As we stare down the barrel of a land shortage that could last years, I am once again being approached by owners about the potential of their homes and landholdings for further development, be it as simple as a one into two split, through to duplexes, unit blocks or full blown subdivisions. After almost two decades where an existing home was often worth more than the development potential as a “site”, has the market turned?
Short answer – yes. Long answer – yes, but not for everything.
With values rising significantly almost across the board, the divide between the “best” and “worst” suburbs has narrowed dramatically, and where a block of land in Trinity Beach was once worth double (or more) the same size in Gordonvale, now both are equally rare and a much smaller premium would be attributed to one or the other. While median house prices and appetites will vary between suburbs, flat land vs flat land, your development costs (civil works, planning, council charges) are going to be pretty similar no matter where you are, so the value of the initial land itself becomes a much smaller piece of the puzzle, depending on your scale.
For a 1 into 2, where a large single block is split into 2 smaller allotments (either selling both or keeping the house and selling off the now surplus land), the cost of the exercise is relatively low, and with the right prayer to the planning gods, you might be in and out inside 12 months. Larger land projects or small build-to-rent developments will take more time, and obviously money. Demand is there though if you can get your pricing right, particularly if you can adapt to the market. The last few years has demonstrated that expensive today can look like great value in 6 months and a bargain in 12, so if you can stomach (and afford) the risk, you can work on viabilities ahead of the market immediately in front of you.
While land is the flavour everyone loves, we have yet to see meaningful numbers of units come out of the ground, and the high cost of construction means that suitable sites can still be a way off viability. Where “as many units as possible” used to be the mantra, taking a more conservative approach to numbers can now yield better results. Instead of 20 units that would need to be sold at a 20% premium above market to break even, you might find a well designed quadplex to be more on the money.