HOMEOWNERS are reselling properties they bought only a few months ago for up to $1.82 million more than they paid for them — just for doing the paperwork necessary to get development approval from local council.
Real estate agents claim developers have been paying such premiums for the certainty of knowing a site is buildable and to avoid the costs of holding a property while development approval is being sought.
Opportunities for builders to snag development-ready blocks have also become increasingly scarce, encouraging developers to offer excessive amounts of money just to snag lots that are available.
A three-bedroom house on a 727sq m block on Raimonde Rd in Eastwood resold this month for $2.05 million, $515,000 higher than the vendors paid 13 months ago. The only change to the property was development approval for a duplex.
A block of apartments at 13 The Crescent in Homebush bought by the sellers two years ago for $2.5 million resold with development approval for $3.85 million, a difference of $1.35 million. Council had greenlit the existing block to be replaced with new units.
A property on Merrylands St in Greystanes recently resold for $420,000 higher than it was purchased for 10 months prior simply due to having DA approval.
Sellers Alfred Farag and business partner David Eskarous said they made no changes to the Greystanes property.
The duo originally intended to build duplexes on the site but changed their minds after waiting five months and spending $20,000 to get development approval from Cumberland Council, Mr Farag said.
“If the site already has the approval it is much easier to start the development … developers don’t want sit on the land for six months,” he said, adding that he and his partner walked away from the sale with net profit of about $220,000 after tax and expenses.
Ray Fayad of Laing and Simmons-Granville currently has a listing in Granville with a price guide of $2.25 million — $1.82 million above the 2012 price of $422,500.
The development approval accounted for the jump in price because “it avoids all the red tape associated with council as well paying interest,” Mr Fayad said.
Starr Partners-Pemulwuy agent Matt Carpenter said DA approved sites attracted such high prices because they were rare. “Demand for DA approval sites is at the highest I have ever seen,” Mr Carpenter said.
Getting approval generally takes between six and 12 months, requires an architect and costs between $20,000 and $40,000, based on the level of development.
Senior Property Valuer Chris Lackey of WBP Property Group said buyers should be careful investing in short-term capital gains, despite the bumper sales. “The approval has to be viable going to the market, all it provides is the benefit of certainty around the site,” he said.
Original article: http://www.realestate.com.au/news/buyers-paying-top-dollar-for-homes-with-da-approval-in-sydney/