Insight

27.07.16  Property Trends

 

Knock Down Rebuild: Buying To Start Over

For many homebuyers, the dream may be to see an ideal property and buy it straight away.

But in many Sydney suburbs in 2016 there has been a significant shortage of homes for sale, making this a difficult prospect.

Instead, for those unsuccessful in finding the perfect home in today’s market, it could be worth considering a desirable block of land. This could be a fantastic block with a great outlook, but with an unsuitable home that may be putting buyers off. The purchaser could then knock down the existing dwelling to build their dream home.

This is especially attractive for upgraders looking for a home larger than those on the market.

There’s an undeniable shortage of land in Sydney and this is particularly evident in the east, with few new houses available and a finite supply of homes with good views and aspect.

This means that those wanting a modern property in the affluent middle-ring areas are going to need to either buy at a premium, look to renovate substantially or start from scratch.

Purchasing an original condition home for close to land price and rebuilding also offers the buyer the opportunity to pay less stamp duty, as you’ll be paying it on close to land value only.

Land values have increased substantially across Sydney from $540 a square metre in September 2005 to $732 in September 2015, according to a HIA/CoreLogic land price report.

But building costs have not increased at the same rate, rising about 11.5 per cent in the 10 years to 2014 to $260,000, excluding the land cost. This amount can vary dramatically depending on the size, style and amenity desired in a home.

When building from scratch, it’s worth considering your holding costs and accommodation plans while your new home is built, as well as the process you will need to follow to ensure everything goes to plan.

The planning process

Guided by your local council’s Local Environmental Plan, also known as the LEP, and other planning frameworks, you should speak to the Council authority, preferably a local planning expert, prior to signing a contract to ensure your desired rebuild will be acceptable on the site.

In some areas, knocking down a dwelling to build multiple homes – such as a duplex – is a possibility. Subdivisions, changing the use of the land (from commercial to residential) and any major alterations to a dwelling must go through the local authority.

In the Waverley Council area, properties on land larger than 450 square metres likely allow dual occupancy.

A development application (DA) must be submitted to Council prior to any building works or demolition taking place. When development approval is granted, this usually stands for five years. Submitting a DA does incur a cost.

Upon the receipt of a DA, most councils send neighbours notification and provide a period of about 14 to 30 days for comment, depending on the type of development. Your DA may also be advertised in the local newspaper.

After this, a council officer may be sent to the site for further assessment – usually to determine whether plans meet council planning requirements.

The plans are then lodged through the councils assessment panels. On average, applications can take 40 days to be processed – though this can vary significantly from council to council and project to project.

Those who do not comply with the required process may be fined.

Heritage homes

Some homes in the eastern suburbs are subject to a heritage overlay, which may restrict your development opportunities with the property.

In scenarios where you wish to completely knock down and rebuild these homes a Heritage Impact Assessment is usually required by council (this is undertaken by a suitable architect).

This report usually discusses the condition of the building and opportunities for retaining it.

In many cases, homes which are considered to be significant on a heritage basis will require a careful renovation or extension, retaining the factors of importance from a conservation perspective.

To check whether a property is on the heritage list, you can look online at the State Heritage Register.

Download our 2018/2019
Eastern Suburbs Market Report

Next Insight

Spotlight on Bondi: A lure for young professionals