Government guarantee to underwrite apartment pre-sales
Construction of more than 300 apartments in Sydney will be brought forward under the state government’s $1 billion plan to help developers finance stalled approved projects.
A $900 million complex of 280 luxury flats in Pyrmont and a 30-unit block in Westmead are the latest projects to benefit from the Minns government’s policy of underwriting up to 50 per cent of off-plan housing in some eligible offers to help developers overcome pre-sale hurdles.
Planning Minister Paul Scully said accelerating the two projects would accelerate the guarantee scheme and the state’s housebuilding pipeline.
“NSW needs new homes sooner,” he said. “Guaranteeing pre-sale financing breaks down barriers and accelerates the start of construction on hundreds of much-needed homes for our communities.”
The government expects around 5,000 homes to be insured, enabling the delivery of around 15,000 homes within five years. The NSW Opposition criticized the plan as a “very modest proposal” and a “drop in the ocean” given the state’s target of building 377,000 new homes by mid-2029.
The first project to use the guarantee scheme was developer Perifa Group’s $285 million mixed-use Rozelle Village development comprising 227 units on the former Balmain Leagues Club site.
The government last year created a revolving fund that allows developers to borrow money to build mid-rise housing projects with the assurance that the government will buy unsold homes for up to $50 million per project.
The scheme, an Australian first, reduces the number of units a developer must pre-sell before a bank is ready to lend money to start construction. Developers can typically receive loan approval for a project only when they reach about 80 percent of presales.
Since October, developers eligible for development approval and some pre-sales have been able to submit a statement of intent for the government to act as guarantor for up to 50 percent of homes in each project, which can be valued at up to $2 million. If approved, the developer must begin construction within six months.
If developers do not pre-sell the homes, they can claim guarantees and the government will buy completed homes at a discounted price before selling them on the private market for buy-to-let or use as social or affordable housing. If the developer secures presales, the guarantee will expire and the funding will return to the $1 billion fund for another project.
Developers have submitted 45 expressions of interest so far, of which around a third have been invited to prepare full applications. Other requests are also being considered which, if approved, could speed up the construction of more than 130 new homes in regional NSW.
Melbourne-based developer Landream is taking advantage of the guarantee for 38 of approximately 280 units at the Pyrmont Place mixed-use development opposite Wentworth Park. The funding will also support 13 flats at Gaby Group’s Elodie complex, including six affordable homes on Good Street in Westmead.
The three pre-sale guarantees issued so far will accelerate the delivery of more than 540 new homes.
Meanwhile, the government appointed real estate investment executives Deb Coakley and Tim Hallam as chair and vice-chair, respectively, of its pre-sale finance guarantee advisory committee.
Scully said the pair will bring their expertise in governance, finance and project delivery to the committee, which will “assist in providing robust and independent evaluation of applications.”
Opposition planning spokesman Chris Rath quizzed Scully about the funding at the budget estimates hearing in March, asking: “Are things so financially bad in the housebuilding sector that the government will need to underwrite or guarantee individual projects?”
Scully responded, “it’s not that they’re bad financially. I think it speeds things up.”
He said developers had set a “particularly high bar in terms of pre-sales” in their discussions with the government about projects that have been approved but have not begun construction.
“I think this is actually a really innovative approach to using the government’s balance sheet without taking any upfront money from taxpayers.
“Worst-case scenario, we would end up with a government that has a small supply of housing that we can buy at a discount, which we can then use as social housing, affordable housing, rental housing for essential workers, or just to sell ourselves,” Scully said.
Scully said the scheme had been copied by South Australia and was being “seriously reviewed” in New Zealand.
Finance Minister Daniel Mookhey has previously said Treasury modeling showed the state’s property market would have to fall by 15 per cent for the government to lose money from the plan.
Mookhey said on Sunday Labor was “using the NSW budget to help households”.
“In a climate of dual cost of living and housing crisis, we are using every tool available to support the delivery of desperately needed new homes,” he said.
NSW has completed nearly 44,000 homes by September 2025; This fell well short of the annual target of 75,000 new homes.
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