Savills | UK Build to Rent Market Update – Q1 2025

² ibid

³ Business Council of Co-operatives and Mutuals. (2024). “Australia urged to look to Europe for solutions to housing crisis”. Accessible from: https://bccm.coop/australia-urged-to-look-to-europe-for-solutions-to-housing-crisis