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September 11, 2013

WA developers net cheap deals as sellers undervalue

Anecdotal evidence suggests some sellers in Western Australia are failing to value property correctly following recent changes to planning laws in the state.

The decreased valuations have resulted in some developers and investors benefiting from reduced prices, as the industry takes its time to become familiar with the new zoning changes introduced in August 2013.

On an R20-zoned lot the changes mean the minimum required area for a two-lot subdivision has decreased from 1000 square metres to 900 square metres, while the minimum size for a subdivided lot is now 350 square metres.

Due to the higher density opportunities, developers are seeking out suitable lots to make the most of these changes.

According to West Australian buyers’ agent Liz Sterzel of Property Wizards, many sellers and agents aren’t fully conversant with changes to the R-Codes that came into effect in August.

“The main changes involve some reductions to minimum lot sizes, but not average lot sizes,” Sterzel says.

“This means you still need the same total block size to subdivide, but within your block some of the lots can be a little smaller.

“For example, if you have a block zoned R25 and you want to retain your existing house and subdivide a lot off the back because you couldn’t quite fit the previously required 320-square-metre site at the back, but only had 300 square metres available, you couldn’t subdivide before and keep your home. Now with the new R-Codes, the minimum lot size is 300 square metres and you can subdivide, assuming you meet all the other requirements of the R-Codes, of course.”

Sterzel says the changes have provided some flexibility to the allocation of lot sizes within the site, which can make all the difference to a potential development.

Liz Sterzel

Liz Sterzel

“Occasionally, there’s a block where the new R-Codes enable you to subdivide, where previously it was impossible because you couldn’t meet the minimum lot sizes as well as get your driveway in.

“Now the smaller lot sizes might enable you to fit the driveway and still meet the average requirements.

“So the changes are few but they’re very welcome and it helps the state with its infill objectives as it makes many sites more viable for development.”

However, the changes have meant there are some agents who haven’t kept abreast of increased values, although Sterzel says this is to be expected in the early stages as the industry becomes familiar with the new zoning requirements.

“There are some switched on agents who are already across the changes but, as is always the case, there are many who don’t keep abreast of zoning and aren’t aware of the new rules,” she says.

“This means sometimes a property would be advertised as a two-unit site when in fact under the new R-Codes it can be split into three and might sell for up to $50,000 less than it’s worth depending on the suburb.

“This is nothing new really as there are always agents and sellers who get the zoning wrong when they advertise.

“We find that even when we point this out to a vendor they invariably insist they’re correct so we still get a bargain.”

Sterzel says despite the odd occasion where a seller might miss the value potential of a site, the new R-Codes properties with a “secret” extra site are few and far between.

“If you were to go out only looking for a mispriced development property, you might miss some very good deals along the way and prices could creep up while you’re waiting. Rather, find yourself the best deal for your purposes that’s available now and if it’s a mispriced bargain too then that’s the cherry on top.”

Sterzel says in her opinion the changes to zoning laws haven’t resulted in an increase in demand.

“We haven’t found an increase in demand since the changes came about. Although it’s a brilliant and very welcome change, it’s not a huge change and doesn’t affect a vast number of properties,” she explains.

“We have found, though, a big increase over the last few years in people wanting to subdivide and develop. Development seems to have become more accessible to mums and dads who want to add that extra value to market-proof their investment.”

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