Money in homes
Potential debt spirals can be avoided, argues Trent Fleskens. Image – Canva.,
  • Trent Flesken's previous article outlined some of the issues of Keystart's lending
  • In this article, he proposes some changes to how and where the loans are made
  • In this way, he argues that Keystart can truly help first-time buyers get into the market

Previously, I wrote about the issues of the so-called ‘The Keystart Generation‘. Here, I provide a solution. 

The solution I advocate for is the only one I see working to break the machine that currently works against our State Government’s policy to promote urban infill.

That solution involves having Keystart add an extra point to its criteria when qualifying a new loan application:

  • being to limit the location of the proposed property to within 15 kilometres of the city and within 500 metres of transport hubs and bus routes, and,
  • limiting its allowable loan book size for the usual house-and-land package on the fringes.

Loan values will adjust over time to facilitate the average price of townhouses, villas, and apartments in these areas to ensure the product can be taken up by all who want it.

Specifically, it will mean that the usual consumer of house-and-land products who are generally steered by building companies to build on the fringes will now be steered towards infill developments within 15kms of the city.

This solution will force positive change in a few ways:

  1. It will strongly incentive builders, who are currently the major marketers of urban expansion, to innovate and use their vast resources to focus their efforts on proliferating and promoting urban infill outcomes to their clients.
  2. It will increase the efficacy of Metronet, and the usefulness of the new train stations being built in existing suburbs.
  3. It will increase the foot traffic in inner-city retail and café strips, providing a much-needed foundation of demand for these business hubs.
  4. Most importantly, it will allow market economics to finally work in Keystart’s favour to achieve its fundamental goal, being to assist its clients to use Keystart as a step ladder so that when demand is greater than the limited supply in inner-city locations, prices rise, equity rises, and the client can refinance to a regular bank with 20% equity.

Keystart holds the power

While Keystart was initially set up to facilitate homeownership for established properties, its very mission statement has been harnessed and repurposed by its #1 clients, the builders, to mainly service new construction home loans, working at odds with the State Government’s prime planning objective.

And because of this reliance by builders, Keystart’s very existence is the dominant reason we have the worst urban expansion footprint in the world.

Fortunately, through the implementation of one key policy change, it could also hold the power (with its control of market forces in this space) to force change for good.

By turning off the tap to builders who market construction on the urban fringes, and conversely incentivising builders to provide housing products and build relationships with landowners in urban centres, the wheel will be broken and our city can work effectively towards the benefits that come from being more connected and less dispersed.

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