MBRC - Strathpine - How to "value" property.

Firstly, I am a poster that visits these forums irregularly and am not in the property game. I just check out the forum to keep a finger on the pulse so to speak, and because I find it interesting. Yes, I am a boring person.

I have a property in Strathpine which is zoned "Strathpine Centre" according to the new zoning regulations. It's relatively close to Bray Park station.

In lieu of all the "hype" concerning the region around the University, I'm wondering how people on these forums would factor that in, if you were to sell.

I realize it's difficult to pin something like that down, and you always have the answer of "the market will tell you what the property is worth", but I am more interested to see the opinions of some the experienced posters on this forum, especially those that know the area.

If you were to get an offer today, something outrageous, what would that number be approximately ? I was approached by a real estate agent recently and said "I wouldn't even consider anything under 500K" (I was interested to see the reaction), expecting them to say that was ridiculous. But they said that given the Uni is more than likely going ahead, that might not be that unrealistic. To be fair, proposing such a number 2 years ago would have been unthinkable. Could the Uni make that much of a difference ?

Also, I noticed that a property nearby was sold and it was advertised as "Land Bank", so I'm assuming at some point (maybe if/when Uni is built ?) it will be developed. Apparently it was bought by some Sydney investors.

And what about long term ? It's all well and good to get a very good offer today, but I wonder if I'd look back in 3, 5, 10 years from now and think "I really sold it quite cheap".

Any thoughts from posters would be great. Thanks in advance.

 

First and foremost you need to know exactly what can be done under the "strathpine centre" zoning with your block, and or adjoining ones . Seek some town planning advice so at least you know what you have got

 

The only thing of note (to me anyway) that stood out was that the maximum height of development is 21 metres. Other than that, I can't really say.

Any town planners you'd recommend ?

 

First of all, confirm whether it is Urban Neighbourhood or some other zoning. If heights are 21m, then I am guessing it is Urban Neighbourhood (suits townhouses or units, although minimum building heights may apply). If it is indeed the commercial area then 21m heights may also apply. You may have more flexibility with the site than Urban Neighbour Hood.

Unless you are a builder, at the moment it is quite difficult to make small developments profitable in the area. Values of the end-product (townhouses or units) just aren’t enough to cover the development cost and leave little room for any margin for the developer. Banks are also not generally valuing the end-product high enough at the moment. This has been confirmed from a telephone discussion I had with a local developer/agent that was working for a recently completed townhouse development. I’ve also put a lot of work into feasibility costings for development options for my own small site in the area. Values just aren’t currently stacking up to pursue a development now (although I can’t fund it at the moment). My original purchase intent for my recent site was always buy and hold with development potential. The uni and the associated rezoning makes it attractive for capital growth.

Unless you can show a margin on top of cost of 20% (including the cost they pay you for your site) builders/developers just won’t be interested. This ideally needs to be with an approved DA and preferably building approval as this reduces their development risk.

If you are to approach development yourself, then you should be aiming for a minimum margin of 20% on your cost (your costs being planning, engineering design, infrastructure contributions, loan/holding costs – i.e. interest, demolition, construction cost, contingency of say 5%).

You are also competing with the large number of other sites that have been rezoned, so if you can’t give them a good price they will just find another site next-door/nearby and approach that owner. There ideally has to be something particularly attractive about your site (for example any of the following - large size, good boundary dimensions, dual-street access, proximity to station/shops/uni etc).

That’s not to say that end-product valuations won’t improve in the future, particularly once construction of the Uni proceeds. Some progress has been made as the site of the old mill has been cleared, remediation (environmental cleanup) works are underway and community consultation has occurred. For the Uni is to start accepting students in 2020 then construction will need to start by 2018 at the latest. I am watching and waiting for basement works to commence, that will be the best indication that construction is underway, although I would expect other news such as contract details and more detailed plans to emerge.

In my opinion, a $50k to $100k uptick in values of the end-product (individual townhouses and units) will help to achieve the margins required.

Agents / builders / developers may be approaching you now as it is their opportunity to get in early and secure sites at a low cost for their own land-banking. i.e. they take the profits from rises in land value and not you.

In my opinion, you are better to hold the site if you can and develop it yourself. If you can’t fund the development yourself, consider doing plans+permits (but before you do, do some profit projections to see what sort of price you could reasonably sell your site for with an approved DA).

I’m very keenly watching the area and will update other threads with news as I get it.

As for town planning, talk to @RPI and his brother Brett.

 

Thanks for the insight @wombat777.

I have heard similar things regarding development not being worth it currently. It's not something I plan to do, at least not short term anyway.

I agree that end values need to increase but it would have to be some sort of a "jump" where it happens fairly rapidly. Otherwise, you may wait say 3-5 years for the end values to increase but what are the building costs at that point ?

 

Yes - you need to factor in escalation of build costs.

With increased expectations of demand once the uni and associated town centre precinct starts we should see a jump in end-values. Run your projections with conservative estimates for capital growth. Keep it low for the next year or two and factor in an uptick from 2019 or 2020. Some of the growth won't occur until the uni nd town centre is realised.

If you are interested in going down the plans+permits route I'd start with a budget of $10k per dwelling to cover design, town planning, engineering reports / plans, building approval drawings and specifications. That's a simplistic number as it depends on how big your site is and how many dwellings it will accomodate.

Also - i didn't mention above, that if you are planning to sell with DA - you need to make sure that the plans are practical, end-product suits the market (whether that be future tenants or owner-occupiers) and it is cost-effective to construct for achieving intended builder margins. Builders will also want a project they can execute with low risk and minimal delays and of course is an easy product to sell.

 

Sorry for late response, been busy doing deals . Not really for that area, but a local TP should be on top of it.