‘Changed everything’: stubborn homeowners lose fortune
Some Aussie families in rezoned areas have scored big financial rewards by refusing to sell their homes to developers – with one in Sydney reported to be sitting on a parcel of land now worth about $60m after decades of holding off developers.
But behind the highly publicised homeowner-developer stand-offs is an often brutal reality: the little guy usually loses.
Experts said homeowners who reject multiple offers from developers wanting to make their land part of their new estates rarely get a fairytale ending and many may see their land lose value over time.
Ray White St Marys principal Peter Diamantidis said homeowners in rezoned areas needed to bear in mind that the type of development permitted on their land could change.
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This Glenfield block recently sold $3.56m: experts said prices for the last development blocks were often similar for the first to sell once inflation was factored in.
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“What you can build there today might not be permissible in one year or in five years. In the past, council changed everything. We’ve seen homeowners lose money overnight,” he said.
Mr Diamantidis has sold large blocks in around the coming rail precinct that will connect Western Sydney to the new airport at Badgerys Creek and said owners could “wait too long”.
He pointed to a 2018 change to council rules in the Penrith local government area in Western Sydney, which increased the minimum size and frontage needed for townhouse development approval.
“Suddenly 98 per cent of the land in the area didn’t comply anymore,” Mr Diamanditis said.
“The land got devalued so hard. Blocks that were selling for $1.1m were soon selling for $850,000. Everyone who had wanted to sell got stuck.”
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Homeowners who turn down developers risk being boxed in.
One of the homeowners who has been in the global spotlight due to their refusal to cave to developer offers is the Zammit family in northwest Sydney.
The family have spent years knocking back offers from developers to purchase their 20,000 sqm parcel of land, with some offers coming in at a staggering $50 million-$60 million.
Developers snapped up every other piece of land around them to construct the new The Ponds suburb, with the family watching the property become boxed in by the new housing around them.
Urban Development Institute of Australia’s NSW director Stuart Ayres said these types of occurrences were “extremely rare” and in the majority of cases it did not work out well for the homeowners. There was a risk in turning developers away, he said.
The Zammit family’s home in Quakers Hill. Picture: Channel 7
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“If you don’t want to sell, no one can force you,” he said, adding that those who held off selling with the aim of getting more money down the line rarely got “as big a windfall as people think”.
“You have to consider the time value of money. Often the value, once you account for inflation, is not that different in today’s spending power than it would have been decades ago, but the owners have had to put up with being next to a construction site in all that time.
“But that’s if things work out. The longer time passes, the more risk there is that the development value of the land can diminish.”
COUNCILS TARGET EMPTY BLOCKS
Mr Ayres said large blocks of empty land, surrounded by smaller blocks of newly built houses, can often become a target for new council infrastructure, including roads and water courses.
This could put the homeowners in a position where councils would be permitted to force a sale of land that no longer has as much value to developers.
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Ray White St Marys principal Peter Diamantidis said some homeowners have lost money “overnight” after turning down developers.
“Any normal planning entity would look at that large parcel of land and it becomes the most obvious site for the provision of future services,” Mr Ayres said.
DEVELOPERS LOSE INTEREST
Housing Industry Association NSW director Brad Armitage said developers could lose interest in constructing new homes in many areas if their costs went up.
“The land is just one of many costs,” he said. “The most significant cost is developing the site for housing, adding the roads, the sewers.
“If you hold on too long you come to a point where the price of land passes the tipping point where the project is viable.”
Mr Armitage pointed to a Productivity Commission report on housing challenges, which revealed a typical medium rise apartment in Sydney was no longer feasible to deliver.
“You could have a really expensive block of land that becomes useless,” he said.
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It’s often the first homeowners to sell that get the rewards. This Castle Hill group sale of homeowners sold in 2015 for $20.5m, shortly after the announcement of a new metro station and rezoning in the area.
“In practical terms, developers and investors are looking for a certain level of return. In Sydney we are already seeing developers turning to southeast Queensland, where their returns are better.
“Investors aren’t just going to sit there waiting for the chance to develop your block. They will go to where development is more friendly.”
Mr Armitage said apartment development in areas that had previously been dominated by houses on large blocks could often drastically change areas.
The homeowners who sold early often got better rewards than those who held off many years and watched apartments develop around them, he added.
151-161 Tallawong Road, Rouse Hill, NSW sold for $36m in 2022.
“When rezoning first takes place, owners will do well out of it, but there is no guarantee you will get massive money if you wait longer.
“The reality is that a developer needs a certain level of land to get a precinct going. If they go ahead without you, your block may no longer be suitable.
“If apartments have sprung up around you, your block may become too small for further apartments. From a design perspective, the development value is gone.”
