By ERWIN CHLANDA
If the government wants 100 residential blocks in Kilgariff ready for sale “off the plan” by July – the target date, according to minister Adam Giles – then they’ll have to get a wriggle-on.
Mr Giles (pictured below) says he’s been fighting hard to bring on the subdivision early but apart from the number of blocks, very little seems clear at the minute.
On the face of it, this is the situation: The new suburb will ultimately have 1000 blocks.
The headworks (power, water, sewerage, etc) have already been taken to the edge of the suburb at a cost of $10m ($10,000 a block).
As the land is flat and sandy, development costs (internal roads, power, water, etc) could be around $80,000 a block, a figure we published in October 2009.
Mr Giles disputes that figure, saying if the next stage of Stirling Heights goes ahead, there is a “rough assessment” the development work would cost $170,000 per block. But he concedes that is in difficult, stony country.
A civil engineer today, speaking on the condition of not being named, says $100,000 plus is a more likely figure now, although for 100 blocks economies of scale may be kicking in.
Kilgariff is not encumbered by native title, and so the land belongs to all Territorians, including you and me.
At prices for residential land last year of $300,000, the 1000 blocks would be worth $300m.
Mr Giles says the prices may have gone down recently, with some blocks at Mt Johns now on offer for $220,000 or $250,000.
At the conservative estimate of $100,000 a block, development costs will total $100m.
Into whose pockets will the difference go, looking to be at least $200m, a nice little earner?
The land has a few drainage problems. The St Mary’s Creek skirts the eastern edge, and there is now a requirement, regarded by many as onerous, to provide for a Q100 flood – a magnitude likely to occur once every 100 years.
(Of course a dam in the Todd River, stopped by Aboriginal interests more than 20 years ago, would make compliance with the Q100 rule far less onerous and expensive because the flood depth would be much lower.)
How much storm water management and flood prevention will cost and who will pay for it is not yet decided.
Two tenders will be called. They will be for the purchase of the two parcels to be subdivided, on either side of the spine road, each to accommodate 50 blocks.
The sale price for the land will go into consolidated revenue.
The developers will then have 50 blocks each to sell for whatever the market will bear.
Well, maybe not quite, says Mr Giles: the tenders may include conditions such as a completion date and a maximum sale price.
Why 100 blocks now? “We have to balance supply and demand to keep the prices as low as we can, that we don’t have price gouging, and that there is an opportunity for more affordable land,” says Mr Giles.
He also says that the number of blocks has been raised from 75 to 100 to qualify the suburb for the National Broadband.
Mr Giles says an earlier proposition, for the government to carry out the subdivision, has been dropped.
This would have allowed some blocks to be sold at the at cost of development, if that serves the interests of the town that has been driven into decline by extortionate land prices.
That was an option floated in 2010 by Robyn Lambley, now the Treasurer and Minister for Central Australia.
What’s more, this process would have given the government very precise information about the development costs.
“We need to find out exactly what it costs to service a block, we are going to test the market and that process is underway now,” says Mr Giles.
We put to Mr Giles that the government seems happy to rely on the offers from developers.
“We are not in the business of selling land,” he says. “Our costs would be dearer than a private developer’s costs.
“The machinery of government is better used to support the private sector rather than the government controlling everything.
“I’m not in the business of big government. I’m in the business to try and have small government and we support the private sector to be able to do the work. We’re not going to do that [suburb] in-house.”
How will he decide what price is reasonable and acceptable and what’s not?
“We’ll be asking for a cost structure, for a time frame, there will be caveats. The tender process hasn’t been finalised so I can’t give you a definitive answer.”
The government may, of course, not accept any tenders.
Mr Giles says he has succeeded in having the National Rental Affordability Scheme applied to Kilgariff, and to other land in The Alice, including “under-utilised infill”.
Under this Federal scheme the NT has been allocated 650 affordable properties for which the Feds will pay 30% of the market value rents for 10 years.
IMAGE: The approximate area where the first 100 residential blocks will be developed. The circled number 1 is the new Stuart Highway intersection.
By ERWIN CHLANDA