Be wary of DA-approved sites on the market

I used to get very excited when an agent called me to say: ”Jo, I’ve got a great DA-approved site coming up...”   My little heart would pound as I’d eagerly keep checking my emails for the plans and consent to come through.

As soon as they did, I’d open the consent file first and scan the conditions. Any weird and wonderful requests would jump out at me like, “the developer shall construct kerb and guttering, construct and gravel the road shoulder, place a two coat hot bitumen seal to road shoulder.” That’s a really bad one.  It could mean up to 50 lineal metres for kerbing plus road works!  This condition really gets up my nose as the council is basically offloading its road cost to us.

Next, I’ll scan to the council contribution condition, the Section 94 as it’s called in NSW.  This can vary greatly from council to council and sometimes it’s reasonable, but mostly it’s highly unreasonable.  All these conditions need to be allowed for and are on top of the construction costs.  And, they won’t add any value to the project.

Once satisfied with the consent, I’d close that pdf and venture onto the others.

Usually the files I receive of plans are bad scans that the agent has tried to do off the large format plans he/she’s been mailed by the vendor.  I can just picture the agent trying to fit the big plans onto the scanner, capturing the vital bits.   If I’m lucky enough to make out the designer at the bottom, I’ll pick up the phone and call the agent to discuss the plans and get a decent lot sent over; in particular I’m looking for the stamped plans. If they are not stamped then they may not be the final plans and I could be wasting my time.

When I have a decent set of plans to review, the first thing I look for is the fall on the block.  Is it a flat block or are we going to need lots of site works and retaining?  Then my eyes would scan over the floor plan, and then skip down to the bottom of the plan where they usually mark up the gross floor areas.  Are the villas big enough?  Are they too big?  I’d check the site plan and look for the little compass rose which will tell me the aspect of living spaces.  North facing is good.  On first glance, most plans may look OK.

Then I’d forward all the details I’ve been able to find onto my builder for an estimate.

In fact, this is exactly what happened this week as I looked at a DA-approved dual-occupancy site.  Then came the call from the builder: ”Jo, I’ve got the cost in,” he’d explain, and I’d hold my breath with my analysis spreadsheet open on my computer, waiting, ready to drop in the number, the magic number.  Bang, there it is, the moment of glory ... or defeat.

Today it was a big noooooo that echoed through my mind (and my office) as I watched the bottom line, the most important line of the spreadsheet, turn red.  The bottom line of my spreadsheet shows the estimated equity that could be created for my clients from the development.  Red is not good.  This DA-approved site was overpriced and been ill-designed. It simply did not stack up. The designer had created a plan that was unfeasible to build.

After a few curses, I return my focus to finding a raw site, one that we can work on from the beginning to get the best results from.

As a developer, it’s important to cross-check the cost of your design before you lodge your DA. Sounds straightforward right?  But most DA-approved sites I come across are on the market for one reason.  They don’t work.

Jo Chivers is director of Property Bloom, which manages property development.