Most weeks I’ll find myself talking to at least one homeowner who owns property which has been upzoned under the Unitary Plan.
If you are a hopeful owner of an upzoned property you’re likely very keen to make the absolute most of an opportunity that may never come again. And who wouldn’t be?
In this article we look at the extent of upzoning in Auckland, the Housing Crisis, demand at present and what this means for you.
What is upzoning?
Upzoning is the process of changing the zoning of a land area to a more intensive, mixed, and/or higher-density use.
So, if you can do more with your property now in terms of residential development, congratulations! You have been u
NOTE: This post will deal with upzoning in a purely residential setting.
You obviously know about The Housing Crisis or you wouldn’t be pondering the potential of your prime bit of God’s Own so I’m not going to try to teach you to suck eggs but here’s a little data for you.
How short are we?
The Chief Economist Unit (at Auckland Council) estimate that we, as a city, have a shortage of 40,000 homes.
That’s a significant number.
It goes without saying that if it is a shortage of land leading to this shortfall your upzoned sites value should go through the roof.
Ok. So how much has the Unitary Plan increased capacity?
But how much has rezoning increased capacity in our fair city? How many other properties have also been rezoned?
I wasn’t able to pinpoint a number of individual properties which have been rezoned but according to this article by Auckland Councils’ Chief Economist David Norman, it is estimated that upzoning has increased potential capacity by 420,000 to 1,000,000 homes.
That’s 10 to 25 times our current shortfall! In brief, we have far more capacity than we need.
Land shortage is not the problem. We just aren’t building enough houses. And while the Unitary Plan has made greater intensification possible across huge swathes of Auckland, the cost of development and construction remain high.
See his full article here.
Figuring out what your upzoned property is worth…
What factors matter?
Amongst the oversupply of upzoned land, we try to establish what your site offers that is uniquely attractive to your ideal buyer.
A combination of factors need to be taken into account such as:
- Road frontage
- Access to services
- Proximity to local amenities
- Availability of similarly attractive sites in both your geographic location and comparable suburbs.
Are developers buying?
Are developers buying? Absolutely. But you probably don’t need an agent to tell you that the pre 2016 speculative frenzy has been and gone.
Developers are buying with their calculator and are judicious with the sites they purchase. Your site needs to be easy. And it needs to be sexy. Or it needs to be cheap. Otherwise, you’ll likely achieve a better price from a more traditional buyer in your location.
So should I stay or should I go now?
Wait it out or sell now?
It all comes down to your reason for waiting.
Is your reason for contemplating a sale purely to cash in on speculative value? Or is it because your life has changed and your property or location no longer offers you the value it once did.
If it’s the former then you might want to rerun your numbers and figure out if a move is actually going to improve your current circumstances at all.
If it’s the latter it would pay to remember that, if your property does not offer something unique enough to fetch a development premium today then, given the capacity explained earlier, you may be in for a very long wait.
Consider where you are heading.
Unless you are moving to a more affordable part of New Zealand, the future may offer no benefit that is not present now. After all, if you are selling and then buying in the same region the difference between what you receive and what you pay may remain fairly steady*.
*Think about the percentages though. ie. If you are increasing your spend the percentages will work against you in a rising market but for you in a falling one.
What about DIY Developing?
Fortune may favour the bold but development is not cheap so do your homework thoroughly.
Make sure you do your numbers conservatively, treat it like a business, consult with your professionals and build a bit of fat in there in case something goes wrong or takes longer than anticipated.
If you plan to sell bare land keep in mind that there is a smaller market and, obviously, the smaller you go and the more restrictions placed on the site, the smaller your market will become.
Mind your step!
The most common mistake sellers make with upzoned sites is failing to do their homework, either completely or objectively.
Run your numbers and ask yourself if there is any money in the project should a developer buy your property? Take development costs, construction costs, holding costs, reduction in value of the existing house on a smaller site (if applicable), and tax into consideration, as well as agents fees for resale of any new sites. Look at what’s left over. Would you take on the risk for the reward?
Note: An experienced agent should be able to assist with a rough guide of costs. You should also consult with your surveyor, accountant
There certainly is a lot to think about but I hope this post has helped to point you in the right direction when considering
If you feel like a little more light reading, check out this article from interest.co.nz on redevelopment premiums and house prices in Auckland.
Good luck with your plans!
More posts for sellers.
Is Auction The Best Strategy? 3 Times It Just Isn’t.
Separation and Selling The Family Home.
Have feedback for me? Or a question? I’d love to hear from you. Give me a call on 021 454694 or email me here.
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