Sometimes, when an established property comes up for sale, a simple inspection would suggest that the majority of the property’s value is in the land rather than the building that currently sits upon it. One option of course would be to renovate, but if the block is well sized, and preserving the home holds little merit, it may instead be a prime location for development.
Of course, there are many factors that must be taken into account when deciding if a block has genuine development potential.
What can be built?
Every bit of land in Victoria is subject to some sort of planning regime developed by state and local government, from residential codes to varying levels of council planning regulations.
In metropolitan areas – and even many regional areas – these can be numerous and often vary dramatically depending on which local government area a piece of land lies within.
Factors such as height, resident access, density, neighbourhood character and heritage, and Aboriginal significance, must all be assessed in addition to any overlays such as vegetation, bushfire, erosion and salinity management, to name a few.
However, while it may seem a minefield of regulations and restrictions, the good news is, agents such as the specialists at RT Edgar, can provide valuable advice and help guide you through the requirements.
They can also be on hand to help with other professionals such as architects, urban planners and planning consultants if you choose to go down the development path.
The site itself
Before purchasing any site, be clear about what can be built on the block, taking into account the impact your plans may have on neighbours, such as the height or size of your building, and whether it may limit sunlight etc.
The best way to achieve this is to engage an architect to draft up a ‘built form guide’, then look at how best that built form can be delivered and to what extent, for example building individual homes, a set of townhouses or an apartment project – and if the latter, to how many levels?
It also means looking at any challenges that the site may present, such as the shape of the block, its slope, access difficulties (including potential driveway obstructions such as significant trees or utility poles), and positioning. Again, the advice of a professional such as an architect can be invaluable.
The next step is to have that rough plan looked at by an experienced town planner, and if all the advice is that you are on the right track, look carefully at the commercial outcomes with your trusted estate agent.
North facing aspects on individual homes are always very marketable thanks to winter sun, so look at how you might be able to maximise this across each of the individual units.
Property Bloom’s Jo Chivers noted in yourmortgage.com.au that some factors that may be less obvious (or completely undetectable just by looking at a site). Will a long deep block add expense due to a long driveway? Is there any debris or structure that may contain asbestos? Are there any natural watercourses, sewers or old mines beneath the property? All will add to the cost of development.
It is one thing to find a site that is suitable from a planning perspective, but of course, you will also need to build the right residential product on the site in order for it to attract buyers.
Once again, research is required.
Again, Jo Chivers suggests investigating four key local considerations:
1. Local market demand – what do people want?
2. Local economics – both what can locals afford and what investments are being made in the area?
3. Population growth – recent and forecast
4. Market growth – historic and forecast
A lot of this information can be collected from Census data, local government annual reports, and even suburb profiles provided by realestate.com.au and domain.com.au
Also research the suburb. What schools and services are nearby? Is the block in a particularly attractive school catchment zone? Is it a long way from (or too close to) public transport etc.
If all the stars are still aligned, and it is time to go ahead with the purchase, that brings us to…
It is often wise to divide a budget into five components:
a) Feasibility study
b) Purchase of the land
c) Planning and development fees
d) Construction and finishing
e) Marketing and listing
Different specialists can help with each area, for instance a development manager will give you an indication of the type of product and likely target price and market to aim for.
An experienced planning consultant can often give you an estimate of the likely planning costs involved. In any case, unless you are a seasoned developer, hiring a planning consultant to help get you through the applications process is highly recommended.
Your architect and builder will be able to give estimates on construction costs. And finally, the team at RT Edgar can help formulate a budget to maximise interest and sales potential when it comes to finally reaping the rewards of transforming a promising site into an outstanding residential address.