Could you profit from amalgamation?
We’ve all seen the big media headlines when neighbours band together and sell their blocks as one, resulting in multi-million dollar sales. With growing populations driving the demand for high density housing near established infrastructure, amalgamation could spell big capital growth for your investment.
Amalgamation is the process when multiple owners come together to sell their properties as a single lot; they can choose to do this for multiple reasons, however usually a sale like this will be the result of developer interest or because a higher price point can be reached for the properties together.
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When a property is amalgamated with others it can be rezoned, usually to a higher valued use, and also can allow for more dwellings to be built on the site which will greatly increase the value of the property.
For example, if you amalgamated your property with your neighbour’s property and the land could be rezoned, a developer may be able to put four dwellings on what would previously only have held two, resulting in a higher sale price.
According to a research paper released by LJ Hooker, the reason for the growing trend of amalgamation is the soaring costs of new infrastructure, resulting in more high-density development in already populated areas and more land being rezoned.
So how can you benefit? Keeping your finger on the pulse of the market around your investment is the best course of action; if the government approves rezoning in your area and there is interest from developers the chances are you could profit from amalgamation.
However it’s important you do your due diligence, there are a lot of factors which will come in to play when deciding if your property is right for this type of sale and it can be easy to get caught up in promises of multi-million dollar sales.
Keeping open communication with your neighbours and being aware of the market around you are great first steps if you are open to amalgamation, it also pays to be aware of the current zoning of your property and the zoning of your surrounding areas.
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