Ep 75. Does Zoning Affect Property Value? Why Home Buyers Need an Investor Hat
Does zoning affect property value? More than most owner-occupiers expect. I always tell home buyers to put their investor hat on, and nowhere does that matter more than density: what your council, or the state government, has zoned to happen around the property you're about to buy.
In this episode I walk through how local councils zone land for houses, duplexes or apartments, and what happens when the state government overrides that zoning to push higher density into an area, like an R4 designation. I cover what a tower going up next door does to your day-to-day and your resale, why a thinning buyer pool from too much similar stock nearby can hold back capital growth, and why buying into an already high-density area can work in your favour. I also get into why brand new builds tend to sit flat for the first five to seven years, why that matters if you might sell inside that window once stamp duty and moving costs are counted, and the extra levies that come with lifts, pools and gyms.
You make your money when you buy. Asset selection is everything, and density is the piece that's easiest to miss.
Chapters
0:00 Why density matters when you buy
0:38 Putting your investor hat on for your own home
2:35 Zoning and what's changing around you
3:50 How density affects value and desirability
4:55 More supply, thinner buyer pool
6:32 Buying where density is already high
7:16 New developments and the first 5 to 7 years
7:50 How long will this property suit you?
8:50 When a low density area changes
Listener FAQs
Does zoning affect property value?
Yes. Your council decides whether the blocks around you can hold a house, a duplex or apartments up to a set height, and the state government can override that. If higher density arrives on your street, you get years of construction and then a lot more similar stock on the market when you sell. Less scarcity means buyers have options, and they're less likely to pay a premium for yours.
What does an R4 zoning designation mean for a property?
R4 is a high density residential zoning. Over the last year the state government has been overruling local councils and applying it to areas that were low or medium density, which opens them up to apartment developments where houses were the norm.
Does buying into an already high-density area hurt capital growth?
Not necessarily. It usually means more options and less pressure to pay a premium as a buyer. The trade-off is that if a lot of similar stock is likely to come onto the market again down the track, your buyer pool thins out when it's your turn to sell.
Should I buy a brand new apartment if I might sell in a few years?
Be careful. In my experience very few properties make money in the first five to seven years after development, a bit like driving a new car off the forecourt. If you sell inside that window, stamp duty, moving costs and your solicitor can swallow whatever growth there was, so think about how long the property will actually suit you before you buy.
Why are strata levies often higher in newer apartment buildings?
A new building has to build up its capital works and admin funds from scratch, and extras like a pool, gym or lift add ongoing maintenance costs on top of that.
Want to go deeper? My earlier episodes on strata report reviews and the risks of buying new and off the plan cover the research side. Questions for a future episode: hello@buyyourside.com.au
Buy Your Side is my podcast about buying property in Sydney. I'm an independent buyers agent, I work buy-side only, and I never act for vendors.
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Speakers in Today's Episode
Michelle May, Michelle May Buyers Agents
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Transcript
Michelle May
Hi and welcome to another episode of the Buy Your Side Podcast, the property podcast that helps you make smarter property buying decisions. Brought to you this time from a casual sofa in the Hunter Valley, and every year at the beginning of December, I go away for a couple of days to take myself from the day-to-day business of running the business and working with my clients to take a few days out to focus on what I want to achieve for the year ahead, make plans, and to write it all down. Whilst I'm here, I thought, let's create a few episodes with you guys as well. Because I know you've been patient, waiting for new episodes to come out this year in particular, because I have been a little absent, because we've just been so incredibly busy. My team has grown as well. So I wanted to make sure that everyone was looked after. I just haven't had as much time to focus on the podcast. So my apologies, I promise I will do better in 2026.
To that end, please send me questions as well, because I'm always wanting to hear from you guys. And if I can answer any of your queries, then, you know, this is what this podcast is for. Now, if you're new here and you're going, who is this woman sitting on this lounge? My name is Michelle May and I am the principal of Michelle May Buyers Agents here in Sydney and my team and I buy property for clients, both owner-occupiers and investors. Now, this episode, I want to focus on you as an owner-occupier and why it's really important to put that investor hat on when you are looking to buy your own home. In particular, when thinking about density.
So we all know that in Australia, the property market is nuts, right? To varying degrees, no matter where you are in this country, there is not enough supply, there's too much demand, and whether it's buying or renting, it's a struggle out there. Particularly when you're buying, you get let up in garden paths, and you may well end up buying a dog without realising it. Most people don't really realise it until they sell, because they struggle to sell, struggle to achieve the price that they're looking for. So it is a truism in real estate that you make your money when you buy your property. Your asset selection is everything. So as an owner-occupier, I know that obviously the number one aim is to get yourself a roof over your head and get out of that rental insecurity and have a secure place to go home and paint your walls purple with yellow dots if that's what you want, right? But you cannot forget this little bit of information which is in Australia, more so than any other country I've ever lived in, so, so important because in Australia, the price of properties is so high and it is vital that you understand that your home is also your biggest investment, most likely ever.
So you need to pick an asset that is going to perform well so that you can take that next step on the property ladder. So therefore, your due diligence needs to be very well executed and detailed so that you leave no stone unturned, and you're not up for any surprises, once you purchase them, when it comes to selling, and also your enjoyment of living there. It's crucial that you do your research before you sign on the dotted line.
So bearing that in mind, you need to pay some attention to density in the area that you're looking to purchase in. What I mean by that is the surrounding area of where you're buying in or the building that you're buying in or the house that you're buying in, they all have different zonings, right? So local local councils determine that on certain blocks of lands you can only build a house or you can build duplexes or you can build apartments in up to a certain number of stories high and in higher density areas like our fall zoning, for example, you can go high sometimes up to 23 meters, etc however before you sign on the dotted line, even if you're buying a house, you need to understand what the surrounding area is doing, or currently is already and particularly in the last year, we've had these announcements, obviously, that Australia needs to build more homes, and so that the state governments have been overruling local councils when it comes to zoning. What previously would have been a low density or medium density area, the state government has come in and said, local council, you're not building enough, we are going to now designate this an R4 area. Now, why is that important?
It is important because it is going to impact your property value, the desirability of your property moving forward, right? Not to mention that if it's surrounding you, it's also going to impact your day-to-day for quite a while to come once these developers come in, take up the land, and start building, right? It's a trend now, subterranean, subterranean garaging, you know, they're going to be excavating several stories onto the ground, there's going to be drilling, going be noise, going be dust, etc. There's traffic stops and also this is going to take a considerable period of time, right? So this is important to understand because if you thought you had bought in a quiet little residential street unit or house and then all of a sudden Meriton or some other big developer moves in and they're going to be building a tower, this is going to change the landscape of that street and your suburb.
What it is going to do is it’s going to increase the number of people that are moving in and it's also going to increase the number of properties that are going to be for sale in the future right so when it comes to capital growth, density is one of the factors of good capital growth above the median capital growth. There is a sense of scarcity so when it comes to selling at any point in time, there is going to be numerous properties of the same style and type as yours on the market, that means that your buyer pool is going to be thinned out because these buyers are going to hop from your inspection to the other inspection to the other inspection and compare yours to the other ones, right? So they're not going to feel the pressure of the FOMO of missing out because they know there are other options currently on the market, and it's likely that other similar options are going to be on the market at the same time in the future; therefore, if they miss out on yours, it's not a big deal. They're also not going to want to pay a premium so much for yours because they might pick up something cheaper with a kitchen that just needs renovating, etc, so they're going to be like, well, this is our limit, and we'll walk away if it goes beyond that. This is why it's really important to understand the current landscape where your property sits, whether it's a unit or a house or anything in between, but also what the future of that landscape is going to look like, because I can tell you that it will impact your property in one shape, way or form.
Now, if you are currently looking to buy or thinking about looking to buy in those areas that are already higher density currently, this is something to be aware of, right? So you probably have an easier time because there are more options for you on the table to purchase, which is great. I mean, because it's damn hard to find a property that A, you like and can afford in a reasonable period of time.
Most people that we end up working with have been trying to purchase for around at least a year or two, if not longer. With higher density comes more options, which is an advantage to you; that is great. And you're also probably not going to have to pay your premium in that sense, but what that then also means, on the flip side of what I've just discussed, is if you are buying into a higher density area, you need to be well aware that if it is in that first period of time when that property has been built, so in the first five to seven years from development, from off the plan, very few properties make money because it's the same as buying a new car off the forecourt of a Volkswagen dealer.
As soon as you drive off the forecourt, you have lost a couple of grand, if not more, right? You pay for the privilege of new or nearly new so if you are looking into your future, you've got to look at your brief very carefully. Why are you looking to purchase? Why do you particularly want to purchase in this area? And how long do you think that this property is going to suit your needs? Because if that is a shorter period of time, less than say five to seven years, you need to be very careful with that because you may end up in a situation where you may not recoup your costs when you think about stamp duty, moving and your solicitor, because whatever little capital growth there was in that period of time may be absolved by those costs, right? Because with your next property, you may not have an exemption as a first home buyer again, and you will be hit with stamp duty and all these other costs that are involved. So higher density mode certainly serves its purpose. You know, we need homes for people to live in, but as an owner-occupier, I can't stress enough that you really got to think about the investment side of things, right? So if you're purchasing in a lower density area, be mindful that it may turn into a higher density area and how is that going to impact your purchase, but if you're buying into a higher density area, be careful there that there may be, there will be most definitely a period of stagnation where the prices aren't gonna grow at the same rate as other areas that aren't as as high density.
Now, I think I've spoken about this before with also the newer of the plan properties. They tend to come with higher costs in the sense that they need to build up their capital work working fund and their admin funds because, you know, it's a new bunch of people living together in this new building. There may be more amenities that come with higher maintenance costs. I'm thinking, pools, gyms, lifts, so the levies may be higher there as well. So make sure that you are aware of all the costs that come with higher-density living. I mean, it's fantastic having a new apartment, shiny and new, I get it. Just be mindful that there will be, let's say, limited growth for a certain period of time.
I mean, the advantage is that if it's all built, there won't be any surprises and your view is going to be safeguarded, right? So what it is, what you buy is what you get, but you need to be mindful that there are some negatives to that as well. Now, if you want to investigate how to research a new property more thoroughly, look at my previous episodes as well, where we go through strata report review and why buying new and off the plan is riskier, etc but I hope this helps.
Do not miss the density piece when it comes to your property search. It's crucial.
If you liked this episode, please give me a follow, share with your friends and family. They may find it helpful as well. I'm on Facebook Instagram TikTok and all of those platforms, and obviously my website as well. Hit me up on hello@buyyourside.com.au.
I look forward to receiving your questions. I am working on something new for the new year, 2026. I've got plans to help you even more so and get you ready for your property purchase. So stay tuned on that. I can't quite reveal what it is, that's one of the reasons I'm working away from home as well, but thank you for listening and until next time.