20-day approvals to address Sydney's 'missing middle'

Property investors in Sydney have a new pathway to redevelop with less risk, greater certainty and lower design costs, under planning regulations introduced last year designed to address housing diversity and affordability.

New South Wales’ Low Rise Housing Diversity Code, introduced midway through last year, gives property owners an opportunity to obtain a council approval to redevelop a duplex, triplex or fourplex site in just 20 days - a timeframe that seems more fantasy than reality given the glacial approvals process currently in place.

To gain a 20-day approval under the code, an investor must submit plans for a complying development which meets a set of development standards and design criteria.

But while that seems an attractive proposition, Sydney-based architect Angelo Korsanos says many owners who could leverage the opportunity simply weren’t aware of the potential of their properties, particular those who own large older houses on big blocks in the city's middle-ring suburbs.

Mr Korsanos said while his architecture firm Redshift Architecture and Art had received a deluge of enquiry when the code was first introduced, that enquiry had slowed to a trickle in 2021.

“It seems to me that the people that this is best suited to are people who are sitting on property and are probably not aware of what they can actually do with it,” Mr Korsanos told Australian Property Investor Magazine.

“They may simply not be aware of the opportunities available to them.

“What we have tried to do is provide something of better value, significant time savings and greater certainty to people that may have been risk averse to doing something with their properties because it sounded too hard.”

Mr Korsanos said he established a new company, PolyHouse, in partnership with residential builder Ages Build, to leverage the opportunities under the code, and help small-scale developers and individual investors to address the long-running undersupply issues that have sent property prices in Sydney into overdrive.

“Certainty is probably the biggest advantage of this whole thing, but for someone who has put money down for a site and is paying the bank’s interest, time obviously matters and that affects their bottom line,” he said.

“Property in Sydney is just crazy, if you think about some of the areas we are looking at to buy a house, in somewhere like the Bankstown LGA, you are looking at something like $1.6 million to buy an established house.

“But if you take that same house in that same location and get four dwellings out of it, and offer something that is almost the same in terms of the individual houses in it but there are more of them, it gives you a lower buy-in point.

“It just means that people who can’t afford a single house or a single residential lot, it’s giving them something to buy into at a lower price point that has all of the benefits a detached house actually gives them.

“What we have tried to do is put redevelopment of sites for duplexes, triplexes and fourplexes within easy reach of property investors. 

“Not developers, but actually property investors. That’s been our mandate and that’s the opportunity we saw in the Low Rise Diversity Housing Code.”

The other advantage for investors outside of time and cost savings, Mr Korsanos said, was greater certainty around attracting a tenant or re-selling the dwellings once they have been developed.

"If you can give people an option to live in a well-serviced established suburb that has access to the things that people desire or aspire to in their day to day lives, you are giving them a genuine option," he said.

"The thing about rentals in these sorts of areas is if someone leaves, within a week you have someone else in, because there is so much to attract people to those locations. Not only do you have a reliable rental return, but it’s actually a consistently performing one.

"Whereas in outer suburbs that are less desirable you are actually getting an equivalent return over a smaller space, but the thing is once someone vacates the house or apartment in one of these less desirable locations, it is much harder to fill."

Case study: a typical scenario for a Sydney suburb

• You own a single suburban residential property with a frontage of 15 metres and an estimated value of $1,000,000 that is capable of being redeveloped.
• With an outlay of $980,000 + GST for approved plans and construction you can redevelop that site with 3 units - more than doubling the value of the asset.
• The property now has a combined value of $2.3 Million (the value of the three units combined).
• Based on a 4 per cent rental return, income has increased from $39,200 to $92,000 per annum.
• But potentially the biggest return is to be gained by holding the property. On average property typically doubles in value every 10 years (equating to a 7 per cent increase per annum). So in 10 years, the undeveloped property has a value of $1,960,000 while the redeveloped property has a value of $4,600,000.