Council Zoning- Dream or nightmare

I am stuck inside an old City beach supermarket that’s covered in cobwebs and a zombie is trying to sell me some mouldy old bread. I try to run away but it lunges forward and starts eating me…
…At this point I wake up to my Labrador licking my hand because he wants to go out. Thank goodness, it was just a bad dream.


Why is this relevant to council rezoning?


When I sat down to pen this article I was contemplating how I can dissect the topic of council rezoning to benefit future developers. While sleep may have been inevitable it was preceded by the thought that you can’t really talk about rezoning without mentioning what going on in City Beach at the moment. I could not help but reflect on my total shop during a visit to the City Beach shopping Centre a while ago, it was like stepping in to a time machine and going back 20-30 years.


In direct contrast, the neighbouring suburb of Scarborough is full of boutique convenience stores, trendy retailers and popular cafes and restaurant. It’s hard to deny that the rezoning of Scarborough has provided an underlying catalyst for this change. Providing a greater density means more people and this in turn can require more infrastructure. This momentum has been slowly building over time and in the last few years it’s become much more visible.


What is “zoning” and how does it work?


Made simple, each residential parcel of land is given a Zoning classification. This helps local councils to control population density which in turn helps sustain a preferred standard of living within the area. This ensures that your neighbourhood won't triple in population density due to unmonitored construction and development and packing too many people into too small of a space, which can put a strain on local infrastructure and basically make your neighbourhood less desirable to live in.


Occasionally, councils change their zoning to meet the demands of a growing population and in particular for Perth, to help address its urban sprawl issues. Since 2010, more and more Perth councils are changing their local zoning, which can be good news if you own land in those council areas.


For example, if your lot has a Zoning of R20 it refers to the fact that for every Hectare of land you can build 20 houses. Should that zoning change to R30 then you can now build 30 houses which is an extra ten houses for the same size lot and approximately an extra 30% increase in density. These zoning classifications are referred to in the industry as R-codes. The most common R-codes for Perth are R20, R30 and R40.


How do I know if I can subdivide my property?


If you check the R-codes and the average lots size fits into your land more than once then the basic rule of thumb is that you will be able to subdivide the lot. It’s a bit more complex than this but that is the basic idea. If you are interested in finding out the R-code for your lot and what it means, talking to a Summit Projects development consultant is a great place to start!


What are the benefits?


The benefits to the developer or owner of the lot are an increased yield which by and large will provide uplift in value, so even if you don’t want to sub-divide your block, if you need to sell it, it will likely have a higher value than blocks that cannot be subdivided. Property investors and people looking to invest in land to then sell on will have a competitive advantage if they stay on top of zoning changes, because they will have an understanding of the property or lots’ future potential.


Will re zoning my block relate to development profit?


In short, not always. You need to consider that the maximum yield will not always be the optimum yield for your lot.


How do I determine the optimum maximum yield?


This will depend on your objectives. If you are a land developer in Perth and you want to turn a quick profit by selling a development then you need to consider the cost of the finished product in relation to the potential resale price of the finished product. In this instance it may be a better option to develop and build 3 single-story villas rather than 6 three-story townhouses if the area will not support the resale value of the end product.


Who allows me to subdivide the lot?


Interestingly it’s the WAPC who look after the subdivision applications, not the shire as most people assume. You can apply for a development application through the local planning authority but ultimately if you can satisfy the requirements of the WAPC, they could authorise the creation of an additional lot of land.


At the moment the trend is towards an increase in infill developments and there have been a number of occasions that I have seen a number of lots created that might not conform to the local planning authority requirements. It will be interesting to see how the council elections in City Beach go but even more interesting to see if they still end up with some lots that are subdivide


If I’m interested in an investment property should I target areas destined for rezoning?


You could do a lot worse but the length of time you intend to keep the investment is the key thing to consider.


I have not chosen City Beach and Scarborough by chance. They are two suburbs I know very well and they are neighbours. If you had purchased a property in City Beach or Scarborough 30 years ago you would have been pretty happy with the results of that investment today. City Beach is one of the most expensive suburbs with old run-down houses sitting on large blocks regularly being replaced with new mansions.


In direct contrast Scarborough has undergone a period where density though infill development has resulted in a vast increase in the population. This residential growth has supported an extensive increase in the availability of boutique stores and trendy restaurants, which in turn attracts more people to the area. Some will say this was a forced change, as Scarborough had a less-than-stellar reputation but the effect is a stunning transformation none the less.


One person’s dream is another person’s nightmare. Where you sit on zoning is a personal preference; while some will love the cafes and shops, others will love the peace of yesteryear.


The lesson for me is simple, while I might still be having nightmares about the scary experience I had when I visited the old City Beach supermarket that day, it’s provided an interesting perspective. While we can’t necessarily jump in a time machine and go forward 20 years, we can often look to the past to predict the future.


The key message for me is in regards to rezoning, if your goals are long-term you can do well regardless of picking rezoning areas. Based on this, the lack of action seem in suburbs like City Beach seems to be the cause of my nightmare. How about you?

Disclaimer: The information within this article is general information only and it does not constitute advice or recommendation. It does not take into account your financial situation, investment objectives or personal circumstances. Before making a decision about developing your property, you should seek independent financial, legal and taxation advice.

 

 

Council Zoning Subdivision Investment Property

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