Demountable homes: Mirvac’s $1 billion answer to housing crisis

Save articles for later

Add articles to your saved list and come back to them any time.

Property development giant Mirvac has partnered with private equity for a $1 billion acquisition of a company that operates an Australian tricked-up version of what is commonly thought of as a trailer park but with demountable houses rather than caravans.

It is the company’s commercial response to the housing affordability crisis and a critical undersupply of dwellings.

Mirvac’s Campbell Hanan the land lease model allows older residents to “age in place”.Credit: Peter Rae

The bad news is that Mirvac’s decision to undertake such a large-scale investment is a bet on the housing crisis being stronger for longer.

More than a year of interest rate rises have not quelled the hot property market, which continues to be a headache for the Reserve Bank’s efforts to tame rising prices and rents. The minutes of the Reserve Bank’s October board meeting noted that, “together with the current low level of new housing starts and completions, relative to population growth, the still-tight conditions in the rental market suggested that rents would be an ongoing source of inflationary pressure over the year ahead”.

Build-to-rent, the borrowing from the bank of mum and dad, and a push for the construction of granny flats are among the other solutions that are receiving more attention as record migration to Australia and inflated building costs have placed pressure on the existing housing stock.

This model Mirvac has just loaded into is called “land lease” – cheap accommodation that is billed as catering to the retirement market. It’s a hybrid owner-renter model.

Mirvac is counting on this model becoming a bigger part of the housing supply solution.

It’s relatively small in Australia but well established in the US market. But Mirvac is counting on this model becoming a bigger part of the housing supply solution.

It involves the landowner (in this case Mirvac and its partner Pacific Equity Partners) building demountable or modular homes that they sell to customers who then rent a plot of land on which their home sits.

The landowner operates the site and builds infrastructure and some shared community facilities – maybe gyms or even bars.

It is a devolved iteration of what one might equate to a caravan park, but with more luxury and without wheels.

While this style of housing already exists in Australia, the $1 billion price tag reflects what Mirvac sees as its growing commercial appeal of what it expects will be a burgeoning market.

Given it is tailored to the over-55s segment, it also taps into the need to accommodate the swelling numbers of the ageing population.

Mirvac chief executive Campbell Hanan says the model allows older residents to “age in place” rather than move to an aged care home.

The portfolio acquired by Mirvac and Pacific Equity Partners is made up of 27 communities with more than 6200 sites, including more than 4200 occupied and around 2000 sites to be developed, almost all of which are development approved.

Mirvac is already a major player in the development of other types of properties including medium and high density residential and build-to-rent.

But the land lease model is particularly attractive for Mirvac because it doesn’t require a lot of capital. It makes money on building then selling these modular houses, and then receives an annuity income from leasing the land to the homeowners.

For homeowners, there is the additional appeal that they don’t get hit with stamp duty because they don’t own the land, plus they can ultimately on-sell their house and if they qualify, owners can apply for government rent assistance.

Mirvac reckons it aligns with the “great Australian dream” of owning a home – but without the prohibitive price.

The Business Briefing newsletter delivers major stories, exclusive coverage and expert opinion. Sign up to get it every weekday morning.

Most Viewed in Business

From our partners

Source: Read Full Article