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Property syndicates’ popularity grows amid planning changes

Tuesday, 5th Apr 2016

property syndicates

Property syndicates have increased in popularity in recent years, but why have they suddenly become a more prominent investment strategy?

It’s not uncommon to see media reports touting the success stories of “average investors” who’ve joined a property development syndicate.

Less than a decade ago, though, property syndicates in Perth were all but unheard of and usually the domain of sophisticated investors with the right connections.

So what’s changed in that time for syndicates to be more commonplace?

Perhaps the biggest catalyst has been the Western Australian government’s planning blueprint, Directions 2031, which was released in 2011.

The report outlines the government’s planning strategy for metropolitan Perth including the identification of key activity centres and transport links.

One of the document’s key goals is to achieve a 47% infill target – that is 47% of new dwellings need to be built in established suburbs, rather than developing new land estates on the urban fringe.

As such, many local councils are updating their town planning schemes to comply with the state government’s objectives and meet set population targets.

This includes increasing housing density, for example from R20 to R40, particularly around key activity centres and public transport nodes.

These zoning increases have led to a more conducive environment for the construction of medium density residential developments, such as boutique apartment complexes between $3 million and $20 million.

These types of developments are generally too large for single investors to bankroll and too small for the consideration of big state and national developers.

Therefore, property syndicates, whereby a number of investors pool their money, are a great avenue to fill this gap in the market and have proven to be highly lucrative for investors.

This development activity is also supported by rising demand for medium density housing, which is increasingly attractive to buyers for its affordability advantages, lower required maintenance and proximity to key amenities, such as transport links, employment hubs and retail and café strips.