Western Australia has put $250 million behind a simple idea: if banks will not lend until a project is mostly sold, the government can help fill the gap. The fund is aimed at apartment and townhouse developers who struggle to meet the pre-sale hurdle that lenders set before releasing construction finance.
That is a real bottleneck. It is also a narrower one than the headline suggests.
Why banks ask for pre-sales in the first place
A lender funding a tower or townhouse complex wants evidence that buyers exist before it advances millions in construction debt. Pre-sales are that evidence. They also protect the bank from being left with unsold stock if the market turns mid-build.
When buyers are cautious, or when construction costs have jumped since a project was first priced, the pre-sale target gets harder to hit. Good projects stall. Not because the site is wrong, but because the sums do not clear the bank’s test.
The scheme sits right on that pressure point. It does not change what banks require. It helps developers meet it.
Where the risk goes
Here is the catch. A pre-sale backstop does not remove risk from the project. It relocates some of it.
If the state steps in to support sales volumes or underwrite part of the hurdle, taxpayers carry a slice of the exposure the bank was unwilling to hold alone. That can be a fair trade if it unlocks homes the market genuinely needs. It is a poor one if projects that would have failed anyway get through on public support.
The difference comes down to how projects are selected. A scheme that backs sound, well-located developments with realistic pricing adds supply. One that props up weak feasibility just defers the problem.
Does it add apartments, or just speed up the ones already planned?
This is the question that matters for supply. There are two possible effects, and they look very different on the ground:
- Additional supply: projects that were dead on the drawing board reach construction because the finance gate opens.
- Timing only: projects that would have proceeded later, once conditions improved, simply start earlier.
Both have value, but only the first lifts the long-run housing count. The scheme’s real effect will show in completions over the next few years, not in announcements this month.
Finance is also only one constraint. Construction costs, contractor availability and planning timelines can sink a project that has cleared the bank. Our look at NSW first home buyers and the apartment shift in Sydney’s west shows how much of the entry-level market now depends on apartments getting built at all.
Key numbers
- $250 million: the size of the WA fund
- Target: apartment and townhouse developers
- Purpose: clear the pre-sale hurdle for construction finance
What it means for buyers
For someone buying off the plan, the scheme is double-edged.
On the upside, more projects reaching construction can mean more choice and less competition for scarce stock, especially at the more affordable end.
On the other side, a project that cleared its hurdle with help is not automatically a stronger project. Off-the-plan buyers still carry settlement risk. If valuations come in below contract price at completion, the buyer can face a shortfall with the lender. The scheme does not change that.
Rule of thumb: treat any government support as a reason to look harder at the developer’s track record, not a substitute for it. Check the builder’s history, how the deposit is held, and what the contract says about sunset dates and price changes.
What could derail this
Three things would blunt the effect:
- Costs keep rising. If build costs outrun sale prices, a cleared pre-sale target still leaves a project underwater.
- Weak buyer demand. Support can help meet a threshold, but it cannot manufacture end buyers who are not there.
- Valuation gaps at settlement. Pre-sold apartments priced before a market shift can value short when it is time to complete, which hurts buyers and can unwind the very sales the scheme relied on.
WA’s market has been tight on supply, so the case for unlocking stock is stronger than in oversupplied markets. Still, the design details, including who qualifies and how much risk the state holds, will decide whether this is a smart bridge or a costly cushion.
The practical take
If you are considering an off-the-plan purchase in WA, do not read the scheme as a safety signal for any particular project. Ask the developer how pre-sales were achieved, get an independent valuation view of the price, and confirm your own finance holds up if the settlement valuation lands lower than expected.
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General info, not financial advice.
