Skip to content Skip to main navigation

Business

The voice of business in Canberra

Unkind words from the banks on Land Rent

By johnboy - 4 May 2009 15

The Liberals have been putting the new FOI regime to good use, this time digging up what the nation’s banks thought of the controversial land rent scheme.

    What Commonwealth Bank said: “… (The bank) is concerned about the risk it would be assuming in providing finance for the depreciating asset…”

    What St George said: “…there was no appetite for participating in the scheme…there is a valid argument that the house will depreciate over time and therefore may be less than the overall debt…”

    What Westpac said: “…it is my understanding that the proposed land rent scheme provided us with some challenges…”

    What Wizard Home Loans said: “…have a hiccup in the process…not comfortable with the inability of the bank to have security of the land…”

Zed is outraged that having had this feedback the Chief Minister still went to the election saying it was all hunky dory.

I’m a bit torn on this. On the one hand I’d hate to have a Government so scared of failure that it never tries anything new or different. On the other hand the flaws in land rental that the banks point out were screamingly obvious from the very start and it appears to only be the legendary stubborness of the Chief Minister keeping it going.

If we’re going to throw things at the wall and see what sticks it’s best to quickly clean up the mess.

UPDATED: The ABC report on this has Mr. Stanhope’s defence:

    Mr Stanhope says the banks did have questions about the scheme but many decided to back it after the Government addressed their concerns.

    He says the Government still has not secured a lender because of the global financial crisis.

What’s Your opinion?


Post a comment
Please login to post your comments, or connect with
15 Responses to
Unkind words from the banks on Land Rent
Deref 4:48 pm 18 Jun 11

Once again proving that the value is in the land, not the house – as if it wasn’t obvious. People who’ve bought, or are thinking of buying, McMansions on postage-stamp sized blocks take note.

dungfungus 3:21 pm 18 Jun 11

The ACT Labor government has always been a sucker for lost causes in the commercial sector e.g.,
Rhodium Asset Solutions, TotalCare, International Hotel School, TransACT etc. so the Land Rent Scheme was a perfectly guaranteed failure for their socialist vision. They succeeded in failure again.
Next thing they will try is reconditioning fax machines.
You can do lots of “visionary” things when you are using other people’s money with no recourse or accountability. It’s different in the real world when you have to put in your own dough and give personal guarantees against borrowings. This would be an alien concept for a Labor person.

Watson 2:55 pm 18 Jun 11

Arlington said :

Community CPS whle being the only financial Institution to lend under the land rent scheme, they still have alot of work to do. We have been trying for an approval but have had nothing but problems trying to meet their changing demands and conditions due to the fact there is no writtern policy in place regarding this type of lending in the current market. It really seams that CPS is in this for themselves and not the people that require this service, and are not willing to put an actual policy in place for the bank and the customer to follow.

“It really seams that CPS is in this for themselves and not the people that require this service”

Err… they are a financial institution? There are only a couple of superficial differences between a bank and a credit union these days.

It’s still great that they agreed to do this, as it sounds like a financial minefield. Houses might slightly increase in value for a while when they’re still fairly new. But after a certain number of years, their value will start decreasing as the wear and tear outweighs the increase in building costs. So they really aren’t such good collateral for a loan.

However, they said they’d do it, so they should get their sh!t together. Maybe a letter to the minister and the CT could jolt them into action?

Arlington 1:41 pm 18 Jun 11

Community CPS whle being the only financial Institution to lend under the land rent scheme, they still have alot of work to do. We have been trying for an approval but have had nothing but problems trying to meet their changing demands and conditions due to the fact there is no writtern policy in place regarding this type of lending in the current market. It really seams that CPS is in this for themselves and not the people that require this service, and are not willing to put an actual policy in place for the bank and the customer to follow.

VYBerlinaV8_the_one_ 5:02 pm 05 May 09

What does that mean? Are they going to employ some people to help Canberrans negotiate with banks when they get stuck?

That actually sounds like a pretty interesting job…

OzChick 3:41 pm 05 May 09

$300,000 has been allocated in this years ACT Government’s budget to administer a Mortgage Relief Scheme.

JC 2:53 pm 05 May 09

hax said :

For all intents and purposes, you do ‘own’ the land during that 99 period. If the value of the land increases, you reap the benefits when you sell.

The difference is, if you buy a TV you can sell it and get some money back. If you are renting the TV, you may not sell it and receive the money – you just give it back (and forgo the rent paid).

As I said the same basic legal structure is in place. With the land rent thing people still own the land (as much as the rest of us own ours), the difference is the rent is not waived like it is on everyone elses land. The analogy seems a bit wrong, because with the land rent scheme selling doesn’t mean you give the land back, presumably the orginal lease owner must payout the rest of the ‘rent’.

hax 9:30 am 05 May 09

JC said :

I don’t quite see why this plan should make much difference to the banks. Now all land in the ACT is lease hold anyway, so the difference between this plan and the normal way of buying land is the amount of rent being charged.

I brought my block of land back in 2000 for $50,000, or should I say I brought my lease for $50,000. My lease is for 99 years with rent of $0.01 per annunm which happens to be waived. Now with the new scheme the difference is surly that rent is actually being charged and paid, so from an ownership perspective it seems no different.

For all intents and purposes, you do ‘own’ the land during that 99 period. If the value of the land increases, you reap the benefits when you sell.

The difference is, if you buy a TV you can sell it and get some money back. If you are renting the TV, you may not sell it and receive the money – you just give it back (and forgo the rent paid).

DJ 6:37 am 05 May 09

I’m offended by this every time it comes up because the banks are right and it should never have gone ahead – how much time and $ has his cost the public?

Stanhope claims that it allows those who would never be able to afford a mortgage the opportunity to do so… but at what cost and why shouldn’t he give me or my friends the same? So what if I earn decent money? Nothing says that I should be paying for somebody else, through tax etc, to have their own home – what is wrong with renting a place?

Even worse is the situation with public housing. I live about 20 minutes drive from the City and pay for parking but some of the scum in government housing in the City pay bugger all and if they don’t pay there are almost no consequences.

Stanhope is hopeless.

JC 2:27 am 05 May 09

I don’t quite see why this plan should make much difference to the banks. Now all land in the ACT is lease hold anyway, so the difference between this plan and the normal way of buying land is the amount of rent being charged.

I brought my block of land back in 2000 for $50,000, or should I say I brought my lease for $50,000. My lease is for 99 years with rent of $0.01 per annunm which happens to be waived. Now with the new scheme the difference is surly that rent is actually being charged and paid, so from an ownership perspective it seems no different.

gomer 5:41 pm 04 May 09

VYBerlinaV8_the_one_they_all_copy said :

And by that I mean it’s very unlikely to be adopted on a large scale. When can we get more land released?

too right V8. land release needs to be way ahead of land purchases, otherwise there is no competition in the market and any old crap gets sold because it’s either crap or nothing.

VYBerlinaV8_the_one_ 5:02 pm 04 May 09

And by that I mean it’s very unlikely to be adopted on a large scale. When can we get more land released?

VYBerlinaV8_the_one_ 5:02 pm 04 May 09

If a solution is economically unviable it’s very unlikely to get up. This sort of scheme does nothing more than artificially increase housing prices by lowering the barriers to entry.

dosomethinguseful 1:14 pm 04 May 09

The land rent scheme was bound to fail from the start. Not a very well thought out idea.

I think the ACT government should look into Equity Finance Mortgages (www.efm.info). From what i’m aware, SA and VIC offer this or something similar.

poptop 1:12 pm 04 May 09

Did the “Secret Bank” which was supportive of the scheme ever become reality?

Related Articles

CBR Tweets

Sign up to our newsletter

Top
Copyright © 2017 Riot ACT Holdings Pty Ltd. All rights reserved.
www.the-riotact.com | www.b2bmagazine.com.au | www.thisiscanberra.com

Search across the site