But supply shortages expected to persist as national housing targets falter
The New South Wales Labor government under premier Chris Minns (pictured) has pressed go on its $1 billion Pre-sale Finance Guarantee fast-track housing program by funding a 225-apartment complex in Sydney’s inner west.
Under the scheme, the NSW state government has committed $1 billion in pre-sales over the next five years. The government reserves the right to up to 50% of homes off-plan in approved developments.
The $285 million Rozelle Village revamp, situated on the site of the former Balmain Leagues Club on Victoria Road, has become the first to receive backing under the scheme.
The mixed-use precinct will comprise retail spaces, community facilities and a public plaza. Up to 32 affordable homes are also expected to be included in the development.
“This is exactly what the $1 billion Pre-sale Finance Guarantee was designed to do – move approved projects from paper to construction,” said NSW treasurer Daniel Mookhey.
Meeting banks’ pre-sale requirements is a persistent barrier in getting housing developments off the ground. The NSW Productivity and Equality Commission’s Review of housing supply challenges and policy options for New South Wales called it “by far the most common issue cited by stakeholders”.
Banks typically require developers to pre-sell a certain number of units before funding is made available and construction can commence.
Some banks reportedly demand at least 100% worth of pre-sales of the amount of debt being sought, leading to a blow out in construction times for much-needed housing stock.
“By providing a targeted pre-sale guarantee, we’re giving the market the confidence it needs to secure finance and start construction, without the government having to spend a dollar upfront,” said Mookhey.
“By removing planning and financial roadblocks, we’re giving developers and lenders certainty, boosting housing supply, and creating vibrant communities where people want to live which means more people in more new homes quicker,” added NSW minister for planning and public spaces Paul Scully.
Industry welcomes Pre-sale Finance Guarantee
The Property Council of Australia called the Rozelle Village guarantee “a major step forward in converting long-approved housing into homes on the ground”.
“Finance has been one of the biggest barriers holding back otherwise viable projects. Our research with Savills found that developers with approvals, demand and delivery partners still couldn’t get projects off the ground because pre-sale hurdles had become unworkable,” Property Council NSW executive director Anita Hugo said.
“Getting the settings right on finance is just as important as getting the planning right. This guarantee is one of the clearest examples of government using its balance sheet to unlock private delivery, and we’ve pushed hard for it.
“The Property Council first put this issue on the table at our 2024 Ministerial Roundtable with the Australian Banking Association, because lenders’ pre-sale settings had become a handbrake on supply. Today’s milestone shows that advocacy has translated into action.”
More work needed on housing targets
While the Minns government’s $1 billion pre-sale project is a step in the right direction, far more needs to be done to address NSW’s housing supply crunch.
Sydney’s typical dwelling value is expected to soar above $1.5 million – marking a 25% uptick from current prices – by 2031 if housing targets are not met.
On a national scale, Anthony Albanese’s Labor government plans to build 1.2 million new homes by 2029, but annual build rates continue to fall far behind what is required.
“We’ve acknowledged as a government that we need to build more homes,” Labor treasurer Jim Chalmers said last month. “That’s the whole reason why we’ve got this ambitious but achievable housing target for 2029. It’s why we’re throwing so much time and energy and resources into building the homes that Australians desperately need, because we recognise that this is one of the defining challenges in our economy.”
