Nightingale Housing is thrilled to announce that we will be delivering buildings in the Nightingale Village using the baugruppen financial structure.
This financial structure focuses on improving the affordability of Nightingale apartments.
The first Nightingale Baugruppen information night was held on Tuesday 6 March at University of Melbourne. A recording and presentation of the event will be posted soon.
What is baugruppen?
Baugruppen is a housing model developed in Germany; the name simply means ‘building group’. Like with the Nightingale model, architects and homeowners use the baugruppen model to construct multi-residential buildings with a focus on intentional community, environmental design and affordability. The financial structure of the baugruppen dramatically improves this affordability.
The Nightingale model was, in fact, inspired by baugruppen – but until now, the financial structure remained elusive.
At Nightingale, we deliver housing at cost. But we want to make our apartments even more affordable. We think we can do that using the baugruppen model.
How does the baugruppen financial structure work?
In the baugruppen model, the future homeowners are brought together much earlier in the process, and can invest their own funds in their own development. The project uses this money as equity to buy the land parcel. As a member of the Nightingale Baugruppen, you co-own the land with the other members.
The baugruppen model creates financial efficiency through significant savings in GST and stamp duty. The use of your funds as equity also reduces the amount of investor interest the project has to pay.
A standard Nightingale aims to deliver between 15 and 20% less than market value.
A Nightingale baugruppen project aims to deliver closer to 30% less than market value.
The initial price of a Nightingale Baugruppen apartment will be on par with the traditional Nightingale model developments. This means the funds you invest early on will be a percentage of that price. The savings will come at settlement.
I want more detail – how are you making it work?
1. Nightingale Housing is collaborating with urBau, a new company that is focused on delivering affordable housing through the baugruppen model. They have been doing fantastic work setting up the legal and financial structure for baugruppen, and sought rulings from the ATO and SRO to support the model’s savings.
2. When Nightingale Housing and urBau find a site, we then need to find our interested purchasers. Once we've found our committed group, they enter a 'Baugruppen Joint Venture' agreement and go on title of the land. This group become the landowners and they engage the Nightingale Development Company to manage the development for them.
3. Each of these homeowners commit 10% of their projected apartment cost upfront. Those funds are then invested in the project to offset development costs.
4. These homeowners are involved in the development process from very early on, in exactly the same way as they are in all Nightingale projects. This gives these homeowners a much greater sense of ownership and authorship over their ultimate home than they could ever achieve with a traditional developer.
5. On completion of the building, each member of the group pays for the remaining 90% of their apartment in the same way that they would in a traditional purchase. This cost will be adjusted to reflect project savings.
Are there any risks?
The difference between a standard Nightingale model building and a Nightingale Baugruppen is that the baugruppen model allows future homeowners to invest their own funds in their own future homes.
While this is exciting, it also means your funds could be at risk. If the project were to fail, there is no guarantee that your funds could be returned.
It’s important to be note that this risk is somewhat mitigated by the Nightingale model. The biggest risks facing property developers today are both the volatility of the housing market and purchasers defaulting on their off-the-plan purchases. We do not operate as traditional property developers, as we participate in deliberative development, which ensures a transparent and honest housing development. This means our development risks are lower and our purchasers are much less likely to default.