Why council zoning changes are your best insight into future capital growth
With population growth and urban sprawl square in the cross hairs of some of our largest metropolitan cities, local council zoning changes are quickly becoming a gold mine for savvy investors.
Council zoning changes are a consistent part of our major cities fabric. The pressures of urban sprawl, demand on current infrastructure, schools, medical facilities and transport hubs mean that in certain instances, basic fibro post-war residences within 1-2 kilometres of local facilities are now becoming real-estate goldmines for investors with their fingers on the pulse.
I'll elaborate a little more.
A recent example of a new train line extension within a Brisbane suburb has now given a much-needed public transport link to a large number of suburbs (which were previously not serviced by train). The next result for property prices in these particular areas has been solid in the 12 months leading up to the launch of the new train line (and will undoubtedly pay dividends in the years to come) however, as part of this particular train line expansion there has also been a (small) number of defined residences in certain suburbs that have subsequently had their zoning change (in this example, from low density residential of one dwelling per 800 square metres, to high density, or, in this council's definition a minimum of 75 dwellings per hectare and up to 27 meters).
Why is this important?
Well, most of that is obvious. What was an 800-square-metre block with a maximum building allowance of one property on the title can now be transformed into potentially 15-20 units (STCA) transforming the intrinsic value of the block in this instance to be far greater than it was only 12 months prior. History will show, however, that fortune will favour the brave in the early periods of council zoning changes as there are very few (if any) real life examples of what can be created from the zoning changes and secondly, the local appetite for higher density living.
The key to making strong capital growth in these examples is NOT gambling on the council’s appetite to maybe change the zoning in the future, but ensuring that you have sound knowledge of what the actual zoning changes mean once they are in effect. In short, not buying a property where you ‘think’ the council might change zoning BUT being prepared to buy ONCE council have changed zoning and having your target streets and properties defined to allow you to invest in these opportunities with confidence.
My tips for getting the inside run on zoning changes and buying future development sites BEFORE the masses have come in and inflated that market:
• Know your council and the infrastructure changes
• Speak to the council town planner (its free)
• Have a local town planner with intimate local knowledge on your team to run the feasibility on each site BEFORE you buy
• Have a buyers agent on your team who has the insight of the zoning definitions and the local contacts to secure OFF-MARKET properties within these defined areas
• Have your finance ready (a good broker is worth their salt to ensure you can pull the trigger once the right property presents itself)
Remember, local insight is key, and don’t be afraid to outsource the right professionals needed to secure you the right property.