Is a quarter-billion-dollar spend enough to boost this state's housing supply?

Last week’s announcement of a new Pre-sale Guarantee Scheme by the Western Australian State Government, to be delivered by Keystart, is another small step toward addressing the state’s persistent housing supply challenges.

The property development industry, like many sectors, is grappling with feasibility constraints, construction cost escalations, skills and material shortages, and this latest initiative represents a meaningful attempt to shift the dial for feasibility in medium and higher density projects in particular.

In our recent Pre State Budget Submission, UDIA WA made several recommendations for targeted measures that can help to unlock much needed housing supply.

The $250 million Pre-sale Guarantee Scheme directly reflects one of the recommendations that UDIA WA put forward in our Budget Submission in relation to leveraging Keystart’s relatively new role in supporting the delivery of new housing projects.

Under current lending conditions, developers are often required to secure a significant proportion of sales before construction finance is approved. In the current market, achieving these thresholds can be difficult, particularly in Perth where buyers are more hesitant to purchase off-the-plan in some instances.

Under the Pre-sale Guarantee Scheme, Keystart will offer to purchase up to 50 per cent of unsold homes in apartment or townhouse developments upon completion (at a ten per cent discount on market rate).

 This will assist projects in meeting lender pre-sale requirements and support project viability.

Medium and higher-density developments are critical to delivering greater housing choice in the Perth market, as well as supporting Perth’s evolution into a more compact city. Yet outside premium locations, these types of projects often struggle to “stack up” financially.

In this context, the Pre-sale Guarantee Scheme has the potential to accelerate delivery timeframes and improve project risk-return profiles.

It provides developers and financiers with greater confidence that projects can reach completion, which in turn can help unlock additional supply across the market.

Importantly, this initiative also reflects the unique position Keystart now occupies following its transition to a Government Trading Enterprise (GTE).

With a broadened mandate and new commercial property finance capabilities, Keystart is well placed to play a more active role in enabling housing supply.

More housing supply action required

It is important to be pragmatic about what the new scheme can achieve on its own.

While the Pre-sale Guarantee Scheme is an important piece of the puzzle, it will not single-handedly resolve the feasibility challenges facing the medium and high-density development sector.

That is why UDIA WA has also called for the establishment of a mezzanine finance facility to be managed by Keystart.

Access to low-interest mezzanine finance could further bridge funding gaps for shovel-ready projects, particularly those that are close to viability but constrained by capital stack pressures.

When combined with the scheme, such a facility could be a powerful enabler to support a broader pipeline of development projects and help to deliver a wider range of housing options across Western Australia.

New price caps announced

Encouragingly, the recent announcement also included updates to Keystart loan product’s property price and income limits.

The increase in the headline property price cap to $860,000, along with the Urban Connect Shared Equity price limit rising to $800,000, reflects current market realities.

Regularly reviewing these thresholds against the median house price ensures that Keystart products remain relevant and accessible to Western Australians who need them.

Ultimately, increasing housing supply requires coordinated action across multiple fronts, with planning reform, infrastructure provision, taxation settings, construction capacity and financing mechanisms all playing a role.

The Pre-sale Guarantee Scheme demonstrates what can be achieved when government listens to industry and responds with targeted, practical solutions.

But momentum must be maintained, and continued collaboration between government, industry and agencies like Keystart will be essential to refining existing initiatives and developing new ones to address systemic housing supply constraints.

There is no single silver bullet, but UDIA WA’s State Budget Submission attempts to provide a workable range of solutions that can shift the dial across the housing continuum.

Western Australians deserve access to appropriate, affordable housing that meets their households needs.

The pre-sale guarantee announcement is a step in the right direction and we must continue to look at more ways to ensure housing remains within reach for those that need it most.