The smell of a new house and land project may have the scent of investment success, but be warned. Not all greenfield developments deliver the same outcome.
Macroplan research suggests that a deep knowledge of future land supply in the area, the location’s particular attributes, and the likely future purchasers or occupants, can drive much more significant returns than indiscriminate investment in house and land packages.
The most important thing to understand is future land supply. There are many highly desirable locations for which there is only the prospect of limited land for release in the coming years. Areas that have fallen into this category in the past include Doncaster and Templestowe in Melbourne and Kuringai in Sydney. The astute investor could identify there was strong demand for this product and constrained supply would ultimately lead to big price increases.
After looking at supply, the next thing to consider is the location itself, especially in relation to schools, shops and public transport. We know that a significant premium is attached to each one of these factors and many greenfield locations have access to all three. What you want is the right location but without paying too much for it. The trick here might be knowing that there will be a train station in place in two years’ time, even if it isn’t there now. Some areas like Wyndham in Melbourne still have house and land packages available within walking distance of the new regional rail line.
Sometimes the future importance or modality of a location is not apparent, so it takes diligent research to find out where future roads, rail, and schools will be. This means visiting Councils and discussing future structure plans.
Areas that have struggled due to a lack of early infrastructure and an abundance of land supply – the two things you want to avoid – include Melton in Victoria and Caboolture in Brisbane. In these locations, relative price improvements have been very low compared to other benchmark areas with quality facilities.
Was there a way to predict this? Not historically. Before the internet allowed access to information, it was very difficult for consumers to identify future value. Today, however, it is much simpler and it’s really a case of ‘buyer beware’. Understanding land release, infrastructure timing and major changes in amenity (new schools or retail centres) will drive higher investment returns.
Another big value driver is the master-planned community which, compared to smaller sub-divisions in similar locations, show significant value growth. That’s because these large-scale projects plan in community facilities, retail, local buses and parklands. Given the scale of the communities, developers are able to deliver higher levels of amenity earlier.
Examples of these master-planned communities are Brighton Butler in Perth, Caroline Springs in Melbourne and Oran Park in Sydney. These are big projects with around 20,000 lots, and over a couple of decades in the making. Oran Park for example bills itself as a town built for the future, offering residents high speed fibre optic cable and sustainable living technologies. The enclosed retail centre, public and private schools were all built almost ‘upfront’.
Let’s not forget that new land and house projects are often developed in areas of new economic opportunity. For example the residential areas around the proposed Western Sydney Airport at Badgerys Creek will house a wide range of well paid employees. Where these local economies become strong, the whole range of service provision occurs, catering from child care to aged care. And so an area becomes more valuable, not only for the first home buyer, but also the last home buyer.
About the author:
Brian Haratsis is MacroPlan’s Founder and Executive Chairman. Brian is an economist and future strategist with over 30 years experience as an advisor to governments and major corporate clients throughout Australia and New Zealand. For more information or to discuss your property research requirements, please contact Amy Williams on 02 9221 5211 or firstname.lastname@example.org.