Thornleigh to Berowra Re-Zoning News

Several Clients took a closer look at the re-zoning plans of Hornsby Council. (The link is http://www.hornsby.nsw.gov.au/planningdevelopment/index.cfm?NavigationID=2403). In addition, I ran the numbers by a Developer and also had a chat with the Town Planner from Hornsby Council in charge of the re-zoning. At the moment, the picture is not as bright as we had hoped. The numbers simply don’t add up.

Firstly, it may be 2 years or more before the proposal is approved and available for sale to Unit Developers.

Secondly, even though the Zoning is for 5 storey unit blocks, the proposed density is not high enough for anyone to make money. In fact, right now the properties are worth more as ‘Houses’ than as Development sites. When I confronted the Town Planner with this news, she told me that Developers were already saying this to her. The Town Planner indicated that Council would have to change densities so that the re-zoning would work economically to entice redevelopment.

Thirdly, redevelopment costs for Units have gone through the roof. Developers typically want to make around 20-25% for their trouble and risks.

Building costs are now $2000-2400 PSM plus garage and balcony at $800 to $1500 PSM. The construction cost of a typical 2 bed unit is $250,000 – $280,000. We are confident that the market today would pay in the mid to high $400,000’s for a new 2 bed unit making a Developer $100,000 per unit profit. Thus right now a Developer will pay no more than $100 000 per ‘UNIT SITE’ for land. The proposed zoning with the current density works out to around half this amount in the suburbs we looked at.

We said in our last newsletter, “Do not pay a dollar more for the speculative aspect” – if you intend to buy properties in the proposed areas. We still maintain that anyone in the proposed areas will make money when they sell to Developers, however it may not be as much as they had hoped for. CAVEAT EMPTOR!

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