The Federal Government is trialling a new scheme in South Australia to assist individuals purchasing their first house. This project will not just look at the land and the structure of the house itself but also the infrastructure required to build the property (water, electricity, etc.). As part of an agreement between the federal and state governments to help create 100,000 new homes for first-time buyers, the two governments will provide $801.5 million in funding to unlock approximately 17,000 homes in South Australia, with 6,877 designated for only first-time buyers.
What sets this project apart from your typical article on housing numbers is not just the $470 million dollar package, but also how it works. For the first time, much of these funds aren’t going towards simply writing a cheque to the builders but for the “last mile” infrastructure (water/sewer, roads, etc.) that the developers say is the biggest hurdle to go from zoned land to a buildable lot. Specifically, this $470 million package includes a $300 million concessional loan for water infrastructure for Adelaide’s rapidly developing northern suburbs, a $50 million loan for civil works associated with building a 400-home first-time buyer area in the Playford Alive redevelopment, and a total of $184 million in funding for renewing other areas in the metropolitan region, along with $133.6 million in grants that will be matched by the South Australian government.
The government’s simple logic is to expedite basic services and to provide houses. The housing industry bodies have praised the emphasis on getting the servicing done quickly. “This investment is critical to getting more homes built quicker,” said Jocelyn Martin, Managing Director of the Housing Industry Association. “Builders are more likely to cite delays from infrastructure than a lack of demand.” The Property Council also agreed with this point and said that the next challenge will be to deliver on their commitment, turning promises into houses.
The AUD 801.5 million agreement also marks the beginning of a recent national election commitment through this National Priority Project. The AUD 10 billion committed by the federal government to deliver 100,000 homes to first home buyers is the investment made through this agreement, which would be approximately USD 6.97 billion in terms of USD. The Prime Minister and the South Australian leaders have framed this action as both practical and symbolic – an initial investment into housing affordability and a direct response to concerns of young people’s ability to afford a home due to escalating housing prices.
For potential first-home purchasers from South Australia, the timing and current state incentives are very important factors in their purchase. South Australia has existing state incentives, such as the First Home Owner Grant, that increase the overall purchasing power of someone who is purchasing a new home; by increasing the number of homes that first home purchasers have available to purchase, the goal is to decrease the time frame of purchasing a residential dwelling and have less competition driving up the prices. (For your reference, the standard First Home Owner Grant in South Australia historically is AUD 15,000 based on established criteria).
Back to the basic currency conversion: the exchange of an Australian dollar to (USD) one dollar at the time of announcement is approximately at 1 Australian dollar = USD 0.697. So when you see a headline with the amount of AUD801.5 million, this is the same as USD558.4 million; this is important information to give investors/investment analysts an idea of how other governments spend money in other countries.
What’s next is that we will watch the loans/grants to see if they really can help alleviate the obstacles that create “last-mile” red tape and restrict businesses from building and how to ramp up building in the cities without creating inflation in materials/wages through the construction process. The most important thing will be to see if there are houses that are a part of these projects (in the reports) by 2027-28, which families will actually have access to as a result of these initiatives. If South Australia’s program succeeds, then it will be a model for all states and territories, plus it will be one of the few examples where the funding was used to build infrastructure with the intention of providing a front door to people rather than just creating a showpiece.
