NSW government’s pre-sale finance guarantee boosts housing supply forecasts

In a bid to tackle the ongoing housing shortage in New South Wales, the state government has launched its Pre-sale Finance Guarantee program, a move that has garnered praise from industry leaders and prompted revisions in housing supply forecasts. The Housing Industry Association (HIA) has hailed the initiative as a significant step towards addressing the chronic undersupply of housing in the region.

The Pre-sale Finance Guarantee program, initially announced last year, aims to facilitate the commencement of new housing projects by providing financial backing to developers. Under this scheme, the NSW Government may commit to purchasing up to 50 per cent of homes in approved developments off the plan, with each home valued at up to $2 million. The support offered through this program can range from $5 million to $50 million per project, providing developers with the financial security needed to secure commercial construction finance.

Brad Armitage, HIA Executive Director NSW, expressed his support for the initiative, stating, “It is good to see the NSW Government taking action to address the chronic undersupply of housing in NSW.” He emphasised the importance of this development in the current market, where securing finance for construction has become increasingly challenging due to a lack of off-the-plan sales.

“After a development has received approval, you still need finance to begin construction and you can’t get finance without a certain amount of off-the-plan sales. In a currently flat market, the Guarantee scheme will enable a developer to access the finance required to get shovels in the ground and sales can continue during construction,” Mr Armitage explained.

The announcement of the first project to receive support under the Pre-sale Finance Guarantee program has already led to a revision of housing supply forecasts by HIA Economics. The organisation now anticipates a tangible increase in housing supply as a direct result of this policy change. Multi-unit starts are projected to grow by 7.7 per cent, reaching 28,540 by 2026. This upward trend is expected to continue, with forecasts suggesting that the number of multi-unit starts will surpass 30,000 per year by 2027.

Mr Armitage noted, “HIA Economics believes this is the first policy change that will result in a tangible increase in housing supply in NSW and have revised their forecasts for housing as a result.” The optimism surrounding this initiative underscores the potential impact it could have on the state’s housing market, particularly in boosting apartment construction.

The Pre-sale Finance Guarantee program is part of a broader effort by the NSW Government to reform the planning system and expedite the construction process. The initiative aims to address the bottlenecks that have historically delayed housing projects and contributed to the undersupply issue. By providing developers with the financial assurance needed to commence construction, the government hopes to accelerate the delivery of new homes and alleviate the pressure on the housing market.

Mr Armitage concluded by commending the government’s efforts, stating, “We commend the NSW Government on the work that has been done to reform the planning system and get shovels in the ground faster.” His endorsement reflects the industry’s recognition of the government’s proactive approach to addressing the housing crisis and its commitment to fostering a more robust and responsive housing market.

As the first project under the Pre-sale Finance Guarantee program gets underway, industry stakeholders and potential homeowners alike will be watching closely to see how this initiative unfolds. The success of this program could serve as a model for other states grappling with similar housing challenges, potentially paving the way for broader adoption of similar schemes across Australia.