Housing affordability is a growing challenge in WA, and the key to improving it is by increasing supply. However, WA needs more housing diversity, not just more single dwellings and continued urban sprawl. We need more high and medium-density stock, such as apartments, townhouses and villas, in well-located areas.
Strata housing has an important role to play in addressing our state’s housing shortage. Strata can deliver more dwellings on available land than the traditional one-house-per-block approach, and by doing so, provide homes that are comparatively more affordable to build and buy.
The growing demand for strata
Very strong price growth over the last couple of years has seen houses become less affordable and increased demand for strata homes, particularly in areas close to urban centres and popular lifestyle hubs.
As well as providing affordable choices for people looking to enter the market for the first time, strata could facilitate downsizing. Many downsizers tell us they would like to stay in the area they know and love, but the lack of medium-density options is keeping them in their large family home.
Unfortunately, WA is struggling to build more strata housing. In the past few years, in the apartment sector, only luxury products have been financially viable for developers. As a result, there has been a shortage of new affordable apartment projects.
Other constraints, such as delays in building approvals at the local government level, and challenges with power and water connection, have hampered the delivery of medium-density housing.
However, measures announced by the Cook Government ahead of the WA State Budget offer welcome support for the construction of strata housing.
The Pre-sale Guarantee
One of the significant financial barriers to new developments is a pre-sale requirement. This sees banks and other lenders mandate projects sell a high proportion of homes in a development before they will provide construction funding. This can significantly delay the start of construction or make projects unviable.
To help address this, the WA Government has launched a $250 million Pre-sale Guarantee, with the aim of delivering up to 1,200 new apartments and townhouses.
Under the scheme, Keystart will provide a guarantee to purchase up to 50 per cent of unsold homes in an apartment development, upon completion.
The guarantee will lapse if developers sell those apartments as construction progresses. If the guarantee is called, Keystart will purchase the homes at a minimum 10 per cent discount on market value in the metro area and 7.5 per cent in the regions.
The Government would then make eligible apartments available for Keystart customers through the $210 million Urban Connect Shared Equity program, or to other State Government housing programs.
To address housing affordability, developments supported through the scheme will be required to sell at least 30 per cent of homes within the project at prices below Keystart’s property price limit, which is pegged to the REIWA median house sale price for Perth. Different criteria will apply in the regions.
Extension and expansion of the off-the-plan concession scheme
The off-the-plan concession scheme was initially aimed at boosting apartment construction. In last year’s budget, it was expanded to include townhouses, and this year it will also apply to villas, units, duplexes and triplexes in an approved strata scheme.
The scheme provides stamp duty concessions for off-the-plan and under-construction sales and the eligibility thresholds have also been increased.
This means that no stamp duty will be paid for dwellings purchased off the plan up to $800,000, tapering to a 50 per cent concession above $900,000.
For dwellings bought while under construction, a 75 per cent concession is available up to $800,000, tapering to a 37.5 per cent concession above $900,000.
The scheme was due to end on 30 June and has been extended for another two years.
We expect the changes will support infill development, creating housing diversity and providing more affordable housing options for buyers.
There are still significant challenges to be overcome in the delivery of new homes, including the issues arising as a result of the ongoing conflict in the Middle East, but these Budget measures are positive steps towards addressing WA’s supply issue through the support of strata housing.
This post appears in Strata News #791.
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