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Residential Focus

21 October 2020

#Property & Real Estate

Published by:

Rebecca Weakley

Residential Focus

HomeBuilder scheme – is it all it’s built up to be?

In June 2020, the federal government introduced the HomeBuilder grant, a $688 million scheme to provide eligible applicants with a grant of $25,000 to build a new home or substantially renovate an existing home, with a view to boost the residential building sector during the pandemic.

Applicants must:

  • be individuals (i.e. not a company or a trust)
  • be Australian citizens aged 18 years or older
  • earn a maximum income of $125,000 per annum (for singles) or up to $200,000 (for couples)
  • enter into a building contract between 4 June 2020 and 31 December 2020 to either:
    • build a new home as a principal place of residence, where the property value does not exceed $750,000; or
    • substantially renovate an existing home as a principal place of residence, where the substantial renovation contract is between $150,000 and $750,000, and where the value of the existing property does not exceed $1.5 million (prior to renovations).
  • the construction or renovation must be carried out by licensed builders
  • construction must commence on or after 4 June 2020 and within three months of the contract date.

The HomeBuilder grant sits alongside the existing state and territory incentives, including first home owner grant programs, stamp duty concessions and other grant schemes, as well as the Commonwealth’s First Home Loan Deposit Scheme and First Home Loan Super Saver Scheme.

A National Partnership Agreement has been put in place to give effect to the HomeBuilder scheme. The Agreement, signed by the Commonwealth government and all state and territory governments, utilises existing state and territory instruments to make HomeBuilder payments to eligible applicants. In NSW, RevenueNSW is the government body accepting applications for the grant.

The numbers so far

The HIA New Home Sales Report (September 2020) (Report) showed that new home sales across Australia rose in September to maintain four strong months of sales since the announcement of the HomeBuilder grant. The Report indicated that sales results nationally had offset the poor results that were seen following the introduction of COVID-19 restrictions. Currently, sales are 11.8 per cent higher than the equivalent period in 2019. However, the HomeBuilder grant has had a varied impact across states.

Since the introduction of the HomeBuilder grant, the highest increase in sales has been seen in Western Australia, which had the shortest pipeline of work entering the recession. This has been achieved despite Western Australia having a comparatively low rate of HomeBuilder applications (in comparison to the other states), with only 466 applications so far. This low rate could be attributed to the decision of the Western Australian revenue office to accept applications only after foundations have been laid or title issued. Comparatively, other states have been accepting applications when a building contract has been signed or a sale takes place.

Sales results have also plateaued in Queensland, although the September 2020 quarter overall was 39.8 per cent higher than the June 2020 quarter. Queensland has had the second highest number of HomeBuilder applications so far, with 2,536 applications.

For South Australia, the September 2020 quarter was 77.7 per cent higher than the June 2020 quarter.

Victorian sales were surprisingly strong considering stage four restrictions were still in place. However, the adverse impact of the stage four restrictions will likely emerge in the following months. Victoria so far has had the highest total number of HomeBuilder applications, with 4,176 applications made.

NSW, in comparison, has not seen the same increase in sales in comparison to the other states. So far, NSW has seen only 2,331 applications for the HomeBuilder grant.

Nationally, the number of loans for the construction of new dwellings increased by 22.9 per cent in August 2020, to its highest level in over a decade. This shows an increase in the number of loans for the construction of new homes and also increase in the purchase of residential land as well as new and established homes. This increase in construction loans can be seen across all jurisdictions except for NSW.

Of the 11,400 applications across the country, 8,884 applications are for new home builds, and 2,483 are for rebuilds or renovations. The Treasury forecasted 27,000 people to apply by the end of December 2020.

Issues

While the HomeBuilder grant appears to have been very successful in some states, there have been some criticisms of the scheme and its operation.

A key criticism of the scheme rests with the length of time to pay the grants and how few people have received the grants so far. Of the 11,000 home builders and renovators that applied for the HomeBuilder grant, only 780 have received the grant. In practice, the payments are typically not made until after foundations are laid for new builds, which requires council approval and can be a lengthy process. The majority of payments are expected to be made in late 2020 and early 2021.

Further, while the scheme has been extremely successful for the building industry in some states, particularly in Western Australia and South Australia, it is now struggling to meet capacity demands in these areas. Under the scheme, sales have to be contracted, with council approvals and finance in place, by 31 December 2020, with the land subdivided and work started by March 2021. There are suggestions that the deadlines should be extended to titling land by 30 June 2021 and commencing work by 30 September 2021, to ease the pressure on builders (particularly in Western Australia, South Australia and parts of Queensland) where the industry has been overwhelmed. Without an extension on the deadlines, there are fears that the scheme could fail, leaving a large number of applications unfulfilled as builders and developers cannot meet the contract or site start date requirements.

Issues in NSW

NSW has not seen the same extent of uptake of the HomeBuilder grant as other states. This is likely due to the restrictions of the eligibility criteria. Builders and developers in Sydney, in particular, have limited customers who would meet all the requirements to access the grant. Primarily the income caps and the shortage of affordable land in Sydney have put the grant beyond reach. In Western Australia, South Australia or Victoria, more affordable land has contributed to a much higher uptake of the grant. It should also be noted that the NSW state government first home owner grant, which targets a similar segment of consumers, is less generous than some other states, in particular Western Australia, where it is double and with a more generous cap on value.

Given the variance between the NSW experience and other states, a question arises whether further steps should be taken in NSW to avoid a two-speed residential building sector across the country.

For other states, the challenge over the coming months will be to keep the momentum beyond December, when the scheme is set to expire.

Authors: Christine Jones & Rebecca Weakley

In the media

Survey finds stimulus supports property industry confidence lift
Property industry confidence is gradually picking up, albeit very cautiously, according to the ANZ/Property Council Survey for the December 2020 quarter. Stimulus measures such as the HomeBuilder grant as well as support from state and territory governments for new and first home buyers are driving up sentiment for the residential construction sector (16 October 2020).  More...

HIA: New home sales remain elevated
“The full impact of HomeBuilder is now evident in the HIA’s New Home Sales Report with sales now 11.8 per cent higher in the seven months since restrictions came into effect than at the same time last year,” commented HIA Chief Economist, Tim Reardon (14 October 2020).  More...

HomeBuilder scheme attracts 11,400 applicants, but only 780 paid so far
More than 11,000 home builders and renovators have applied for the federal government's $25,000 sweetener to encourage housing activity (14 October 2020).  More...

Time’s up for shoddy building code compliance
ASBEC is calling for urgent changes to the way building compliance is enforced as outlined in the 2018 Building Confidence report by Professor Peter Shergold and Bronwyn Weir on issues in the construction industry. The body wants to see a digital log book introduced that can be audited and passed on to the next owners to make sure buildings stay compliant (13 October 2020).  More...

HIA: Impact of HomeBuilder now evident in housing finance data
The short-term stimulus from HomeBuilder is emerging in the housing finance data released by the ABS. This is particularly evident in the issuing of loans for the construction of new homes and in lending to first home buyers,” stated HIA’s Chief Economist (09 October 2020).  More...

AIA: Construction cliff still a concern post big-spending budget
The Australian Government has handed down its 2020–21 Budget. Yet the Australian Institute of Architects (AIA) has warned that it may not be enough to stop the pipeline of new construction projects drying up thereby  hampering efforts to create jobs in one of the economy’s biggest employing sectors (08 October 2020).  More...

MBA: Budget will boost confidence and support construction industry to rebuild Australia
Productivity enhancing infrastructure, including local community infrastructure   wage subsidies and massive tax incentives for builders and tradies to invest means the Government is putting in place the right foundation for recovery (07 October 2020).  More...

New cover available for building certifiers without ‘cladding exclusion’
After lengthy due diligence, Professional Indemnity Insurance (PII) without a ‘cladding exclusion’ became available last week through Lloyd’s of London for Australian building certifiers. Limits of $1m and $2m are now available (06 October 2020).  More...

New World-wide fire safety standard launched
Despite rapid globalisation, with investment flowing across borders, money pouring into built assets and increasing numbers of different professionals operating across the world, the industry currently lacks a consistent set of high-level principles for design, construction and management of buildings for fire safety. The IFSS-CP framework articulates the functions, life span characteristics and attributes of fire safety in buildings (05 October 2020).  More...

Statement on the 2020-21 Federal Budget
NSW Treasurer Dominic Perrottet welcomed the Federal Government’s job-creating budget which provides significant tax relief for hard working Australians, supports businesses, and boosts investment in key infrastructure projects across NSW (06 October 2020).  More...

Published - articles, papers, reports

Budget 2020-21
Economic Recovery Plan for Australia.  More...

ABCC Industry update – 15 October 2020 Edition
For the October edition of Industry Update we take an in-depth look into Right of Entry, featuring case studies and a need to know guide. Also featured are our upcoming wages and entitlement activities as well as recent court outcomes. More...

Practice and courts

Adoption of the 2022 edition of the NCC will be delayed
15 October 2020 - The Building Ministers’ Forum has agreed to a four month delay to the adoption of NCC 2022. More...

Adoption of NCC 2022 to be delayed
NCC 2022 is now expected to be adopted by states and territories from 1 September 2022.
The delayed adoption will also see adjustments to key dates in the amendment cycle process for NCC 2022 to allow stakeholders time to participate. These adjusted dates include:
May – July 2021: NCC 2022 Public Comment Draft released for public consultation
May 2022: NCC 2022 Preview published here
If you have any questions regarding the delayed adoption of NCC 2022, please submit an online enquiry.

AIBS Member Communique - PI Insurance Alert
Please see Member Communique regarding PI Insurance here

ABCB Consultations
For Public Comment Technical Specification for the WaterMark Certification Scheme WMTS-522:2020,incorporates amendments to allow an addition of similar products of alternate design to obtain certification. Closes 28 October 2020.  More...

Definition for building complexity
The defined term for 'Building complexity' has been developed in response to a decision of the Building Ministers’ Forum (BMF) that a definition be prepared regarding the design, construction and certification of complex buildings. Closes 01 November 2020. 

GBCA: draft Green Star Homes Standard for consultation
Part of the Green Building Council of Australia’s Future Homes Strategy, the Standard is a key tool to help drive transformation in the residential sector to create a market for healthier, more resilient, energy efficient homes.
Consultation on the draft standard will run until 30 October 2020. A copy of the Green Star Homes Draft Standard and information on how to provide feedback is available here

2020 National Housing Research Program commences
Research is underway for the suite of projects funded by AHURI as part of the 2020 National Housing Research Program (NHRP). The research will be undertaken by collaborative teams from AHURI’s eight national university research partners. For more details of the 2020 NHRP projects please click here.  More...

NSW
The Certifiers Practice Standard is now available to assist certifiers in carrying out their statutory obligations. The guide makes clear the legal duties and processes required for trustworthy buildings in NSW and has been developed through consultation with over 25 industry experts. 

Developers must provide advance notice of building completion
Building developers must provide an expected date that they will apply for an occupation certificate. This notice must be provided at least 6 months in advance and no later than 12 months.   If building developers do not provide notice, fines may apply and/or a prohibition order may be made that stops or delays an occupation certificate being issued. Notice can be given through the NSW Planning Portal or online here.
Reminder: A transitional period applies to developers with residential apartment buildings due for completion within the first six months of the Act starting 1 September 2020. In these cases, notice must be given within two weeks of the new legislation coming into effect.

NSW Revenue: HomeBuilder program
HomeBuilder will provide eligible owner-occupiers (including first home buyers) with a grant of $25,000 to build a new home or substantially renovate an existing home where the contract is signed between 4 June 2020 and 31 December 2020. Construction must commence within three months of the contract date.  More...

Cases

ACN 057 690 034 Pty Limited v Wykrota [2020] NSWSC 1430
LEGAL PROFESSION – duty of candour – undefended hearing – principles at [83], [91] – no breach of duty – trial judge not misled. SET ASIDE JUDGMENT – building contract –problems getting occupation certificate – damages sought from builder including loss of rent – first defendant appeared in person on occasion – 12 directions hearings – no appearance at final hearing – aware of hearing – unsatisfactory medical certificate – inadequate explanation – experienced litigant – access to legal advice – writ of execution registered against first defendant’s property – property sold and judgment sum paid into court – application to set aside judgment, being 18 months after judgment. JUDGMENT IRREGULARLY OBTAINED – r 36.15 UCPR – principles at [3]-[7] – whether admissions arising from failure to file defence provided basis for judgment – imperfect pleading against multiple defendants – admissions by first defendant founded judgment against him – whether damages awarded outside pleaded case – damages sought notified to first defendant in schedule of damages – no misconduct or dishonourable conduct by plaintiff –failure to accord procedure fairness no basis to set aside judgment (nor such unfairness here). JUDGMENT IN ABSENCE OF PARTY – r 36.16 UCPR – principles at [8]-[12] – inadequate explanation for failure to attend – significant delay in bringing application – inadequate explanation for delay – little proffered to reduce hardship of judgment creditor – second defendant now deregistered – plaintiff took large discount in its claim before trial judge in order to finalise proceedings and only the judgment amount secured – offers in respect of plaintiff’s legal costs parsimonious – arguable defence – not unjust to let judgment stand.

Rice v JR & SD Farmer t/a Urban Bespoke Homes [2020] NSWCATAP 208
APPEAL– discretion regarding admission evidence – Tribunal decision based on a mistaken view of relevant facts – refusal to admit evidence did not facilitate the just, quick and cheap resolution of the real issues in the proceedings – Tribunal decision to refuse admission of evidence due to improper form - s 36 and 38(4) Civil and Administrative Tribunal Act 2013 – appeal allowed. APPEAL- Building and Construction – home building - requirement for variations to be in writing and signed – variation not in writing not enforceable in contract – recovery for unenforceable variation on a quantum meruit – cost of variation calculated in accordance with the contract constitutes cap on what may be recovered as fair and reasonable cost of work. ADMINISTRATIVE LAW – appeal on a question of law – bias – actual bias – apprehended bias – decision not affected by actual or apprehended bias.         Civil and Administrative Tribunal Act 2013; Civil and Administrative Tribunal Rules 2013
Home Building Act 1989

DB Homes Australia Pty Ltd v Zhao [2020] NSWCATAP 206
APPEAL – home building contract – construction of terms of the agreement - whether the agreement included the disputed stormwater drainage work

Roupell v Zhang [2020] NSWSC 1362
CIVIL PROCEDURE – Freezing orders – Where plaintiff engaged defendant to install air conditioner – Where fire ignited and destroyed plaintiff’s home –Whether risk of dissipation established – Where prospect of impending insolvency not alone a reason to grant freezing order – Where no evidence that defendant would take steps to make himself proof against an order to pay judgment against him – Whether plaintiff demonstrated defendant’s lack of probity - Risk of dissipation of assets not established
During the work undertaken on 19 October a fire broke out, destroying the house. They now seek orders restraining Mr Zhang’s assets to the value of $1.2 million and requiring him to provide an affidavit disclosing his assets and liabilities: Uniform Civil Procedure Rules 25.11 and 25.12.

Roar Fire Systems Pty Ltd v The Construction Studio [2020] VCC 1576
CONTRACTS Building contract – payment claim – whether reference date available for payment claim – whether payment claim served prior to reference date valid.
Building and Construction Industry Security of Payment Act 2002 (Vic) ss3, 4, 7, 9(1),10B, 12, 14(2), 15, 16(2), 16(4), 17(2), 47, 48, 50; Civil Procedure Act 2010 (Vic) s61, 63.
The defendant became liable to pay the amount of $32,373.00 as a consequence of it having scheduled that amount as payable and having failed to make payment before the due date

Slotwinski v Nutek Constructions Pty Ltd [2020] NSWCATAP 216
CONTRACTS – remedies – damages – after repudiation – measure of damages – proper construction of contracts
CIVIL PROCEDURE – jurisdiction – inferior tribunal – equitable defence
CIVIL PROCEDURE – jurisdiction – whether s 48K(9) of the Home Building Act 1989 confers jurisdiction on the Tribunal despite cl 5(7) of Sch 4 of the Civil and Administrative Tribunal Act 2013

Woodward v Warwick Green Building Pty Ltd [2020] NSWCATAP 214
APPEAL – Costs – costs of application for a stay

Deane Projects Building Pty Ltd v Kinda Kapers Holdings Pty Ltd [2020] NSWDC 622
CONTRACTS – building and construction – variation claims – whether provision for variations was itself varied – whether implied term incorporated through prior course of dealing – alleged defective works – whether owner’s claim limited in time – whether claimed defects appeared during defects liability period – whether builder liable for “design defects” in commercial contract for construction
DAMAGES – claim for rectification costs for defective works – whether owner intended to rectify – whether proposed works reasonable
PRACTICE AND PROCEDURE – building disputes – building experts – conflicting evidence about defects and scope of rectification works – desirability of practitioners ensuring building experts confer and jointly produce report prior to hearing

Legislation

Environmental Planning Instruments
Local Environmental Plan Amendment (Major Infrastructure Corridors—Maps) 2020 (2020-596) — published LW 2 October 2020
State Environmental Planning Policy (Infrastructure) Amendment (Sydney Metro West Interim Corridor) 2020 (2020-591) — published LW 2 October 2020
State Environmental Planning Policy (Western Sydney Aerotropolis) Amendment (Commencement) 2020 (2020-586) — published LW 30 September 2020

Bills introduced  Non-Government – 23 September 2020
Restart NSW Fund Amendment (Rural and Regional Infrastructure Funding) Bill 2020

Disclaimer
The information in this publication is of a general nature and is not intended to address the circumstances of any particular individual or entity. Although we endeavour to provide accurate and timely information, we do not guarantee that the information in this newsletter is accurate at the date it is received or that it will continue to be accurate in the future.

Published by:

Rebecca Weakley

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