City of Karratha

Proposed City Housing Investment Program FAQ

30 Jan 2020

Here are some answers to frequently asked questions regarding the proposed City Housing Investment Program.

1. What is the City Housing Investment Program?

The City invited proposals from key stakeholders regarding opportunities to potentially invest in property development to alleviate current and anticipated future housing stress. No commitment to proceed with any of the proposals has been made by Council.

2. Why is the City considering investing in property development?

There is a significant undersupply of residential properties available to rent or buy within the City, with 1.5% of housing stock available compared to approx. 7% over the past 5-6 years. With more than $65b in investment in our region over the next 5 years and anticipated population growth, Council is concerned the market could tighten considerably over the next few years, driving up rent and house prices and negatively impacting the cost of living in our community. 

3. How much money has the Council committed to the project so far?

Council has allocated $250,000 in the 2019/20 Budget to support the engagement of project management services. No further financial commitment has been made at this stage.

4. How would any potential investment be funded?

Council has significant reserve funds, derived primarily through the City’s ownership of the Karratha waste transfer station, Karratha Airport and other commercial investments that return funds to the City. Investors have been advised that the City may be willing to invest up to $35m to increase housing stock in Karratha, using some of the cash at bank which would be returned with interest. No loans or direct rates revenue would be used to fund any potential investment.

5. Why not let the market sort itself out?

Karratha has a unique and volatile real estate market, as demonstrated during the last construction boom. More recently, external conditions such as tight lending restrictions, high construction costs and a lack of large-scale project underwriters have created barriers to property development. Council is investigating opportunities to partner with key stakeholders to address housing stress.

6. What about homeowners who bought during the last boom?

There are slightly more than 8500 dwellings worth more than $4.2b within the City. Council’s potential investment of up to $35m is small when put into context of the overall real estate market and would not flood the market.

7. What are the benefits to ratepayers?

Potential benefits include alleviating housing stress, stimulating the local construction industry and our local economy, creating local jobs, providing desirable urban renewal outcomes and a return on investment for the City.

8. Why hasn't the community been consulted?

Council invited proposals to alleviate current and anticipated future housing stress by February 5. No commitment to proceed with any of the proposals has been made by Council. Community feedback will be sought before any investment decision is made.

9. What are the investment options?

Of the 15 proposals received, five have been shortlisted for further consideration:

  • Tambrey Nominee Pty Ltd's proposal to build 93 apartments on land adjacent to the Tambrey Tavern;
  • H&M Tracey Construction Pty Ltd's proposal to build up to 60 houses over three years on City-owned land;
  • Oztopia Holdings Pty Ltd's proposal to build up to 94 dwellings on City-owned land;
  • WTC Holdings Pty Ltd's proposal to develop 47 apartments at The Quarter; and
  • GBSC Yurra Pty Ltd's proposal to build nine dwellings on three City-owned lots.
     

10. Would building more houses cause an oversupply once the construction boom ends?

The aim of the proposed City Housing Investment Program is to stimulate the local building and development industry. A potential investment of $35m represents less than 1% of the total stock of 8500 residential properties within the City district and would not flood the market.

11. Would the houses be rented or sold?

The request for proposal process required proponents to indicate the intended use of the property development, with the five shortlisted proposals including a mix of properties to be rented and sold. The City currently rents 11 residential properties on the open market.

12. Won't a potential investment impact local builders?

The City has received a lot of interest from local builders regarding the request for proposals. Providing a positive outcome for the local building and construction industry is one of the key objectives of the proposed investment program.

13. Who are the key stakeholders?

Key stakeholders include state and federal government representatives, government departments, resource companies, major land owners, real estate industry bodies and local developers and builders.

14. This is not normal Local Government activity, why is the City considering getting involved?

Through our annual community survey, the community consistently ranks the cost of living as the number one issue for Council to address. While investing in property development may not traditionally be a local government responsibility, the City has previously invested in commercial projects where there are demonstrated benefits to the community.

15. Would Councillors or City managment directly benefit from any potential investment?

No. Councillors and City management would not receive any direct benefits from any potential investment. The majority of Councillors and the City executive management team own residential property in Karratha and would personally benefit if house values and rents continue to rise. The proposed investment program aims to ensure rent and purchase prices do not reach exorbitant and unsustainable levels, as experienced during the last construction boom.

16. Is the City trying to manipulate the market for profit?

No. While the City would receive a return on any potential investment, this is not a money-making exercise. Failure to address current and anticipated future housing stress will invariably result in a spike in rents/house prices, which would negatively impact on the cost of living in our community.

17. Why does the City need a project manager?

The City has secured a project manager firm with extensive experience in property development transactions to assist Council during this process.

18. Are there any risks?

The City requested that proposals identify and address any risks associated with their submission. The shortlisted proposals will be presented to Council for careful consideration in March and community consultation prior to any investment decision being made.

19. What happens next?

At the February Council meeting, Council resolved to meet with the five shortlisted proponents to clarify details of their proposals. Community feedback will be sought prior to any investment decision.