Is now a good time to develop property? With Herron Todd White valuers.
Herron Todd White monthly update for November 2016.
National property valuers Herron Todd White have published their monthly property review, including their Property Clock which shows where the various cities and regional markets are positioned in the current cycle on both Detached Housing (houses) and Attached Dwellings (units).
This month’s focus was particularly on small development projects and splitting larger blocks of land into smaller lots, which is common practice in Brisbane. We have seen developers purchase larger 800+ sqm blocks within 5km of the city, retain the Queenslander at the front and develop units or townhouses behind.
We have funded and project managed several of these projects, for example, Ellena Avenue Greenslopes and Rolle Street Holland Park West. In both cases, the front house was retained and the units were developed behind.
Herron Todd White have assessed Brisbane’s market as having scope to grow in the detached dwelling (housing and townhouse) market being poised at the ‘start of the recovery’ phase within the property cycle, and the unit market in Brisbane in some pockets being in over supply they see the broader market as being more advanced in the cycle and ‘starting to decline’. As can be seen from the Property Clock, this is a regular part of all markets as they approach the bottom of the market and start to recover in due course.
Our city has all the important elements to help make small development fairly low risk. Our buy-in prices for sites are relatively cheap (compared to Sydney and Melbourne at least) plus there are a number of town plans in the region that have created proactive small development zones. Also – despite our fairly subdued overall market – there’s still enough demand for end product, be it vacant land, a new home, or even a townhouse or unit. You can make a profit with most property types, but only if you adopt a smart approach.
Due diligence is essential, even in Brisbane’s relatively forgiving market. Know what you’re buying, know what you’re doing and know what you’re selling. Key to it all is having an understanding of property values… but of course you can call us for help on this front. Small developers in southeast Queensland like to gravitate towards particular project types.
Most entrepreneurs cut their teeth on one-intotwo splitter blocks, particularly within five to 10 kilometres of the CBD. In this radius, many purchasers buy an 809 square metre site with a post war dwelling. Why post war? Demolition or removal will be on the cards. The options are then to sell off the newly titled 405 square metre blocks as vacant, or shoot for a bit more profit by building two contemporary homes on the sites.
The valuers had this to say about Sydney, which is currently poised on the ‘Rising Market’ side of the Property Clock for Houses and ‘Approaching Peak of Market’ for Units in the city.
The strength of the Sydney property market, demand for housing and overall affordability have seen professional developers and mum-and-dad developers invest in the property market with small scale developments. It seems that investors are moving away from the once traditional investments such as government bonds and also shares which are seen as more volatile with higher risk for less return. This along with the increases in property values has proven that the property market has more appeal.
A lack of available land in already established areas has seen a rise in popularity of redevelopment on both a large scale and on the small mum-and-dad scale as developers take advantage of infill rezoning, transport infrastructure projects and overall demand for new products.
In Melbourne detached houses are firmly in the ‘rising market’ in this part of the cycle with the city being taken along for a ride with The Block affect, people are opting to stay and renovate rather than knock down and start again.
Renovations are all the rage in the inner city, with the current trend being renovating, extending and restoring classic Victorian and Edwardian terraces. This is occurring in suburbs such as Fitzroy, Carlton, South Yarra, Albert Park and St Kilda amongst others.
The key challenge facing owners of these properties is maintaining the heritage façade whilst still being able to modernise the property. To obtain approval in the majority of cases, the house will need to maintain the front two rooms on both levels if applicable and demolish the rest to build a modern extension, sometimes with a second level attached. One loophole that was exploited several years ago was at 8 Tyson Street in Richmond.
Instead of maintaining the façade and building a modern extension, the owners demolished the house completely, built a modern house and laser etched a photo of the original façade onto the front of the house, giving the illusion that the original dwelling was still there.
Read Herron Todd White’s full report here.