A groundbreaking $1 billion pre-sale finance guarantee policy was recently announced by New South Wales Treasurer Daniel Mookhey as part of his latest budget. The initiative aims to facilitate the construction of more residential housing by ensuring developers can secure funding even with lower pre-sale requirements, targeting the release of 15,000 new homes over the next five years.
Under this policy, the state will provide guarantees for the pre-sale of up to 5,000 apartments or units, addressing one of the significant obstacles developers face — the need for up to 80% of units to be sold before construction starts. The new framework allows for guarantees ranging from $5 million to $50 million for eligible projects, provided developers have planning approval and at least 50% pre-sales in place. Following approval, construction must commence within six months.
If homes are sold, the guarantee is released, replenishing the fund for future use. However, if units remain unsold, the developer can invoke the guarantee, permitting the state to purchase the unsold homes at a discounted rate. The government can then either rent out, sell, or retain these properties as affordable or social housing.
Current estimates indicate that this policy could help alleviate the ongoing housing crisis in New South Wales, which has faced significant delays in project completions, often lasting months or years. Mookhey emphasized the importance of low-to-medium density housing projects, highlighting that the scheme’s streamlined approach would allow developers to focus more on construction rather than drumming up pre-sales.
Leo Patterson Ross, CEO of the Tenants’ Union of NSW, noted that while the guarantee might alleviate some financial barriers, it does not specifically address the affordability or type of dwellings produced. He expressed disappointment that the scheme does not include direct investments in genuinely affordable public housing, which the state desperately requires.
Industry groups largely welcomed the plan, with many calling it a significant breakthrough. The Property Council of NSW acknowledged that the pre-sale finance guarantee directly tackles the challenges posed by stringent pre-sale thresholds, which often hinder viable projects from progressing.
Overall, while some concerns remain, particularly regarding affordability and the types of homes to be built, the state government remains optimistic. Mookhey described the initiative as a strategic use of governmental resources designed to stimulate housing growth and overcome existing financing bottlenecks in the market.