26 Jun Real estate is all about the land – here is proof! – Shannon Davis
More and more older properties are being purchased with a view to knocking them over to build a more contemporary home. This highlights the value of land. Shannon Davis looks at the opportunities.
Kevin: One thing we do know is that when you’re investing in property, you have to be aware of what the trends are all the time. One thing that I’ve noticed, and I think my guest in this interview is going to reinforce, is that there are a lot more properties being knocked down – the land is the most valuable part of the investment – of course, and new dwellings being put on that, either single dwellings or double dwellings.
Shannon Davis is from Image Property, and they have offices in Melbourne and Brisbane.
Shannon, thanks again for your time.
Shannon: Good day, Kevin.
Kevin: Shannon, is it my imagination, or is this a bit of a trend?
Shannon: Yes. I think right now in the cap city that I have the most alignment to, in Brisbane especially, is we’re seeing a thirst for land. Those infill opportunities are becoming more and more scarce, and people who have land-banked or have recently purchased are paying higher and higher amounts to put contemporary properties in place of character housing or older-style properties.
Kevin: It makes it a very expensive proposition, doesn’t it, because effectively, you buy a house and land and you knock the house out, effectively paying that just for the land.
Shannon: Yes, and you have the full cost of construction to come later. And often, these are houses that are owner-occupied type houses where people want to build their dream house and they have higher specifications.
To give you an idea, we were at auction for a client recently and we were expecting a good price – it was in one of Brisbane’s best streets with great views to the back – but it just exceeded everyone’s expectations for the price to go out past $1.4 million for a knockdown. And that’s what we’re seeing in some of the better suburbs of Brisbane.
Kevin: I can understand if you’re spending that amount of money and you’re going to be able to take the house out and get two – or maybe even three – on it, because it does lower the site cost. But just to put house for house, to me, doesn’t seem to make a lot of sense.
Shannon: I think you have owner-occupiers who are either in successful businesses or well assured of their jobs and prospects at the moment and have always wanted that dream house to entertain and grow up their children and not want for anything. They tend to be good investments going forward, that they’re in the right areas surrounded by the right demographics and have the right dirt that makes up a good investment.
But you do see from time to time that these prestigious areas that are maybe double or triple the median price of the cap city can be prone to share market corrections, and sometimes those trophy type houses don’t make sense if there’s a recession or a big slide on the price of shares or a financial crisis.
Kevin: As we’ve already highlighted, the fact that the land is where the value is, if you’re buying an investment property now with a view to knocking it down in the future, what size block should you be looking at – 400 or 600 square meters?
Shannon: I think you should try and get a high land-to-asset ratio into your purchase wherever possible. Not all land is created equal.
I think what’s really driving this is you’ve got the big outer suburbs land-and-house packages, but people are wary of the commute. If you get stuck in that commute from 7:00 to 8:30, it can be a really long time. While you’re in there, there seem to be 80% of the cars on the road at the same time doing the school and work run.
I think that’s one of the things where people are wanting to move closer rather than further, and they’re happy to take perhaps a smaller block in order to build a house on that block and be further in with a smaller commute.
Kevin: Can I just ask, on that point, Shannon, Sydney and Melbourne, are we seeing a similar trend there?
Shannon: Yes, definitely. It has been for some time that you’re seeing people come in wherever possible and redevelop plots of land closer to the city. And while those markets have had a very good run and showing some signs of slowing a bit at the moment, you’ll still see owner-occupiers taking the time to build their dream homes and knock down what was previously there to reconfigure something that’s going to be more suitable for their lifestyle.
Kevin: I guess they figure that they’re going to hold it for some time as well, which makes it even more logical to purchase that way.
The Brisbane market is still very, very affordable. Are you seeing many people coming from Sydney and Melbourne because of the affordability and looking at getting a development happening?
Shannon: Yes, we’re getting more interest for rental applications, we’re getting more interested in unit blocks that we have for sale, development sites that we have for sale, and also, you start to see the move back up. Things get over-bought and over-sold, and I think for a period, perhaps Sydney and Melbourne have been over-bought and Brisbane has been over-sold.
You’re going to start to see that equalize a little bit more now because the gap is at its widest. The biggest problem was jobs not being created. That’s on the way back up. The migration is on the way back up, and there’s a much better affordability for lifestyle reasons to move to Australia’s third biggest city.
Kevin: Yes. Good talking to you. Shannon Davis from Image Property with offices in Brisbane and Melbourne. You can reach them at their website, of course, at ImageProperty.com.au.
Shannon: That’s correct, KT.
Kevin: Good on you. Thanks, Shannon, talk to you again soon.
Shannon: Okay. Bye.