By Simon Riordan, Partner – Head of Capital
For decades, Australian property investment has largely centred around residential housing, commercial property and, more recently, private credit.
But Australia’s housing needs are changing, and it’s creating new opportunities that haven’t really been on investor’s radars before.
Most property investment has focused on residential housing, commercial property or industrial assets. But when you step back and look at what’s happening across the country, including housing shortages, population growth, an ageing population and affordability pressures, it’s clear that the way Australians live is changing too.
That’s why Land Lease Communities are becoming an area that warrants far more attention for savvy investors.
They’re not a new concept, but they are an asset class that’s only just beginning to gain momentum in Australia.
What exactly is a Land Lease Community?
The concept is actually quite simple.
Residents own their home, but they lease the land it sits on.
By removing the cost of buying the land, home ownership becomes much more accessible. For many people, it provides an opportunity to free up equity while still enjoying the security and lifestyle of owning their own home.
For investors, it’s a different way of thinking about residential property.
Instead of owning individual homes, you’re investing in the land itself and the ongoing income generated through long-term site leases. That not only helps address a genuine housing need but creates a recurring income stream backed by a real asset.
Why is the opportunity growing?
The biggest reason is that the fundamentals aren’t going away anytime soon.
Australia needs more housing, yet it’s becoming harder and more expensive to build it. Rental vacancy rates remain incredibly tight, construction costs have increased significantly and many Australians are finding traditional home ownership increasingly out of reach.
At the same time, we’re seeing more people looking for affordable, lower-maintenance living options without compromising on quality or location and a focus on lifestyle.
By purchasing only the home rather than both the home and land, residents can significantly reduce their upfront housing costs while freeing capital for retirement or lifestyle.
Many communities also provide:
- professionally managed environments
- lower maintenance living
- community facilities
- security benefits
- access to well-located coastal and regional communities.
As Australia’s population ages, demand for this style of living is expected to continue growing.
When you put those trends together, Land Lease Communities make a lot of sense now and for the future.
Why investors are starting to notice
One of the biggest attractions to this sector is that it isn’t driven by short-term market sentiment.
Demand comes from people needing somewhere affordable to live.
That creates a very different dynamic to many traditional property investments.
Residents own their homes, while the landowner receives ongoing site rental income. Because homeowners are responsible for their own homes, operating costs can also be lower than many traditional residential investments over the long term.
It’s a model that’s already well established internationally but Australia is still relatively early in that journey, making the opportunity even greater.
Land lease communities offer a different investment profile from traditional residential property.
Instead of relying primarily on capital appreciation from individual homes, investors own the underlying land and receive recurring site rental income.
That creates several attractive characteristics.
- Recurring income: Residents pay ongoing site fees, providing predictable, long-term income supported by housing demand.
- Ownership of the underlying land: Unlike residential landlords, the investment is focused on the land itself rather than owning and maintaining individual homes.
- Reduced maintenance obligation: Because residents own their homes, responsibility for much of the ongoing maintenance sits with the homeowner rather than the landowner, helping reduce operating costs over time. This operational model is one of the reasons the strategy anticipates improved efficiency as communities mature.
- Strong demographic tailwinds: Demand isn’t driven purely by the property cycle. It’s supported by ageing demographics, affordability challenges and sustained population growth.
- Portfolio diversification: Land lease communities provide exposure to an emerging segment of real estate that behaves differently to traditional residential investment.
Beyond income: creating value through active management
One of the reasons AVARI believes this sector presents a compelling opportunity is that many existing caravan parks and mixed-use accommodation assets can be repositioned into higher-quality land lease communities over time.
Rather than developing from scratch, AVARI’s strategy focuses initially on acquiring operating assets that already generate income, then progressively enhancing their value through redevelopment, operational improvements and staged conversion to permanent land lease communities. This allows assets to continue generating cash flow while value is created over time.
Bringing the Land Lease opportunity to our investors
The AVARI Alternative Accommodation Fund has already begun executing this strategy.
Importantly, these are not speculative greenfield developments.
What we’ve been looking for are existing assets that already generate income today but also have the potential to become something much more valuable over time.
Rather than starting with a blank piece of land, we can acquire established caravan parks in strong locations, continue generating income from day one, and then progressively reposition them into high-quality Land Lease Communities as demand grows and approvals are achieved.
That’s exactly the thinking behind our Cairns and Busselton acquisitions. They each provide immediate income while also giving us opportunities to improve operations and avenues to create additional value and build long-term recurring revenue from the land.
Looking ahead
Land Lease Communities are not a niche investment. I see them becoming an increasingly important part of Australia’s housing mix.
They’re helping solve a real affordability challenge, they’re supported by long-term demographic trends and they offer a different way for investors to access Australian real estate.
That’s what makes this opportunity compelling.
Not because it’s new, but because the fundamentals behind it are strong, and we’re still in the early stages of where this sector can go creating true opportunity for our investors.