Page 1600 - Week 05 - Tuesday, 8 May 2018
Next page . . . . Previous page . . . . Speeches . . . . Contents . . . . Debates(HTML) . . . . PDF . . . . Video
Here we have a government committed to improving housing affordability on one hand while on the other hand belting up the price of a unit by around $25,000. In real figures you are talking about two to three-year savings for many Canberrans who are striving for their first home. Homebuyers, and of course investors, have to find the cost hike through increased borrowings and the increased threat of mortgage stress. Rents are impacted by investors passing the LVC cost on to their tenants. There are no wins coming out of this process, just pain and stress.
I cannot for the life of me understand why the government would foist these costs on to homebuyers and renters. But the damage does not stop there. The sheer quantum of the lease variation liability could deter many development proposals in the first place. It denies opportunities to improve the supply of residential accommodation and therefore a lever to exert downward pressure on the price of residential dwellings, especially for first homebuyers. We all know that to be the case. But the government refuses to concede that the LVC is having any impact at all.
This bill would give developers the option of paying the LVC at the issuing of the certificate of occupancy rather than at the start of the project. Depending on the value of remissions, the LVC liability could be quite significant, and deferral could be attractive. We certainly concede that that could be the case.
There are a few strings here. The ACT government is casting itself in the role of a bank. In the first instance, there is an interest charge that escalates the final cost of the development. At the moment this is mooted to be less than four per cent. Secondly, the developer will be compelled to assign to the government the first charge over the land. In the event of a developer defaulting on their LVC debt, the government then has discretion to sell the land to recover their debt. In other words, the government’s liability is secured ahead of those who finance the project. This increases their risk by many millions and creates a major deterrent to providing finance for development projects in the first place.
The banking industry made it very clear to me that they would be extremely unhappy about being placed second in the queue. Indeed a number of them have indicated that they would be unwilling to be a part of such an agreement. I understand the government say this is all A-OK. They have compared it to the government having first charge in regard to other unpaid liabilities. The great difference is that, when it comes to the LVC, the amount in question is far higher than any other charge. It would radically change the shape of any loan.
I note in correspondence from the Property Council that—surprise, surprise—they got the same feedback from the banks. Correspondence from Adina Cirson, the ACT executive director of the Property Council, says, “During the course of our consultation with members and financiers, we’ve now met with the senior members of five leading institutions who are responsible for approving a significant proportion of financing for property development in the ACT.” We are talking about NAB, Westpac, St George, Commonwealth Bank and ANZ.
Next page . . . . Previous page . . . . Speeches . . . . Contents . . . . Debates(HTML) . . . . PDF . . . . Video