Minimise your risks of bad – and high-rise – neighbours when buying property
There’s an old Jewish proverb that simply states “Ask about your neighbours, then buy the house.” It seems sensible enough advice. After all, even in prestigious zones, neighbours can make life heaven or hell, depending on how cordial the relationship is. Yet it seems even with due recognition of the importance of neighbours in daily life, Aussie home buyers spend more time watching the above-named television series than they do investigating a potential property and its neighbourhood surrounds.
A recent survey conducted by St George Bank suggests little more than an hour is spent inspecting a property prior to a home buyer happily signing on the dotted line. Consequently, over 55% of those surveyed reported experiencing problems once they’d moved in – problems ranging from plumbing complaints to insufficient parking, poor TV reception and unsurprisingly close to the top of the list: noisy neighbours.
To be fair, arranging a lengthy private inspection is not always possible due to work hours and family commitments. The majority of buyers are often restricted to weekend open for inspection times, during which the property is decked out in “show home” fashion, hiding the poor paint work or damp patch on the carpet with careful placement of furniture. This is why a building inspection is highly advisable even in the acquisition of new houses.
But what about the neighbours – how do you check the calibre of those living next door or within cooee down the street? It’s not an easy task, and there’s no fool-proof answer. However, from personal experience, spending time walking and assessing the local streets outside of work hours should uncover if there’s a yappy dog or would-be drummer residing close by. Knocking on doors, chatting to a resident while they’re putting out the bins, asking questions, checking if gardens are well attended and calling the council to assess if there are any proposed developments pending can all assist with risk management.
Of course, once you’re in the house, there’s nothing to stop new less than desirable neighbours moving in. However, if you’ve been careful and purchased into a neighbourhood predominantly attracting a similar demographic, the chance of a group of party-loving 20-year-olds renting in a family-oriented suburb should be reduced.
Another aspect affecting the type of neighbours buyers can adopt is the planning zone a residential property falls within. Purchasers are frequently unaware of the zoning around their property at the time of acquisition. They often assume they’re in a residential zone based on street appeal alone. However, business zones and industrial zones can look just as residential in their aspect and under current laws, should the council approve, unsuspecting owners can find themselves located next to a McDonald’s, factory, or worst still, an adult sex shop, rather than the dilapidated house situated there at time of purchase.
This is one reason banks are reluctant to lend on residential property in a business or industrial zones without a healthier-than-usual deposit – a matter that often catches the uneducated buyer off guard. However, all the checks in the world won’t protect a home owner if the movers and shakers in local or state government decide to meddle with current zoning laws – or for that matter, change them all together.
The primary purpose of zoning is to prevent over-development altering the character of a suburb or interfering detrimentally with residents and businesses residing there. Buy in a heritage-protected area, for example, and it’s unlikely you’ll end up with a tower block overshadowing the backyard. However, if you purchase a house situated in a business or Capital City Zone, it’s far more likely a high-rise monstrosity may be constructed next door.
Any change to a property’s zone can have significant consequences on the price and future potential it holds. In Perth, for example, large swathes of land have been re-zoned to allow for greater density in major activity centres. This could mean a house sitting on a block of land with the potential for a two-storey seven-metre-high development could easily become next month’s six-storey unit site! Obviously the affect it has on any area will advantage some and disadvantage others – but at the time of acquisition, none would have been the wiser.
Similar changes have been suggested in Sydney – and the Victorian government is also revising its zoning guidelines. Like Perth, the changes have the potential to affect individual property prices, not to mention the lifestyles of those unfortunate enough to draw the short straw. And the zoning alterations suggested in Melbourne are not by any means subtle. If you’ve ever been to a Melbourne auction and heard it spruiked in the preamble that the property to be sold is in the most desired “residential 1” zoning category, brace yourself! It’s all about to change.
As a brief rundown, the state government aims to delete the nine existing zones and merge them into five categories. Residential zone 1, 2 and 3 will become “Residential Growth Zone, General Residential Zone and Neighbourhood Residential Zone” For each the zone, the density restrictions alter. You can go here to find a rundown of the changes – however, in most instances, planning controls are loser, maximum height restrictions have been removed or increased (with the proviso they can also be exceeded) – and the size of land needed for subdivisions reduced.
While some areas will be protected, don’t be fooled by various articles which claim the changes will increase land values or protect backyards! Even the assertion by Planning Minister Guy that “The Victorian Coalition government's sweeping reform of planning zones, will return certainty to our suburbs and towns and in particular to councils, residents, and the development industry” is broadly misleading.
A close reading of the proposed guidelines for each category leaves a lot to the imagination as far as height limits, subdivisions and facades are concerned. In some cases, it’s not even necessary to specify a future build form. The submissions are wishy washy with statements such as
“higher or lower maximum building height can be set by a council” and
“a permit to exceed any height limit may be granted”.
To be fair – the government is giving the public a right of reply to express opinion – however, who thinks it will listen? The government has made it abundantly clear in its 2030 plans, the idea is to increase density rather than facilitate outer suburban locations with infrastructure.
Maximum height limits for the CBD have already exceeded reasonable levels – with 14,000 apartments due for construction through the course of 2013 in Melbourne alone. However, it’s fair to suggest areas with heritage significance will still be protected from over development. Home buyers and investors should take heed of this before they lock in a purchase.
And while we all understand the need to provide feasible options for a growing population of migrants, you would expect, at the very least, governments would learn from previous planning mishaps and avoid repeating the errors. Melbourne’s Docklands – a suburb built out of high-rise tower blocks – is widely known as a city lacking soul. With “the sky’s the limit” height restrictions and overzealous developers, the suburb has struggled to attract any diversity of resident. There are few family homes and apartment sales have been dominated by the investor sector – many of which remain vacant for much of the year.
Improvements have been made since – however with more high rise currently under construction, any improvements will be limited in what they can achieve. I met a Docklands’ advocate at a recent party I attended. While discussing future development in the suburb, I asked, “What about schools?” “Oh! We conduct many school trips,” he answered. However I wasn’t talking about trips – I was talking about primary and secondary schools – the focus of family and community life. You can build as many parks as you like, however if there’s no one to play on the swings, no children running around playing footy, something’s missing. The soul of any community focuses on the family.
This is why it was disappointing to read this week of another Docklands in the making. One I highlighted months ago as being a potential disaster. And now, it’s coming to fruition – that of “Fishermans Bend.”
Once again the government is altering “capital city zones”, giving developers all but carte blanche to capitalise on high-density tower blocks maximising the residential capacity the land has to offer. However, as evidenced by Docklands, high-rise accommodation does not offer affordable solutions for renters or buyers – or solutions they would necessarily take advantage of even if it did.
In the Docklands development, selling agents were paid high commissions to flog off-the-plan apartments to unwitting investors. This usually came with rental guarantees, which once expired, left the purchasers unable to achieve the same return. Unit growth charts for Docklands read like a day’s trading on the stock exchange, with sharp rises and plummeting dips proving anything but stable capital growth. Averaged out the growth has been little more than 5% per annum, and worst following the GFC – a level currently exceeded by many long-term deposit accounts and a dim shadow of what other properties in Melbourne historically achieve.
How many of these apartments are currently sitting vacant is hard to assess, however SQM has the vacancy rate above 11%. Considering our population growth and previous surge of single-person households, you’d expect these developments to be busting at the seams, however clearly they’re not attracting the level of demand that’s oft been spruiked.
All in all the warning is loud and clear for the home buyer or investor. You can’t avoid the planning changes currently underway, however you can minimise risks when purchasing. Take my advice and inspect the neighbourhood before you inspect the house. Or “love thy neighbour” could present more challenges than you’d expect.
Catherine Cashmore is a market analyst with extensive experience in all aspects relating to property acquisition.