Development Application Changes NSW

Development Application Changes NSW

Some important changes that you should be up to speed across Staged and Concept Stage Development Applications. These changes detailed below has implications for any Developers and any related parties/Stakeholders of large scale projects who have pending, or proposed, applications for concept proposals in NSW.

development application changes nsw

Key changes

  • Staged Development Applications will be renamed Concept Development Applications, to better reflect what they contain in practice,
  • A Concept Development Application will be able to be followed by only ONE development application for the site, rather than the multiple applications currently required, and
  • A new provision (section 83B(5)) will make it clear that the impacts of carrying out the development may be considered when the concept proposals are being assessed, but must be considered where approval to carry out works is sought.

 Reasons for the changes

“The Government proposes to amend the legislation, so it is explicitly clear that staged development applications can include only a concept approval and a single subsequent detailed application. Construction impacts will be fully assessed before any work can start.

“This two-stage approach has become common practice in the development industry. The Government is simply making the legislation clearer to ensure the current pipeline of DAs worth $8 billion can proceed without delay.

“Staged DAs tend to be for larger, more complex projects. A concept approval makes it clear what the high-level planning limits are for a development, including its use, shape and scale, and height which provides certainty to developers, financial backers, stakeholders, and the community.

“Having multiple DAs when one would suffice would create time delays and additional costs to the applicant, with no commercial, technical or community benefit.”

What’s the impact of these changes?

The Decision will terminate single stage concept DAs, and will mean that all concept DA’s need more detailed assessment of Construction Impacts for all stages of the development proposal at the Front End. This could potentially add further costs and time to the concept DA process.

Further information can be obtained from NSW Planning and Environment website below and or speak with your Planning Lawyer.

http://www.planning.nsw.gov.au/Policy-and-Legislation/Under-review-and-new-Policy-and-Legislation/Legislative-amendment-for-concept-proposals

James Okkerse

Disclaimer

“Prudential Finance are intended to provide commentary and general information. They should not be relied upon as legal advice. Formal legal advice should be sought in particular transactions or on matters of interest arising from this communication. Persons listed may not be admitted in all States and Territories. Prudential Finance does not provide financial product advice and does not hold an Australian Financial Services Licence. Prudential Finance recommends that investors consider their own objectives, financial situation and needs before proceeding with any investment and seek professional advice. All information contained within this Website is specifically structured for corporate, business, commercial, construction clients, wholesale and professional investors.”

 

 

 

 

 

Dwelling Supply across Eastern Seaboard of Australia

Dwelling Supply across Eastern Seaboard of Australia

We thought it would be useful to illustrate where dwelling supply is forecasted for NSW, VIC, QLD ACT and TAS. Each state has its own technicals (population growth, overseas migration, building approvals, for example) but it’s fair to say that there is a healthy level of Supply that the market will be eager to see how this is absorbed.

It will be interesting to closely monitor what effect excess supply along with potential increases in interest rates will have on the Australia’s House Price Growth. No doubt an increased amount of Volatility will be expected over next 12-18 months.

Dwelling Supply across Eastern Seaboard of Australia

James Okkerse

 

 

 

Insolvency Legislation Reforms – Safe Harbour & Ipso Facto

Insolvency Legislation Reforms – Safe Harbour & Ipso Facto

Key Legislation changes have been introduced whereby ‘’safe harbour’’ protects company directors from personal liability for financially distressed/insolvent trading companies

Insolvency Legislation Reforms - Safe Harbour & Ipso Facto

Directors are to ensure they have developed a course of action which are reasonably likely to lead to a better outcome for the company and its creditors rather than triggering immediate administration or liquidation.

There is also another layer of legislation which prevents contractors terminating supply and other contracts with the business during the restructuring period, under what are called “ipso facto” clauses.

The objective for the reforms are to encourage company directors to engage early with financial hardship, keep control of their companies and take reasonable steps to pursue a corporate restructure.

It’s also intended to provide a better opportunity for companies to restructure and trade through financial difficulties, when they may have otherwise entered into liquidation or external administration.

Feel free to call us where we can run you through what type of Credit Impaired Loans / Debt Solutions we can offer.

Further Information on Safe Harbour and Ipso can be found on Australian Government legislation link below.

Treasury Laws Amendment (2017 Enterprise Incentives No. 2) Act 2017

https://www.legislation.gov.au/Details/C2017A00112

J.O.

“Prudential Finance does not provide financial product advice and does not hold an Australian Financial Services Licence. Prudential Finance recommends that investors consider their own objectives, financial situation and needs before proceeding with any investment and seek professional advice. All information contained within this Website is specifically structured for corporate, business, commercial, construction clients, wholesale and professional investors.”

 

 

 

Historical Cash Rates & Median House Prices

Historical Cash Rates & Median House Prices

We are living in a very interesting world, where I’m sure in 20 years’ time the ‘’experts’’ will be either saying how good we had it or what on earth where we thinking.

We believe that despite current asset values, yields, supply etc, etc we have tremendous Opportunity within Debt and Equity side of Real Estate Market in both an upward/downward scenario if your pragmatic and have a strategy in place for any change in landscape.

What can be challenging is looking at current asset prices vs historical basis for relative value purposes, everything appears expensive. I think the next phase of opportunity will be to keep your leverage under control/prudent level in order to have the ability to sustain any shocks that may be coming and or take advantage in a Volatile Market.

We were looking at historical cash rate from 1993-2017, See below (This may only be appealing to statisticians) and I was primarily looking for consecutive months of an unchanged cash rate. You can see we are reaching the resistance level 16-17 where it would appear based on history that current cash rate is due for a move (this is a hot topic, it’s nice to see this through simple historical data). We also looked at the immediate move post long run of unchanged cash rate and as you can see 25bps move was consistent theme.

It will be intriguing to see how the market reacts and what effect this has on asset prices once rates start move again.

Historical Cash Rates & Median House Prices

We also took a look at the Historical Median House Prices for Sydney and Melbourne (other states had less data, so we left them out). Its’s interesting to see the Dramatic effect that Global Quantitively Easing (QE) has had on Asset Prices. We looked at the US QE cycle and added when they were introduced, see below.

Where do you think the Cash Rate and Median House Prices will be at end 2018?

Do you have a strategy in place?

Historical Cash Rates & Median House Prices 1

Data Source: RBA, 1970-1979 from Applied Economics (1991); 1980-2003 are from NSW VG / Department of Housing data. (b) 1970-79 are Productivity Commission data; 1980-2003 are Victorian VG data. (c ) 1973-79 are mean prices from Abelson (1982) factored down by 8% to fit REIA median data in 1980 and 1981; 1980-85, REIA data; 1986-2003, Queensland VG data (d) 1971-79 are mean values from Abelson (1981)Applied Economics (1991) reduced by 8% for medians; 1980-2003 are from SA VG. (e) 1970-89, based on REIA data. 1990-2003, average of quarterly data from the Department of Land. (f) 1971-81 are mean values (Abelson, 1982) reduced by 8%; 1982-83 are interpolated; 1984-90, CBA data spliced to 1991-2003 average quarterly REIA data.. (g) Average of quarterly medians from REIA. (h) 1971-80 are mean values from Abelson (1982) reduced by 9% for medians; 1981-2003 are average of quarterly REIA medians.

J.O.

“Prudential Finance does not provide financial product advice and does not hold an Australian Financial Services Licence. Prudential Finance recommends that investors consider their own Objectives, financial situation and needs before proceeding with any investment and seek professional advice. All information contained within this Website is specifically structured for corporate, business, commercial, construction clients, wholesale and professional investors.”

 

 

 

 

 

 

 

GAIC Rates

Victoria’s Growth Area Infrastructure Contribution (GAIC) historical GAIC rates changes.

The growth areas infrastructure contribution (GAIC) was established to help provide infrastructure in Melbourne’s expanding fringe suburbs.

It is a one off-contribution payable on certain “events” usually associated with urban property development. These are usually buying, subdividing, and applying for a building permit on large blocks of land.

GAIC Rates

Below you can see a Balanced increase in each band per year.
Type B1/B2 and C have higher rates as relates to recent purchases, B1/B2 on or after 2008/2009, C on or after 2010 and or are in investigation areas such as Cardinia, Casey, Hume, Melton, Mitchell, Whittlesea and Wyndham.

GAIC Rates

Deferred GAIC Interest Rate

Interest rate applied on Deferred GAIC Liability which is linked to Victorian 10yr Government Bond has compressed over time for several reasons, most obvious is unprecedented global monetary policy applied (QE) having a significant effect on asset prices/interest rates.

I think it’s important to take a broader view if your deferring GAIC as you can see rates are slowly changing course, 2016-2017 was 2.3%, increased to 2.9% for 2017-2018. You may think this is only a small move, but we are pre-empting perhaps a longer-term upward trajectory where further increases can become more onerous when deferring GAIC payments.

GAIC Rates 2

If you need further information on Growth Area Infrastructure Contribution you can find here;

https://www.sro.vic.gov.au/growth-areas-infrastructure-contribution

Data source SRO Victoria

James Okkerse

“Prudential Finance does not provide financial product advice and does not hold an Australian Financial Services Licence. Prudential Finance recommends that investors consider their own objectives, financial situation and needs before proceeding with any investment and seek professional advice. All information contained within this Website is specifically structured for corporate, business, commercial, construction clients, wholesale and professional investors.”

 

 

NSW Section 94 Changes

NSW Section 94 Changes

A friendly reminder of the changes which provide some form of clarity albeit will introduce another level of uncertainty and unease from Industry Stakeholders with NSW Section 94 Changes.

NSW Section 94 Changes

Changes to Section 94 of the Environmental Planning and Assessment Act, which allows local councils to levy contributions for public amenities and services because of new development, will now be Uncapped.

Caps that have been fixed since 2010;

  • $30,000 in greenfield areas
  • $20,000 in infill areas

(per dwelling or residential lot).

New structure

Greenfield;  

  • $35,000 on 1 January 2018;
  • $40,000 on 1 July 2018;
  • $45,000 on 1 July 2019; and
  • no cap from 1 July 2020 (provided that the levies are in-line with an IPART reviewed contributions plan).

 Infill Areas;

  • $25,000 on 1 January 2018;
  • $30,000 on 1 July 2018;
  • $35,000 on 1 July 2019; and
  • no cap from 1 July 2020 (provided that the levies are in-line with an IPART reviewed contributions plan).

If you wanted to read further, NSW Government Planning circular below.

http://www.planning.nsw.gov.au/Policy-and-Legislation/~/media/EFBE020CD61C4FFD8BC4F51591A447CF.ashx

James Okkerse

 

 

 

Building Bond Scheme

Industry Reforms the Building Bond Scheme

Further industry reforms have taken effect 1 January 2018 (Building Bond Scheme) where Developers of residential Strata schemes will be required to execute Mandatory Defect Inspection Reports along with lodging a Building Bond equal to 2% of the final contracted construction cost of the building.

building bond scheme

The building bond scheme applies to building work to construct residential or partially-residential strata properties that are four or more storeys. Buildings that are three storeys or under are covered under the Home Building Compensation Fund.

We thought it would be worthwhile to remind yourselves of these changes which I’m sure your already up to speed with these reforms, if not you can find more information on Fair Trading NSW website below and or speak with your property lawyer.

FairTrading.nsw.gov.au

James Okkerse

“Prudential Finance does not provide financial product advice and does not hold an Australian Financial Services Licence. Prudential Finance recommends that investors consider their own objectives, financial situation and needs before proceeding with any investment and seek professional advice. All information contained within this Website is specifically structured for corporate, business, commercial, construction clients, wholesale and professional investors.”

 

Multiple Funding Channels for Property Developers

Multiple Funding Channels for Property Developers are Imperative

The vast majority of developers we help obtain Construction and or Development Finance tend to focus only on private funding solutions as it has been a reliable way to efficiently source funding.

Multiple Funding Channels for Property Developers

We are seeing an increasing number of new clients who have historically relied upon bank funding who are now migrating over to non-bank lending.  Its no surprise that bank funding has become increasing difficult due to pressure from regulators which is heavy publicised and hence a shift to private funding.

I think its important to have a mixture of both bank and non-bank funding channels/relationships in place at all times. This is a common conversation we have with new and existing clients.

There are several pros and cons of bank and private funding such as interest rate, timeframe, pre-sales, LVR differentials etc, etc but to me no matter what cycle we are in, building robust relationships and having multiple options with both Bank and Private Funding will be paramount to developers who have or are working on building a healthy pipeline.

What I do know, is the landscape is continually changing and either you adapt or you fall behind as the future is unknown.  Most developers may already have coverage from both sides but we continue to hear otherwise and wanted to reiterate our view in event we can help someone who may be thinking about this.

James Okkerse

We assist obtaining multiple funding channels for property developers.  Please see our Development Finance Page

“Prudential Finance does not provide financial product advice and does not hold an Australian Financial Services Licence. Prudential Finance recommends that investors consider their own objectives, financial situation and needs before proceeding with any investment and seek professional advice. All information contained within this Website is specifically structured for corporate, business, commercial, construction clients, wholesale and professional investors.”

Debt or Equity

What do large Institutional Funds looking at the Australian Real Estate Market prefer – Debt or Equity.

It’s no surprise that we continue to see increasing demand for high quality debt or equity opportunities here in Australia (Sydney and Melbourne preference) from large institutional investors.

debt or equity

What is interesting to me is the shift in appetite towards debt investment.  Why?

On the Equity Side

1) Cap rates continue to tighten and are at a point where large funds simply focus on other regions outside Australia that have more attractive valuations or they decide to take more risk and invest in less liquid regions which I think is less preferred

2) Supply remains Thin and therefore less focus is applied as funds can’t be deployed efficiently and therefore will funnel elsewhere

3) Dislike for On Market bidding for Physical Assets as time can be wasted if unsuccessful.

Why would they prefer Debt Investment?

1) Higher return can be achieved with more security

2) Pension funds and Insurance Companies prefer debt as its less penal on their metrics vs equity hence a larger mandate into debt

3) The Banks consolidation of their balance sheets and essentially reducing risk on various parts of lending market has created a window of opportunity for non-bank lending and private money to fill the gap.

I’m not actually biased either way on debt to equity investment as I believe in this market you will continue to find opportunities in both segments if your proactive and opposed to reactionary.

2018 is going to be a big year. Give us a call and we can work proactively together in finding lucrative opportunities for you and your company.

James Okkerse

For investment opportunities click Property Investment

“Prudential Finance does not provide financial product advice and does not hold an Australian Financial Services Licence. Prudential Finance recommends that investors consider their own objectives, financial situation and needs before proceeding with any investment and seek professional advice. All information contained within this Website is specifically structured for corporate, business, commercial, construction clients, wholesale and professional investors.”

Development site values start to crack

Development site values start to crack

“Metropolitan development sites values, which have surged in recent years on a wave of Chinese money, are showing the first signs of correcting after developer Nicholas Smedley secured two sites at discounts of 30 per cent or more after vendors rejected his original off-market offers, thinking they would get more through a public campaign.

Chinese buyers have quit the market in droves, and off-the-plan sales rates have slowed drastically in Sydney and Melbourne meaning the building boom is starting to wane.”

For the full article go to Australian Financial Review

Development Finance Availability

With property development site values falling due to market forces and Banks tightening lending criteria, private property loans are the flavour now and into 2018.

Prudential Finance has private development loans available for experienced property developers, loans from $5M to $1B.

Call 1300 550 669 to discuss your development finance requirements.

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