6 Brisbane ‘burbs set for equity building boom
Knocking down a property and rebuilding is not for the faint of heart, but it is emerging as a solid strategy to swiftly grow equity - particularly if it’s done in the right location.
That’s the call from Brisbane-based buyers agent Melinda Jennison, who told Australian Property Investor Magazine that building a dream home in place of a dilapidated dwelling is becoming a popular strategy for owner-occupiers and investors in the river city.
Mrs Jennison, the managing director of Streamline Property Buyers, said there were six suburbs in Brisbane emerging as ripe for the knock-down and rebuild strategy, with the property’s location crucial to ensure capital growth.
“You firstly need to find near-city locations where it’s easy to demolish an existing home and create a clean slate,” Mrs Jennison said.
“But the suburb must also have a wide price disparity between new and existing homes, gentrification, strong family-buyer demand and desirable attributes such as views.
“It’s the magic formula that makes it work.”
Mrs Jennison said the six suburbs she identified - Wavell Heights, Seven Hills, Tarragindi, Alderley, Corinda and Gordon Park - shared several attributes that made them ideal for a knock-down and rebuild strategy.
“Outside of Gordon Park, which is a difficult suburb simply because of the character housing in that location, the other suburbs do have a lot of homes that can be knocked down, it’s just identifying those that are as close as possible to land value, meaning there is not much value left in the house,” Mrs Jennison said.
“They are all premium suburbs that have elevations and city views in some locations, so I believe there are some parts of the suburbs that will do better than other parts across all of those locations.
“That said, they are all areas where you have got a high proportion of owner occupiers, you’ve got incomes well above the state average, you’ve got people that have the capacity to continue to improve the area through renovation and redevelopment, so I think that generally they are all very well placed for future capital growth.
“From an investment perspective, they tick most boxes that we would be identifying to select an investment-grade location for clients and for people to take that capital growth strategy.”
Mrs Jennison said while the knock-down and rebuild strategy had the potential to provide fast equity growth, many property buyers would not consider it as an option.
"People don’t know where to start,” she said.
“For example, we have a client that we’ve just helped in Gordon Park, and we’ve bought a house that we’ve demolished and we are in the process of getting the applications into council to build the new dwelling.
“People don’t know that process, and when you don’t know and understand the process it’s not a thought that enters your mind.
“Not all investors would be able to approach this type of strategy, it depends on their risk appetite and their capacity, because you’re not just relying on standard residential funding, you’re going into construction lending as well.
“But it’s a great way to force some value into a portfolio because you can manufacture equity and you can do that a lot faster than waiting for capital growth to catch up.”
Mrs Jennison said timing was particularly ripe in Brisbane to knock-down and rebuild, with significant capacity available in the city’s homebuilding sector.
“Because a lot of the larger projects have been stalled, delayed or just haven’t started for whatever reason, some of the big builders are moving into the medium-sized projects, which is pushing out a lot of the smaller builders out of that space, so they are looking for the smaller projects,” she said.
“There is a big cohort of builders that are hungry for work at the moment and in this current environment, simply because there are not enough big construction jobs and everyone is having to move down the scale, there is the opportunity to secure a quality builder who is going to look after you in terms of price.
“If there are builders that are hungry for work, they are going to be sharpening their bids to win the job.”
Melinda Jennison’s top six Brisbane suburbs for dream-home construction:
Positioned nine kilometres north of Brisbane’s CBD and dominated by detached homes on generous allotments, the family appeal of Wavell Heights is undeniable.
The suburb has a median price of $742,500 according to CoreLogic data. Wavell Heights has huge price disparity where the difference from the entry price to the exit
price is significant because the end product is so highly desired by the local buyer demographic.
Wavell Heights is also the first suburb north of the CBD with limited numbers of character protected homes, which means most older dwellings can be knocked down.
It’s also an elevated suburb and some streets allow for city views. We are seeing rapid gentrification here with old homes transformed into brand new large family homes. This continues to bolster value at the upper price point.
With a median value of $943,750, Seven Hills is full of potential for buyers wanting to construct a dream home.
Seven Hills is located five kilometres from the CBD and is the first suburb on the south east not dominated by demolition-protected character residential. The entry price for an old house in this area is around $750,000.
This pocket is family friendly and is a small suburb that is only 1.8 square kilometres, so supply is limited which helps keep end-values high.
It’s elevated, hilly topography provides opportunities for city views. Price disparity is also significant, making it easier to create instant equity from a new build.
This southside suburb often flies under the statistical radar because it shares a postcode with Holland Park.
But it’s big blocks and demolishable housing are presenting opportunities nine kilometres south of the CBD.
There is plenty of new-build gentrification happening here, and it’s close to the new metro infrastructure that is coming to Brisbane, which is driving up price disparity.
Multiple positions also have city views and it’s highly desirable for families looking to knock down the older dwellings and build their dream home.
Good access to desirable schools is also helping bring in families, and with a buy in price for the older homes of $650,000, there’s excellent upside for new builds.
With a median house price of $850,000, Alderley’s mix of facilities and family friendly appeal are key to its new-build potential.
In Alderley, you’ll find an array of different sized blocks, solid retail facilities and great public transport options.
Most properties aren’t demolition protected so having access to a large pocket of real estate just seven kilometres from the CBD to build your family home is a no brainer.
Corinda’s elevated streets –some with city views – are the start of its new-build appeal. Corinda has very little character-home protection so you can create an excellent homesite for building a dream home.
Demand for Corinda feeds off the highly desirable suburbs of Chelmer, Graceville and Sherwood which are areas with predominantly character protected homes.
By selecting the right position within Corinda, you can take advantage of the huge price disparity between existing and new homes.
Blocks of 600 square metres are achieving prices of around $650,000, but the median value of homes in this suburb is around $850,000.
While Gordon Park has proportionally more character housing than the other suburbs, there are pockets of demolishable homes with excellent buy/build/sell price disparity… if you know where to look, that is.
The big sell for Gordon Park is its proximity to infrastructure and services. The busway, for example, has made commuting a breeze.
The parkland lifestyle also attracts family buyers which is bolstering the value of newly built homes relative to older stock.
Finally, Gordon Park enjoys easy access to retail and lifestyle hubs such as the Lutwyche shopping district and Kedron Brook Road.