Property Lobbyists Propose State Funded Mezzanine Finance Arm With Premier Brumby

They believe such an arm could immediately kick-start $10 billion in property developments, for which it is difficult to secure funding in the current environment.

Other emergency reforms discussed by the industry lobbyists, some whom have met Mr Brumby twice since January 30, include changing the way deposits are treated in the Sale of Land Act, introducing new planning guidelines to fast-track projects, and allowing first-home buyers to use government grants to buy apartments off the plan.

Victorian Trades Hall Council secretary Brian Boyd and Urban Development Institute of Australia executive director Victoria Tony De Domenico were at the meetings.

The meetings came about after a series of letters to the Government last year, warning that Victoria’s development sector risked coming to a near standstill, unless sweeping changes were made, particularly to funding projects.

A mezzanine finance arm would enable the State Government to fund the "bridge amount" between what a financier is prepared to loan, and the cost of a development. Mr De Domenico said the Government might be able to target development in precincts it wants, and with facilities it wants, such as public housing, by offering a mezzanine interest rate. In the past year, and despite several interest rate cuts, financiers have become much more conservative in the amount they loan to fund property developments.

They now insist developers have more up-front cash, pre-sales, or tenants prepared to lease space.

Because of this, the lobbyists believe half of Victoria’s development projects did not proceed last year.

Mr De Domenico said the building industry directly employed 180,000 people in Victoria. He said that while the $4billion "Rudd Bank" development fund announced last month allowed for refinancing loans on existing commercial buildings, it did not provide for new development projects due to start this year and in 2010.

He said talks with the Premier were continuing.

Meanwhile, Mr Boyd described the initial January30 meeting with the Premier as "very frustrating".

He predicted up to another 100 residential and commercial projects could be shelved in Victoria, unless changes were made to lending criteria. He said the trigger for the recovery in the building sector lay with the banks, of which leaders of the "Big Four" were represented at the table.

Mr Boyd had previously told The Age that redemptions on the building industry’s redundancy fund increased late last year. The fund provides some income to workers retrenched or laid off. Employers pay into the fund on behalf of workers.

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Marc Pallisco

A former property analyst and print journalist, Marc is the publisher of realestatesource.com.au.

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