New apartment and townhouse property developments will be underwritten by the state government as part of a $250 million pre-budget commitment.
New apartment and townhouse property developments will be underwritten by the state government as part of a $250 million pre-budget commitment.
Through its Keystart lender, a pre-sale guarantee will be given to encourage developers to build density projects.
“It's giving the developers the ability to convert the approvals into construction in the affordable apartment space,” said Treasurer Rita Saffioti.
“At any given time, there are apartment buildings that have the approval but are not able to be developed because they haven't undertaken or haven't been able to pre-sell.
“Financial institutions are now requiring between 50 per cent and 80 per cent of pre-sales to support the financing of these developments.
“What we're doing through Keystart is supporting that certainty and the ability to convert approvals into construction.”
The government was hoping the underwriting policy would “unlock more than 1000 new apartments and townhouses”.
“The message is that we are doing everything we can,” Housing Minister John Carey said.
“This is innovative. This is thinking outside the box.”
The government wasn’t concerned that if it underwrites a poor-quality development or gives a guarantee to a building developer that turns out to be unscrupulous it might be left exposed.
“Well, we do a guarantee, so we make the payment at the end of the construction,” said treasurer Saffioti.
“But what it does, it gives us certainty for the builder or the developer to then go to the bank and show that they've got the pre-sales.”
Developers that breach the terms of the guarantee must agree to sell the apartments to Keystart at a 10 per cent discount on market value.
The government said it would prioritise areas connected to public transport and assess applications on a case by case basis.
Reacting to the announcement, Liberal Member for Cottesloe Sandra Brewer said the fact that the government was prioritising Metronet sites meant some areas could miss out.
"Apartment hotspots like Karrinyup, West Leederville, Applecross and Burswood [may] not be eligible for this product," she said.
Industry experts confirmed that banks' lending critieria for apartment projects had actually softened in recent years, given increasing competition from non bank lenders.
Ms Brewer said she had heard of some apartment developments getting off the ground with zero presales.
"The development industry has no problem attracting finance ... so how will this help," she asked.
She added that the real issue with getting apartment projects off the ground was construction costs and worker availability, blaming the government's significant infrastructure program for draining the supply of skilled workers.
Property Council of Australia WA Division executive director Nicola Brischetto today asked Ms Saffioti about the impact of fuel cost increases as a result of the Middle East war.
"There has been calls around the country for governments to pull back on spending as a result of that," Ms Brischetto said.
Ms Saffioti said the government needed to do more to support housing supply, which involved spending more money on roads, energy and water infrastructure.
"It is a tricky thing to balance, because to support supply we want to invest more to get the land ready, to get to raods ready, to get the energy and water infrastructure in place to open new housing," she said.
"I don't think people want us to stop spending on infrastructure, because if we did then there wouldn't be the energy connections or water connections and the roads to deliver new houses."
