Choosing the location of a property development is one of the most important steps. The success and profitability of the project is dependent upon the development site that is chosen.
Here’s a general overview of the process we use when choosing a development site.
Firstly, we look at macro-level factors to decide on a city. We look out for indicators of future population growth (such as net migration), planned infrastructure upgrades, current and planned amenities, and new employment hubs. These factors influence which locations are desirable, and thus which locations are likely to grow in price.
We then repeat this process, zooming in further each time. We begin by looking at cities. Then we focus on regions within that city. Then individual suburbs. And then even individual streets.
As we zoom in, the factors get more specific. At the city level, we’re looking for things like Melbourne’s $11 billion Metro Tunnel project or Brisbane’s net migration of 1.6% in 2016-17. By the end, key factors might be the walking distance to the nearest train station or that a nearby intersection is being upgraded.
This process allows us to build a shortlist of areas that are suitable for a development site.
Next, we keep an eye out for properties up for sale within those shortlisted suburbs. When we locate a potential development site, we undertake a feasibility study. We take into consideration the size of the lot, which Planning Zone/s it falls within, and Council requirements to receive permits.
We use this information to create a preliminary plan exploring how the land might be used. Some sites are suitable for thin, but tall townhouses, others must be low and wide and so are suitable for house and land packages. Some sites, such as our Epoch development, may involve the use of pre-existing properties. This is where we create an optimised plan that best utilises the site to deliver the highest sale price.
We calculate the cost of purchasing the development site plus the costs required to build, and compare it against the anticipated profit. By evaluating the historical sales prices of similar properties in the area and taking into consideration the growth rate of the area, we can predict a range of what the properties should sell for by the time they are complete.
If the feasibility study indicates that the development site will yield an acceptable profit margin, we pursue the project. If the project is too risky or the margins are too small, we pass on the development site and keep searching.