Redevelopment: The New Buzzword Of The Eastern Suburbs
The word you’ll be seeing increasingly this year is going to be redevelopment.
After a raft of property reforms in NSW was introduced in November, a strata scheme existing can ‘opt in’ to a new law allowing them to sell their apartment block to a developer if 75% of property owners agree. The opt-in process is for an ordinary resolution to be passed at a general meeting with at least half of lot owners agreeing. From feedback in the market so far, it seems likely many strata schemes will agree to this new decision.
Previously, all property owners would have had to agree for a redevelopment to occur – which was known as ‘unanimous agreement’. Effectively, in a block of even 100 properties, one home owner could restrict the redevelopment of the block. This new change puts significant power in the hands of unit owners, who can now make lucrative profits by on-selling their older blocks of units.
For a developer to redevelop the block, they have to present a case in a formal proposal to the strata committee that can then be considered and voted on. This will include a statement from the developer of their plans for the land.
Property owners will have 60 days to consider the proposal – including speaking to solicitors and real estate agents as necessary – after which they will be required to vote as to whether they want the block to be redeveloped. If three-quarters or more of apartment owners in the block agree, then the developer will be allowed to buy the entire strata complex. This could result in some being unhappy with the outcome – particularly if they were in a minority that disagreed.
However, all lot owners should receive “compensation based on just terms” under the rules, so no one should be left in the lurch. This compensation is likely to cover market value for the apartment, losses incurred (such as legal costs, removalist fees and valuation fees) and stamp duty compensation.In the east, developers are still hungry for well-positioned parcels of land and apartment blocks that can be rejuvenated into a higher end alternative are highly desirable. With the South East Light Rail down to Randwick under construction, developers are even more likely to be circling.
As developers can sometimes turn smaller blocks of apartments into more high-density situations, this can mean they could pay a higher sum for your property than it would be worth if you sold it to an owner occupier. This is all down to the zoning of your property. Some developers and purchasers will be wanting to redevelop a block into the same number of dwellings, but to a higher quality.
This can be a smart decision for those whose properties have high maintenance costs, including where strata levies are becoming excessive, or who are looking for a decent profit on their build. In particular, Bondi and its surrounding suburbs has good prospects due to its rare combination of older apartment blocks and significant demand for apartments of all styles.
Recent research by UNSW, titled Renewing the Compact City, found across Sydney a total of 15% of strata schemes registered before 1990 could be developed up to three storeys, while a third could be redeveloped up to 10 storeys.
The report found that many older strata schemes “particularly in inner and middle ring suburbs and around transport nodes” were under strong pressure from planners and developers for more intensive use. This could encourage significant rezoning – something that would particularly benefit the older apartment blocks that could do with an upgrade and would also benefit the huge number of hopeful buyers waiting for new properties to become available.
Despite all the excitement surrounding a redevelopment, remember everyone’s personal circumstances vary. It is prudent to obtain independent financial advice, including your own valuations, appraisals and legal information when this process is occurring.