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What do you need to do?Read this alert for our view on how this initiative is likely to be packaged to create a commercially attractive proposition for developers and investors.
Stuart Dixon-Smith
Partner
Stuart Dixon-Smith
Partner
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Michael Allen
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Stuart Dixon-Smith
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Melbourne
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John Malon
Brisbane
David Bell
Canberra
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Chris Wheeler
Mallesons Stephen Jaques predicts the emergence of a new property industry sector catering for affordable housing developments, kick started by the government’s affordable housing subsidy.
Specialist property has become a playing field for Australia’s property industry over the last decade, with large institutional investments in diverse areas such as retirement villages, nursing homes, hospitals, marinas and child care centres. This “institutionalisation” of former cottage industries, as well as large public infrastructure projects, is likely to spill over to the affordable housing sector given the Federal Government’s need to make this initiative work.
Mallesons Stephen Jaques sees scope for such institutionalised involvement to extend beyond simply being the developer. Participants are likely to combine being the direct issuer of funding instruments, the developer and the eventual property manager.
This area is likely to attract the attention of both institution investors and Australian fund managers who’ll pool money from superannuation funds, and wholesale and retail managed funds into this sector. Major listed developers already operating in the housing sector, who often themselves have in-house fund management and property management expertise, are likely to be participants - either in partnership with investment banks or as stand alone players.
Innovation in the property and financial services industries, which Australians are world leaders in, is likely to be necessary to design the best packages and structures to fit into a complex regulatory regime and to access the many disparate incentives available.
It is likely that the Federal Government subsidy will not be enough on its own to support the sector. However, co-subsidies from the States, plus concessions on stamp duty and infrastructure levies together with superannuation funds now being able to gear on a limited recourse basis and having a greater demand for income streams because of recent tax changes could all be brought together to create an attractive financial outcome.
The benefits to funds, banks and developers operating in a socially responsible sector should not be discounted, with recent bad publicity regarding developer political donations, and sub-prime and over-gearing woes impacting on the financial stability of the property and investment banking sector, a good news investment will be attractive to those who remain strong in these sectors.