Australia’s Living Sector Tops Investor Wish List, but Supply Constraints Threaten Growth

Australia’s institutional living sector has emerged as the most sought-after real estate asset class among investors, ranking ahead of office, industrial and logistics assets as capital chases exposure to the nation’s chronic housing undersupply and resilient rental growth.  

According to Cushman & Wakefield’s latest APAC Living Investor Survey 2026 Australia Spotlight, Australia and New Zealand ranked as the most preferred Living investment destination across the Asia-Pacific region, ahead of Japan, highlighting the growing appeal of living-sector investments ranging from build-to-rent and student accommodation to co-living and seniors housing. 

Yet while investor demand is abundant, developers and investors continue to face a familiar challenge: finding viable opportunities to deploy capital. 

The survey found more than half of diversified investors ranked living assets as their preferred Australian real estate sector, ahead of industrial and logistics, office, hotels and retail. At the same time, 76 per cent of investors are targeting multiple living subsectors, underlining growing conviction in the broader residential investment theme rather than any single niche. 

For all the enthusiasm surrounding the sector, investors remain acutely aware of the obstacles confronting new development. Feasibility concerns were identified as the biggest barrier to investment by 40 per cent of respondents, followed by planning approvals and complexity, cited by 28 per cent. Tax settings and a shortage of investable stock were also highlighted as significant impediments. 
“Investors are sending a clear signal that they want greater exposure to Australia’s living sectors, but enthusiasm alone doesn’t create investment opportunities,” said Josh Rose-Nokes, Director, Living Research, APAC at Cushman & Wakefield and author of the report. 

“Demand for rental housing remains exceptionally strong and institutional capital is ready to deploy; however, feasibility constraints, planning delays and limited stock continue to restrict the market’s ability to meet that demand. The challenge now is creating more pathways to deliver investable product at scale.”
Sydney emerged as the standout destination among investors, attracting interest from every survey respondent despite having significantly less completed institutional living stock than Melbourne.  

Brisbane also attracted strong interest, while Melbourne remained highly regarded despite already hosting a larger share of completed build-to-rent and purpose-built student accommodation supply. 

The mismatch between investor preference and existing stock points to a market where development partnerships, conversions and recapitalisations are likely to play a greater role in facilitating investment. 

Indeed, the survey found 88 per cent of investors were interested in distressed opportunities and recapitalisations, while 80 per cent expressed interest in development joint ventures. Forward-funding arrangements and stabilised acquisitions also attracted significant support. 

For capital seeking long-term growth, the appeal of the sector is underpinned by structural housing shortages.  

Since the commencement of the National Housing Accord in mid-2024, dwelling completions have remained materially below the pace required to meet government supply targets, supporting expectations for continued rental growth across major cities. 

While most investors expect rental growth of approximately 3 to 4 per cent over the next year, current market conditions suggest upside risks to those forecasts, particularly in tightly supplied markets. 

According to Conal Newland, International Director and Head of Living, APAC at Cushman & Wakefield, the next phase of growth will depend less on finding demand and more on delivering operational excellence. 
“The living sector is evolving and in a higher interest rate environment, investors can no longer rely on yield compression to drive returns. Performance increasingly depends on the ability to retain residents, grow rents sustainably and manage operating costs effectively. 

“As institutional ownership expands, the quality of operations will become a major differentiator. Investors are looking not only at occupancy levels, but at how efficiently those assets can convert rental demand into durable income growth.” 
Mr Newland concluded that the survey suggests Australia remains in the early stages of institutional living-sector adoption relative to more mature markets overseas, creating significant room for expansion over the coming decade.  
“However, realising that potential will require governments, developers and investors to address the barriers that continue to constrain new supply” he said.