The rush for land or land value

The demand for vacant land or knock down/rebuild opportunities feels unprecedented on the Upper North Shore. Enquiry levels on listings with redevelopment potential are incredibly high and, unsurprisingly, this is resulting in a rapid rise in prices for what are often referred to as ‘land value’ properties. We experienced this with the recent sale of 22 Woodlands Ave with hundreds of enquiries received, over 90 groups shown through the property (more than 20 hours of private inspections) and over 70 contracts issued to interested parties. We noticed that we were having many of the same conversations with buyers which gave us some clues as to why this ‘land rush’ is occurring.

The first interesting observation was that almost every buyer asked if we had anything else similar coming to the market, often accompanied by a lamentation of the lack of stock. Demand for all types of properties has grown this year and there still seems to be an imbalance in the market with the available supply – ‘land value’ or not. The overall low level of listings is further exacerbated by council imposed restrictions that make many properties in the area unsuitable for a new build. Some of the other questions a majority of prospective purchasers asked related to zoning and dimensions of the block – is it a heritage home or in a conservation area?, is it in a bushfire zone?, what is the width and depth of the block? These questions are all to determine how easy the land will be to build on without falling foul of limitations imposed by Ku-ring-gai Council. Conservation zoning can make approval for demolition very difficult and a narrow block may mean your dream design doesn’t fit without encroaching on the council’s required setbacks. A property with the right zoning and dimensions mean a development can potentially be done through a private certifier avoiding the time and expense of a Council Development Application.

Finally, we had many interesting discussions around the cost of renovating vs building and the premium prices that brand new homes where achieving. Many potential buyers noted that the relative cost of renovation vs a new build meant that it often made little economic sense to try to retain an existing home, especially if they intended to add significant floor space so a knock down home was a must. They also saw a need to pay a substantial premium to go to the market and buy a new home and felt it would be more cost effective to build themselves. A significant number of spec builders looking to construct a new home to sell for profit viewed the property and they will continue be an active and competitive part of the market. With all the above factors in play ‘land value’ properties will continue to achieve a premium in Ku-ring-gai and, with council unlikely to change restrictions on building in the near future and brand new homes continuing to hold strong appeal, the only probable way for this to change is if there is a significant increase in overall stock levels.

Josh Luschwitz - Director of Luschwitz Real Estate

[email protected] | 0412 067 676