By Rich Harvey, CEO & Founder, propertybuyer.com.au
Anthony Albanese’s multi-billion dollar flagship housing plan, to build 1.2 million new dwellings in the next five years, is set to spark a slew of planning changes across the country. Reaching that mammoth goal won’t be easy and state and territory governments are now working together with local councils to overhaul rules and regulations on density.
While this creates plenty of opportunity for investors seeking to capitalise on the sudden development potential of a site, it also comes with some pitfalls that could cost those who get caught out.
You can’t simply assume a house on a big block could be knocked down and turned into a duplex, a row of townhouses, or even a small apartment block, just because there’s an appetite for density. As you’ll see, what is and isn’t allowed will vary wildly in each area – and in some cases, there are unlikely to be any significant changes at all.
Planning is a tricky thing
Any looming changes aside, getting your head around planning regulations can be an absolute nightmare. Ask any rookie developer who’s managed to get a project off the ground, big or small, and they’ll tell you a whole host of horror stories.
The inner-workings of a council’s guidebook for assessing a potential development are complex. It could be that the whole suburb, or at least part of it, your property is in has special conditions applied that aren’t enforced elsewhere.
This is common in parts of Sydney and Melbourne where the heritage character of an area is protected with an overlay. Even if you buy a total dump with no historic value whatsoever, and even if it was built in the 1980s, you might be prevented from knocking it down and rebuilding something new.
In those cases, the old adage of ‘worst house on the best street’ can come back to bite you in a big way. You might be severely restricted by what you’re allowed to do with that site. There will likely be rules around height, setback, density and even appearance.
Some councils also have unwritten precedents that are loosely followed. For example, it might take just one adverse response to a development application to kill a project. Even if there’s nothing on paper about fair ways to respond to objections, it could just be that the council has a history of heavily weighting the feedback from locals.
Some dangers are hidden
I heard a tale some years back about a small developer who bought a derelict house on a big block with the intention of building a few villa-style units on it.
There were no indications that his goal would be unachievable. The vision fit with planning controls, the council seemed fairly developer friendly, and the neighbours were broadly on board with the look and feel of the new homes.
But the guy didn’t know what to look out for and missed in the conveyancing review the fact that an old easement protecting stormwater infrastructure covered the back third of the block. In a nutshell, it was his land… but he couldn’t just do what he pleased with that section of it because there were crucial pipes running beneath it. It sparked a huge delay, massive headaches trying to come up with a solution, and in the end of a hefty bill for relocating the pipes back to the boundary.
There was a reason that house had such a big backyard and the assumption that it was up for grabs was a bad one.
Similarly, some jurisdictions have strict vegetation management controls that make removing greenery on your site tricky, if not entirely impossible. Certain species and even unremarkable trees that are ‘needed’ for leafy volume must remain, making what you’re able to do with a block exceptionally difficult.
And in certain areas, there are very rigid - and understandable - guidelines that have been informed by historic flooding events. After a major disaster, even one that occurred decades earlier, there are likely to be tweaks to what’s allowed and what isn’t.
But one of my favourite stories of all came from a couple who were doing a thoughtful restoration on a neglected heritage home. They did all the right things. What they wanted to create was a thing of beauty. But the heritage advisor was… challenging. On top of only working three days a month, making it hard to pin her down, she was working within boundaries that barely existed.
They wanted to paint the exterior of the home, but the tones they suggested were shot down each time. They didn’t suit the property and surrounding area’s heritage. When they asked for a list of approved colours, she couldn’t provide one - because it didn’t exist. There were no written rules about colours. It was just a ‘gut feeling’. Can you imagine?
Big and bold changes with a catch
The New South Wales Government is keen to spark a building boom to help meet its share of the housing target. It announced sweeping reforms to allow denser developments near transport hubs to be approved quicker, cheaper and easier.
But some councils have pushed back. A few of the ritzy, leafy prestige areas in Sydney’s east are resistant to change because their constituents are less likely to want a block of flats next to their high-priced homes. On the flip side, at least one council in the city’s west are fighting the changes because they’ve contributed to bulk of new supply in the past decade and are worried about the strain on already pressured infrastructure.
So, while the policy sounds enticing in theory, it would be unwise to assume that the planned changes will be universal.
In Queensland, Brisbane City Council has just announced major changes to car parking rules, removing the minimum required number of spots to make developing at a greater scale simpler. But again, while this sounds great as a headline, the fine print shows the tweak will only apply to a defined and relative compact part of the inner-city.
The Victorian Government is working with councils to streamline planning processes and look at rezoning in appropriate areas to allow development. But the kicker is, the state recently rolled out a windfall tax, which means any investor who benefits financially from a planning change on their existing land holdings must hand over a hefty share of their realised profits to the government.
But don’t be deterred
It’s not impossible to generate a healthy return from turning a property into something new and more lucrative. I’ve seen it countless times.
An old house on a big block becomes a duplex. A generously proportioned site is subdivided with one half sold off. A home has a granny flat built in the back, creating two dwellings - and streams of income. A good site is turned into townhouses or units.
In times like these, when the need for new housing stock has never been greater and more urgent, there’s certainly a lot of exciting potential to be explored.
What’s important is to not enter into something blindly. With greater potential returns comes a higher possible risk. You must be absolutely, positively sure that what you want to do is possible.
And that’s to say nothing of the finance, schedule, trades and materials access, and resale market considerations that should be front of mind.
In the eagerness to seize those emerging opportunities, it can be easy to overlook potential planning roadblocks. And as I’ve pointed out, some ‘rules’ aren’t written down in black and white at all. They exist in an alternate reality that only a few ‘experts’ live in.
That’s why engaging an experienced, qualified and connected buyer’s agent is crucial. Whether taking on a small development, a more ambitious project, or even something as seemingly straightforward as an extension, you must know what you’re dealing with.
A buyer’s agent will have worked with countless clients pursuing all of those goals and more, and learnt how to navigate the frustrating ins and outs of planning policy. They know the patches they work in intimately, they understand an area’s character and its resident base’s appetite for change, and they get how individual councils work.
A really good buyer’s agent can work with you to understand your goals and find sites that fit the bill. They can go out into market to unearth opportunities that you might not otherwise see. And they can assess whether your dreams can become a reality.
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