Happy New Year, Happy New LEP

As we moved into the new year of 2012, I found myself celebrating another milestone.  One of the council’s we work under finally gazetted a new LEP - Local Environmental Plan.  Right now, the NSW planning system is undergoing the biggest change in 30 years. The NSW Government is changing the way that LEPs are developed and approved for our communities.  This means many councils are undergoing a change to their LEP.

One of the biggest challenges of a property developer is keeping up with council regulations. 

If you’re thinking of renovating, extending, building new dwellings, demolishing or subdividing you will need to lodge a Development Application - DA with your local council.  But even before you are ready to put your DA together, you must have a good understanding of the council’s Local Environment Plan - LEP.  

Something very important you should ask your council is whether there is a draft LEP in existence. A simple search of their website should tell you what’s in their planning pipeline.

There are no general regulations that apply throughout Australia –so as a developer, you must contact your local council for specific details relating to what you want to do.  DAs allow councils to assess whether your plans are appropriate for the area based on their LEP and DCP – Development Control Plan. 

This brings me to share an ‘interesting’ period we’ve had with several local Hunter councils as they went through the process of introducing new LEPs.

A LEP is a legal instrument that imposes standards to control development. These plans determine the areas in which various types of development can be considered and which areas of open space and environmental sensitivity need to be protected.  These plans can have a profound and lasting impact on local communities.

A LEP generally comprises a written document and accompanying maps. LEPs apply to a particular area, generally the whole, or part of, a local government area.

Most LEPs remain in force until they are amended or repealed by an amending LEP. The process to amend an LEP is massive.  We’ve been waiting for one council to draft and finally implement their LEP for five years!  There were many changes and each time a new edition of the Draft LEP went on exhibition, we had to study it.  Finally, the LEP was gazetted. When the Draft LEP is gazetted, it takes over from the current LEP as the primary environmental planning instrument. 

In the case of our local Hunter council, the new LEP will provide more than 1,000 additional residential lots at eight sites across the LGA – Local Government Area.   In addition the LEP zones new employment land which will encourage job creation in close proximity to the existing centre of town, while protecting the environmental values of the area. 

The LEP also identifies planning controls for a major new town.  For a developer, this is very important information. A whole new town will impact greatly on the economy and the demand and availability of housing, so you can see it’s crucial for you to know of any changes to your council’s planning process.
Importantly we’ve found that as the new LEP comes in there is a big, grey area.  DAs that were submitted prior to the date that the new LEP was gazetted will continue to be assessed under the old LEP and the old DCP, with due consideration of the new LEP.  What the?
This may sound a bit confusing but as a developer it’s your responsibility to get a handle on the requirements of your local council. I’d suggest you use a planning consultant with a strong understanding of your council’s requirements if you don’t have the time. Remember, the planning phase is just one of the many phases you’ll journey through as a developer. It’s a time consuming pursuit but one that can bring many rewards.

Surfs Up in 2012

Personally, I am really bullish on the investment property market for 2012.  Please note my reference to ‘investment’ market as I do see a split between the owner occupier markets and think these may remain subdued or perhaps grow slowly.  Its property investors that will dive into action and stimulate the market into a steady capital growth wave.

Whilst some of the points I base my predictions on relate to the national market, most relate to the Hunter Region of NSW where Property Bloom develops property.  It’s where we focus our research efforts. The Hunter Region has one of Australia’s largest regional populations.  It is also within about a two hour drive from Sydney, so we are not talking boondocks here.  It’s made up of 5 major cities or centres; Newcastle, Cessnock, Lake Macquarie, Maitland and Port Stephens.   However smaller towns like Singleton and Muswellbrook have become major contributors to the region’s economy primarily due to their large coal mining projects.  

Here are some of the facts that I have built my 2012 forecast for the investment property market:

-           Major Banks decide to pass on the full .25% cut last week. According to Westpac’s chief economist, we will see another .50% cut by June 2012. 

-          Tight labour markets in the Hunter Region

-          Federal government funding just announced  in training to increase skilled labour

-          Major regional capital expenditure, particularly resource sector related or transport related initiatives will be a driving force in the Hunter economy over the next few years. Planned expenditure of over $3 billion in the Upper Hunter alone in the areas of mine expansions, rail and wharf investment, on top of a $1.7 billion Hunter Expressway roads project in the Lower Hunter.  These major projects are expected to also flow on to small-medium businesses in the area.

-          Low vacancy rates and still falling, in November we saw a drop of .3% to 1.4% in the Hunter Region and the Sydney Metropolitan area vacancy rate is also just 1.4%.

-          High yields. In most towns we develop in the projects finish with a 7-9% gross yield. 

-          Shortage of housing.  We have seen four declines in five quarters with the Sept ‘11 quarter seeing an 11.5% decline in total new dwelling commencements.

To me these conditions are ripe for investors to take advantage of lower holding costs as interest rates drop.  There is one massive factor that will impact what happens in 2012 and that is consumer sentiment.  With the continued doom and gloom messages coming at us from Europe and other international markets and the dissatisfaction with our political leaders right now, I think this will also impact on consumer and investor confidence. 

 I see a fantastic opportunity for savvy property investors over the next 12 months to take advantage of the current environment and get in early before the mainstream investors hit the market, because when this happens it will increase demand which will result in higher prices and translate into capital growth.  

Let’s take it one step further....by developing property in this environment; you can fast track your portfolio by creating up to three properties from one.  You can create more, but keeping to three or less minimises risk and works within the current lending criteria. Banks will lend on building up to three new dwellings on one title right now.

Developing property is exciting, but if you can develop at the right time when the market is moving into a growth phase, then you will see the real benefits of creating equity through the development process whilst also completing your development in time to catch the next capital growth wave. Happy surfing in 2012.