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Finding a development site

Tuesday, 18th Oct 2016

finding-a-siteAfter countless hours of market research and attending dozens of home opens in the hopes of finding a development site, you’ve finally found a site that looks set to deliver a huge financial windfall. But will it live up to your expectations?

When purchasing a property with plans for future development, it’s important to hold a comprehensive understanding of the local council planning scheme to ensure the property meets the necessary criteria.

Typically, land appreciates in value while buildings depreciate, meaning a property with a higher land value proportion has better prospects for capital growth.

Therefore, development sites generally appreciate quicker than those without development potential due to the increased value in the land derived by this ability to develop. (Development sites typically cost more to hold though as existing dwellings are typically older and don’t command as much rent and require more maintenance expenses).

However, if planning polices and scheme clauses limit the site’s development potential, then the capital growth prospects can be restrained.

For example, it’s not uncommon for investors to purchase a split-zoned property (such as R40/60) only to find out later that the site doesn’t meet the dual-density criteria needed to gain the higher coding.

This can severely affect an investor’s strategy, and financial standing, as they may only be able to develop a fraction of the number of apartments they had planned.

If you think you’ve found the perfect development site, it’s important to gain a comprehensive understanding of the relevant local council planning policy before placing an offer.

Failing to do so may leave you with a property that doesn’t live up to your development expectations and could cause significant financial loss.