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buying old property near future subdivisions

Discussion in 'General Property Chat' started by Timwest, 15th Mar, 2016.

  1. Timwest

    Timwest Well-Known Member

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    I found a property that is on a no through road that is due to be connected to a new subdivsion that is just starting construction, checked DA's and its for 100 lots. That means eventually this old property will be on the same street as the new houses in the subdivsion.

    House and land packages according to similar ones in the area should be around 400k, whereas the old property which has the same block size as proposed lots and a reasonable house on it is about 100k less.

    Assuming the supply is there. Do you think this could increase the value of the old property once the new houses are built and the road connects?
     
  2. RiMo

    RiMo Well-Known Member

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    What you need to find out is the actual price of the land component for those H&L packages. That way you can get a better idea on how much the land is worth on that old property you're looking at. Then you can calculate how much the existing house is worth. If you end up paying for land only with that $300k asking price (you said it's 100k less than the H&L), how much would it cost to build a new house if a buyer wants to demolish the old house and rebuild a new one? Would this old property still offer good value if you need to take into account the cost of a KDR scenario?
     
  3. Timwest

    Timwest Well-Known Member

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    The land value in the new estate will be around the 200k mark, so the old house value is 100k roughly. The old house is brick and in pretty good condition with renovated bathroom etc.

    So basically the options for buyers on that street will be 400k for a brand new house or 300k for an existing older house which is in good shape.

    I would think as long as the supply is there it could potentially bring the price of the existing house up as it looks like a cheaper alternative.
     
  4. RiMo

    RiMo Well-Known Member

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    As long as the demands are there, sure - there is always a possibility for CG once the road is connected and new houses are built. You may even consider value-adding strategy by doing a simple reno to manufacture further growth. But don't just rely on the prices of those H&L packages. H&L can be notoriously overpriced since they have factored in the developer's and builder's margin in the price. Do a thorough DD on price growth in this area for existing homes.
     
    Last edited: 15th Mar, 2016
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  5. Chilliblue

    Chilliblue Well-Known Member

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    Also factor in does any tenant want to live alongside a building site that could potentially go on for years.
     
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  6. Timwest

    Timwest Well-Known Member

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  7. albanga

    albanga Well-Known Member

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    All depends on when it was sold. If the uptake on the land is huge and people miss out then yeah it becomes more valuable.
    But if they are having trouble selling the new lots, what do you think they will do with the price? Discount it and try to make it up on the house. The end result is decreased land costs and increased dwelling costs.
    For someone where the value is in the land then this is not good.