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Western Australian Government Announces $250 Million Pre-Sale Guarantee Program for Apartment Developments

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WA Government Unveils $250 Million Apartment Development Guarantee

The Western Australian State Government has announced a $250 million program designed to increase housing supply by underwriting new apartment developments. The initiative, known as the "pre-sale guarantee," aims to facilitate the construction of approximately 1,200 apartments by assisting developers in meeting bank lending requirements. The program will be included in the upcoming May State Budget, with applications opening in the second half of this year.

Program Overview and Mechanics

The program is structured to address a common requirement in construction financing, where banks typically require developers to pre-sell 50-60% of apartments in a project before approving construction loans.

  • Core Mechanism: The state-owned agency Keystart will provide a guarantee to purchase up to 50% of unsold apartments in eligible developments upon completion. If a developer sells all apartments, the government will not purchase any.
  • Purchase Terms: Apartments acquired by the government under this guarantee will be purchased at a discount: 10% below market value in metropolitan areas and 7.5% below market value in regional areas.
  • Subsequent Use: Apartments purchased through this mechanism will be added to the existing $210 million Urban Connect shared equity program, which facilitates home ownership through co-ownership with Keystart.

Eligibility Criteria

Developments must meet specific criteria to qualify for the pre-sale guarantee.

  • Affordability Requirement: At least 30% of apartments in a development must be priced below the current Western Australian median house price of $880,000, as per the Real Estate Institute of WA (REIWA) index.
  • Priority Areas: Developments located in Metronet precincts will receive priority consideration.
  • Regional Variations: Developments in regional areas will be subject to different eligibility criteria, which involve a higher guarantee proportion and a lower purchase discount rate compared to metropolitan areas.

Related Policy Changes

Concurrent with the new program announcement, the government also revealed increases to the price limits for several existing Keystart home buyer assistance schemes.

  • Low Deposit Loans: The price limit increases from $800,000 to $860,000.
  • Urban Connect Shared Equity Scheme: The price limit increases from $730,000 to $800,000.
  • Other Shared Equity Products: Price limits increase from $660,000 to $720,000.

Government Statements

Treasurer Rita Saffioti stated that construction finance has been a challenge for developers, with the requirement for significant pre-sales potentially delaying projects or making them unviable. Saffioti said the program "could turn the dial" on development and described the government's role as "basically underwriting these projects" to secure stock for the shared equity program.

Premier Roger Cook said the plan would help more people into home ownership through Keystart, aligning with what he described as the government's vision "to ensure every Western Australian has a home."

Housing Minister John Carey stated that housing is the number one priority of this year's State Budget and that the initiative would assist first-home buyers and downsizers.