Treasurer Tom Koutsantonis said today that a scoping study by Moelis and Company found that while the “commercialisation” of the saleable part of the portfolio could make a potential return, foregone revenues over the coming five years would lead to a break-even result, or even a deterioration in the budget position.
HomeStart, a statutory body that aims to help first home buyers into the housing market, has been concerned about the potential sell-off, using its strong results last December to send a message to the Government.
HomeStart CEO John Oliver said at the time that HomeStart’s results, delivered “against a backdrop” of the scoping study, were a “clear demonstration” of the important role played by the lender in the South Australian housing market.
Koutsantonis said today that the scoping study had involved extensive modelling of a “range of sale scenarios”.
“Ultimately, based on the scoping study findings, it has been decided to not proceed with the commercialisation of the saleable portion of the loan portfolio,” he said.
“This is exactly why we undertook this scoping study – to understand as fully as possible what the result of commercialisation would be.
“HomeStart will continue in its current format and will offer loans under flexible conditions to South Australians.”
HomeStart’s loan book is worth $1.8 billion.
In December it reported its strongest annual results in a decade, including an 18 per cent rise in lending and a net profit of $17 million. It also made its biggest-ever annual contribution to the Government’s coffers in 2015/16 – $59.8 million, including a $20 million special dividend.
HomeStart chair Jim Kouts said today that he “notes” the result of the scoping study.
“HomeStart Finance plays an important role in the state’s housing landscape, helping more South Australian households to break into home ownership and enabling them to experience the financial security that goes with it,” he said in a statement.
“Given the current housing affordability issues being experienced in many markets across Australia, including here in South Australia, we see our role as more important than ever.
“In the last financial year, HomeStart helped 1599 South Australian households into home ownership, up from 1360 last year, with almost half (47 per cent) of its customers being first home buyers and 88 per cent unlikely to secure finance from a mainstream lender at the time of application. ”
The potential privatisation was one of several new sell-offs under consideration that could have boosted Koutsantonis’s final pre-election budget, to be handed down next month.
The other major privatisation, the Land Services Group, is still very much on the cards, despite internal division in Labor.Jump to next article