The month in review: Brisbane
By Herron Todd White
Small projects in Brisbane are a way for dabblers to dip their toe into the big pool of property projects. Our city has all the important elements to help make small development fairly low risk.
Our buy-in prices for sites are relatively cheap (compared to Sydney and Melbourne at least) plus there are a number of town plans in the region that have created proactive small development zones. Also – despite our fairly subdued overall market – there’s still enough demand for end product, be it vacant land, a new home, or even a townhouse or unit. You can make a profit with most property types, but only if you adopt a smart approach.
Due diligence is essential, even in Brisbane’s relatively forgiving market. Know what you’re buying, know what you’re doing and know what you’re selling. Key to it all is having an understanding of property values… but of course you can call us for help on this front.
Small developers in southeast Queensland like to gravitate towards particular project types.
Most entrepreneurs cut their teeth on one-into-two splitter blocks, particularly within five to 10 kilometres of the CBD. In this radius, many purchasers buy an 809 square metre site with a post war dwelling. Why post war? Demolition or removal will be on the cards. The options are then to sell off the newly titled 405 square metre blocks as vacant, or shoot for a bit more profit by building two contemporary homes on the sites.
In the Logan City Council area, there’s also an opportunity to build extra accommodation. Logan landlords are constructing one or two-bedroom auxiliary units to the rear of an existing dwelling for extra rental return. For these auxiliary units, the living area must be below 70 square metres with only one vehicular crossover to the site. This style of construction is specific to the Logan City Council area. Local government has approved the two properties being rented on separate tenancies – a scenario that isn’t allowed within Brisbane City Council borders.
There are a few other rules worth noting under the small development banner. In Brisbane, splitter blocks must initially have a 20-metre frontage, because the finished allotments will each require a 10-metre frontage to comply with the town plan.
There are options, however, to do something a bit smaller under special conditions. Six hundred square metre sites can be cut into two provided the right criteria are met, such as being within a certain distance of neighbourhood shopping nodes. These sorts of guidelines demonstrate the importance of having a well-informed town planner among your team.
So where can you find these sweet, sweet little projects?
For the splitter blocks on the south side of town, take a look around Camp Hill, Coorparoo, Holland Park, Mt Gravatt, Bulimba and Balmoral.
If heading north, the inner ring offers a band of suburbs from Indooroopilly to Kelvin Grove and as far out as the Kedron/Wavell area. If you’re happy to go further out from our city centre, try Geebung, Aspley, Boondall and Banyo. They’ll provide more affordable buy-in options for first time developers, although remember demand for property tends to ramp up the closer you get to the CBD. Therefore while it can pay to have a go in the outer suburbs, temper your profit expectations and price your end product accordingly.
If you’d like to try your hand at granny flats then Marsden, Shailer Park, Kingston and Logan Central are the best options.
When it comes to the all important question of cost, then for desirably-located properties with easy development potential you’ll be paying $1.1 million to $1.25 million in Camp Hill or Coorparoo, and around $1.2 million to $1.4 million in Bulimba. On the northern side of town the buy-in price can be somewhat cheaper – particularly if you head further out where it’s possibly to grab a site for $700,000 to $900,000. If you want to be closer to town however, it’s $1.1 million to $1.4 million for blue-chip spots such as Paddington or Bardon.
These facts are all well and good, but how hard is it to land a small development site at the moment? Well, it’s a little tough. There’s a lot of competition for splitter blocks at present and purchasers are accepting the slimmest of profit margins in order to get a foot on some suitable property. As an example, if you were to buy an 809 square metre property for $1.2 million the value of the 405 square metre allotments once the site is cleared and subdivided is probably $600,000 per allotment, plus you’ll also incur costs during the demolition and subdivision phase. In our reports, we often describe exactly how competitive demand is for splitter projects, with buyers paying premiums that have pushed prices into the very upper limits of the market value range. In these instances the developer is relying on an overall improvement in the local property market to increase the profitability of the venture. In other words, they’re land banking sites that aren’t viable projects now, in the hope they’ll be profitable later.
For this reason, sites that have a holding income offer the most attractive options. Having an income stream while waiting for the market to improve makes these properties worthwhile, but of course this means demand is even higher for these rentable deals, so be prepared to pay handsomely.
Not all small projects are winners of course. We’ve seen cases where developers attempt to do a four-townhouse development or small-scale unit development – but often these ventures don’t end well for the novices. It’s important to have experience under your belt and good industry knowledge, as well as access to tradesman and service providers that can get the job done in a reasonable timeframe and within budget.
Find out more information and to chat with a local Mortgage Broker in Brisbane.