The property advisory firm states that it’s important to be well informed as even the most seemingly minor of projects can be a financial undoing – particularly if you don’t get fully prepared before taking the leap.
The report stated the strength of the Sydney property market, demand for housing and overall affordability have seen professional developers and mum and dad developers invest in the property market with small scale developments.
"It seems that investors are moving away from the once traditional investments such as government bonds and also shares which are seen as more volatile with higher risk for less return," the report said.
"This along with the increases in property values has proven that the property market has more appeal."
A lack of available land in already established areas has seen a rise in popularity of redevelopment on both a large scale and on the small mum-and-dad scale as developers take advantage of infill rezoning, transport infrastructure projects and overall demand for new products.
"The northern suburbs of Sydney is price restrictive for the mum-and-dad developer, creating a barrier to entry for developers who are not cashed-up," HTW said.
"The only way mum-and-dad developers can participate is if they already own the property.
"We note the recent sale of an approved two lot subdivision in the leafy north shore suburb of Lindfield."
"The property sold for $2.55 million in January 2015. The purchaser subsequently secured approval to subdivide the rear portion of the block. This same house with approved subdivision plans re-sold in July 2016 for $3.92 million.
"That’s a profit of $1.37 million over 18 months for obtaining approval only.
"This is reflective of the difficulty in obtaining approval in this area, the potential end value for a new dwelling if sold and how entry level mum-and-dad investors can be priced out of the market."
It noted that south west parts of Sydney has seen an explosion in development.
Areas such as Parramatta, Holroyd, Fairfield and Liverpool generally see dwellings on far larger allotments than inner city suburbs which makes way for development opportunities subject to council approval.
Typical small scale projects include:
• Dual occupancies (granny flats, two dwellings on one title, duplex pairs);
• Subdivision of an existing parcel where the owner keeps the main dwelling and sells off the vacant parcel.
When taking on such projects an understanding of the council’s local environmental plans and development control plans is a necessity to ensure any viability with proposed projects.
Source: Property Observer