Perth land undervalued as vendors slow to understand zoning changes

Alistair WalshDecember 7, 2020

Perth developers are taking advantage of vendors who have failed to update their asking prices following planning law changes in WA.

Under laws introduced in August, developers are potentially able to build double the number of units on a site than they were previously.

Vendors in Perth, unaware of the changes, have failed to factor in the additional earning potential of their land and have not updated the price and have recently been warned to ensure they price correctly.

Jake Prout, director of development firm Progressive Developments, says he was able to purchase the land at his latest development for well below market price.

He paid $420,000 for an 868 square metre block of land in Midland, a block he says would likely have been priced at around $550,000 if new zoning laws had been taken into account.

Prout will be building an eight unit apartment block on the site.

“Looking at other development sites you’d be looking at least $80,000 per unit which makes it $550,000 or $600,000,” Prout told Property Observer.

“We bought it with eight units in mind, we knew we would be able to get it through planning. There was another site nearby which went for $365,000 and it was advertised as a potential five unit site. But we had already worked out feasibility and we knew we could get 10 on it.”

Had the zoning changes not come into effect Prout would have been forced to build four town-house or villa style apartments on the site which sell at a higher individual price but less in total.

“We did feasibility study on the four versus the eight and obviously you’ll make a lot more on the eight. In that particular area we don’t think it will support purchases much more than $380,000. If you did four $500,000 townhouses I don’ think you’d make as much money.”

Prout is starting marketing on the project next week through Clarendon Realty’s Ray Conrad.

The first three units will be marketed for around $338,000.

They are being marketed at first home buyers and investors.

He says vendors will cotton on to the new zoning changes soon.

“I think it’s probably fair to say there’s a short window where all of a sudden there is an opportunity to buy well,” he says.

“Over time, people tend to price their land on what it can be redeveloped for. As soon as people realise we can build eight units on this site then blocks of land will go up.”

Alistair Walsh

Deutsche Welle online reporter

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