Can you create equity on a single house build? Well yes... and no

I often get asked whether you can make some equity in a single house build or a house and land package. It’s a good question and the answer is yes...and no.

Typically a dual occupancy development where two dwellings are built on one lot can create some pretty good equity. It’s fairly simple to understand that if you take one piece of land and put two dwellings on it, each dwelling is basically benefiting from half the cost of the land and this is where a lot of the equity is created. The economies of scale, building two dwellings at once, also contributes.

Lately I started studying some suburbs of the Hunter Region in NSW, where Property Bloom manages developments, for our clients that we would not normally target for dual occupancies or medium density development. This is mainly because there are usually covenants on the land in these new estates, so this type of development is not permissible. I watched the sales on the houses at the premium end and was amazed at some of the results. In some of these suburbs we were seeing house sales exceeding the median price for the local government area (LGA) by around $150-$200,000.

For a single house, the land price may be lower than that of a dual occupancy site, as you don’t need such a large block (although a larger block will add to the end value in some locations so should be considered). You must find a location where homes are selling at a premium and there is good demand. Then you find a way to build them as cost effectively as possible to create your margin.

You need to be very clever with your design, fittings, decoration and landscaping – all are areas that you can cost effectively add value with.

The key to this strategy working is also location. Find land within a short distance to strong sales references and build something similar. You then have a good idea of what your house should be worth and you can work back from there as you get your construction quotes in.

It’s all in the numbers; if you get the land at a good price, in a good location, with strong comparable sales, and the build cost is right, then there is equity to be created. It won’t work in all areas but it is working in the Hunter and that’s why we’ve just launched our new single house build strategy. This strategy allows clients on a budget to dip their toe into development on a single house build and reap some of the rewards of a larger development project.

For around the same cost of a one bedroom unit in Sydney you can build a four bedroom house in the Hunter. Is that worth thinking about?

Jo Chivers is director of Property Bloom, which manages property development.