Much of the talk around the property market has been a bit dire lately, with rising interest rates and cost of living pressures dominating headlines. I understand things are tough for many, but when you’ve been in the game for a while, you can spot opportunities where others see hurdles.
I think that mired among the bad news floating through the zeitgeist, there’s an excellent prospect people keep overlooking. If you’re ready to jump, it can deliver exceptional outcomes in terms of liveability and profit.
I’m talking about vacant house sites in our inner suburbs.
I know, some will think I’m crazy for talking about empty allotments as an opportunity. However, I’m convinced now is the time to strike to secure land and build a home in our most desirable locations and here are four reasons why.
1. Scarcity
The suburbs I work in are, for the most part, built out. Areas such as the inner-west gem of Paddington, or Newmarket to the north. These are places where construction over the past 100-plus years means there are precious few vacant sites available to build on. Most of the vacant property we come across is infill land leftover from redevelopment. It exists simply because house design has adapted progressively to suit ever-smaller allotments. Then there are lots that exist because an in situ home can and should be demolished.
However they come about, they’re as rare as the proverbial hen’s teeth in my areas. In fact, they are an asset pretty much guaranteed to grow in value due to long-term scarcity.
And I love it when one hits the market. I have, for example, a listing at 8 North Street, Newmarket which will make some savvy buyer very pleased with themselves. It’s a 306 square metre site within a couple of minutes’ walk of both Newmarket Village and the train station. The seller has already designed a beautiful five-bedroom, three-bathroom home for the block, but you can really do what you want if their plan doesn’t fit your needs. Even if you purchased it as a buy-and-hold proposition, it’s a solid investment.
2. The ideal home
Vacant land is a blank canvas on which you can create your ideal family home.
Of course, some might think buyers should simply renovate an existing house. I believe renovations are fantastic, but they come with a swathe of limitations you don’t get when you have a vacant block at your disposal.
Renovations may have heritage restrictions on the existing home which will limit how you adapt and upgrade the improvements. Also, renovations tend to be more expensive to complete per square metre than the cost of building new. Builders need to approach a renovation differently which usually results in extended construction times and creative building techniques – and that means more cost.
Finally, renovations mean you must work with someone else’s idea of the perfect home. You’re working with their room sizes, layouts, aspects etc.
When you have a vacant site, you can be creatively untethered (within the building code of course) and design a bespoke home that meets your specific needs.
3. Building challenges are your buyer advantage
The other scary thing about vacant land at present is the challenge around securing a builder.
We’ve all heard how demand for good builders has seen construction delays and rising labour costs. Also, materials are more and more expensive, so building contract prices aren’t going backwards.
But this has some unexpected benefits for buyers who are finance-ready and keen to buy vacant. It’s the perfect countercyclical opportunity.
Firstly, demand for vacant land has softened in 2022. For the first time in years, you can secure a clean-slate property with less competition. Sellers are open to discussing offers and are ready to do deals.
Secondly, despite the high demand for builders, we are hearing that their long pipeline of work is beginning to slow. The reason for this is that rising costs have seen many owners choosing to delay or cancel their projects. I know of several builders who have work booked through to the start of 2023, but they’re keen to secure future projects to keep their businesses going.
4. Less chance of overcapitalisation
Another fantastic reason for building on a vacant block in our inner-city addresses is that there’s less likelihood of overcapitalisation. It’s a fundamental of property economics that if all else remains equal, the closer a site is to the CBD, the more valuable it is per square metre. As such, buyers in these addresses are willing to pay premium prices for high quality homes.
It’s these very suburbs where you can spend extra on your specifications, finishes and inclusions, safe in the knowledge that the home’s value will justify, and eventually exceed, its cost.
When you break it down, choosing vacant land in our most in-demand suburbs makes sense — especially now. When opportunities present themselves, don’t hesitate. We’re on the cusp of seeing markets ramp up again as we settle into still low interest rates and a rising population. Those buyers who “wait for something better” will be left holding nothing and wondering why they didn’t act when they had their chance.