Many property investors who choose to buy-and-hold their investments work on capitalising on council rezonings in order to make the most out of their properties and ultimately add value to their portfolio.
Plan Assist’s Sarah Verheyen studies the changes occurring in council’s Local Environmental Plan (LCP) and Development Control Plan (DCP) due to the rezoning of land in order to help investors maximise returns in their investment with little to no cost.
According to her: “This can be very beneficial for our clients who are looking at a longer-term buy-and-hold strategy, particularly with [regards to] purchases through their superannuation funds or [those] who are purchasing in a cash flow positive position with a dual occupancy strategy.”
“This allows our clients to hold their property at little or no cost, whilst holding the property for future growth and development potential based on proposed rezoning,” she added.
Reasons for rezoning
There are two main reasons for the implementation of changes in zoning regulations:
1. Request made by the state government
Most councils in New South Wales agreed to make changes in zoning regulations in order to align all of the zonings within the state into a comprehensive Local Environmental Plan (LEP).
The aligned zoning makes it easier for the government and their employees, as well as the property owners, to comprehend property zoning, in contrast with having different rulings and names for each of the zones within the council area.
2. Demands of residents
Population growth requires a meticulous planning for infrastructure in order to accommodate the increasing demand for space and dwellings.
In Blacktown, it used to be possible to build townhouses anywhere in the local council as long as the site is larger than 3000 metres and it meets the rules of the LEP and DCP. After the implementation of changes in zoning regulations, only R3 or Medium-density zones can accommodate the development of townhouses.
Meanwhile, in Hills Shire, an estimated 36,000 dwellings are needed by 2031. The local council decided to break down the numbers to the North West Growth Centre—21,500 of the dwelling will be provided within the existing urban areas and release areas.
Some councils have gone into great detail to show which areas and suburbs are set to be rezoned to higher density areas, from streets to even the radius around different stations to be rezoned. This proactive and strategic approach is expected to be a more effective way of handling the increasing demand for properties.
“Local councils have put together their own plan to meet the demand of population, housing, infrastructure, and employment growth; some councils have set the outline for their future rezoning needs,” Sarah said.
Benefits for property investors
While rezonings are not guaranteed, property investors who are planning to buy-and-hold their investment can still work to capitalise on the changes to be implemented. As always, research is vital to achieving success using this strategy—you need to make sure that the property you are going to purchase really has the potential to be in a higher density area in the future.
One of Sarah’s clients bought a property in Blacktown five years ago, constructed a granny flat on it, and held it on a positive cash flow position.
The property acquisition specialist shared: “Six weeks after settlement, the property was issued with a draft rezoning, from low density to R4 density, which permits seven-storey high-density unit buildings.”
“This instantly added value to the property, [which coincided with] the growth that the property has experienced with the recent price growth in Blacktown.
“Twelve months later, a property on the same street—on the other side of the road, [out of the] R4 zoned—sold for $110,000 more. This was a great result for our client,” she added.
The data associated with council rezonings can often be confusing to most property investors, so aside from keeping yourself updated with information from state government and local councils, it will also be best to seek the assistance of reliable property professionals.
Even if the information is always publicly available, it is also ever-changing, Sarah said.
“It’s just a matter of spending the time to find it,” she concluded.