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SIX Brisbane suburbs have been identified where savvy home hunters can instantly pocket hundreds of thousands of dollars by building rather than buying their dream home.

Buying a knockdown property and rebuilding on the site is emerging as a trend among owner-occupiers wanting to find a home and turn a profit straight away in the current market conditions.

But buyer’s agents warn the strategy could go horribly wrong unless the right locations are chosen.

Streamline Property Buyers managing director Melinda Jennison said the lack of property listings, rise in interstate enquiry and difficulty in finding the right home were contributing to the trend.

Mrs Jennison said she knew of more than 20 sales across six prime suburbs in recent months, where clients had bought a knockdown, demolished it and rebuilt on the site, creating between $100,000 and $530,000 in equity.

In the inner north suburb of Wavell Heights, an owner-occupier recently paid $642,000 for a knockdown at 49 Power Street, spent $650,000 building a new home on the site and ended up with a property worth $1.65 million — giving them $358,000 in instant equity.

The buyer of a knockdown home at 102 Fingal St, Tarragindi, recently pocketed $422,500 in equity after buying the site for $527,500 and paying $650,000 for the build.

“When you actually run the numbers, the tactic makes sense, but location is crucial otherwise you’ll be left out of pocket,” Mrs Jennison said.

“It really is a case of destruction, plus construction, equals profit.”

Mrs Jennison said the key to the strategy’s success was identifying specific suburbs and

individual property characteristics.

“You firstly need to find near-city locations where it’s easy to demolish an existing home and

create a clean slate,” she said.

“But the suburb must also have wide price disparity between new and existing homes,

gentrification, strong family-buyer demand and desirable attributes such as views.

“It’s the magic formula that makes the figures work.”

Mrs Jennison said the COVID-19 pandemic had created ideal conditions for inner-Brisbane home builders.

“Property listings have fallen dramatically in the shadow of the crisis,” she said.

“As such, there’s hot competition among buyers, with high-quality homes being snapped up quickly at surprisingly high prices.”

Mrs Jennison said the COVID crisis had also increased southeast Queensland’s appeal among

southern buyers, and many interstate relocaters would look to embrace this strategy.

“We were seeing strong net interstate migration prior to the crisis,” she said.

“While this momentum has slowed due to border restrictions, there’s no doubt once they’re lifted, huge numbers of southerners will make Brisbane their new home.”

Buyer’s agent and Cohen Handler Queensland general manager Jordan Navybox said he had also noticed an increase in clients looking for post-war homes to demolish so that they could build on the site.

“Definitely more recently because there is such a lack of stock when it comes to the finished product,” Mr Navybox said.

“The reason people are doing it is it’s cheaper to buy a post-war home and build than it is to buy the finished product in certain suburbs.”

Mr Navybox said the most popular suburbs for his clients looking to knockdown and rebuild were Camp Hill, Coorparoo, Bardon and Grange.

“We have so many clients asking for Grange, and when they can’t find what they’re looking for, they move on to Gordon Park,” he said.

But Mr Navybox said the strategy was not for every buyer.

“It’s a time thing,” he said. “You have to rent in the meantime and once you’ve committed to buying the land and building, you’re then paying mortgage repayments on a home you’re not even living in, plus rent.”

He said well-priced post-war homes in city fringe suburbs were also hard to find.

“You want to pay as close to land value as possible,” he said.

Ali and Seamus Kay have just started demolishing a knockdown home they bought offmarket in Gordon Park.

Mrs Kay said they never intended to build, but could not find a home on the market that ticked all their boxes.

“We never would have contemplated in our wildest dreams building new on a block of land in Gordon Park,” Mrs Kay said.

“But definitely this is a much more affordable option for us.

“With what we would have been looking at, we wouldn’t have gotten as much house as we’re getting now, and we’d have had to pay a few thousand more to get what we really wanted. This way, we’re saving money and getting exactly what we want.”

Mrs Kay said the only downside was having to wait up to 12 months for the house to be built.

“But we’re prepared to wait to get the value for money for this, as opposed to settling for something that wasn’t ticking all the boxes,” she said.

Mrs Jennison, who bought the property for the Kays on their behalf, said they would lock in at least $200,000 in equity based on comparative sales in the area.

SIX BRISBANE SUBURBS WHERE YOU SHOULD BUY A KNOCKDOWN

1. Wavell Heights

Just nine kilometres north of Brisbane’s CBD and dominated by homes on big blocks, Wavell Heights appeals to families.

With a median price of $742,500, according to CoreLogic, the suburb has a huge price difference between existing and new homes.

Wavell Heights is also the first suburb north of the CBD with limited numbers of character

protected homes, which means most older dwellings can be knocked down.

2. Seven Hills

With a median value of $943,750, Seven Hills is only five kilometres from the CBD and is the first suburb on the southeast side of town that is not dominated by demolition-protected character residential.

The entry price for an old house in the suburb is about $750,000.

Its small size means supply is limited, which helps keep end values high, and it is also elevated

Price disparity is also significant, making it easier to create instant equity from a new build.

3. Tarragindi

This southside suburb often flies under the statistical radar because it shares a postcode

with Holland Park.

But its big blocks and demolishable housing are presenting opportunities nine kilometres

south of the CBD.

New-build gentrification and proximity to the new metro infrastructure coming to Brisbane is driving up price disparity.

The buy-in price for an older home in Tarragindi is $650,000, providing excellent upside for new builds.

4. Alderley

With a median house price of $850,000, Alderley’s mix of facilities and family-friendly appeal

are key to its new-build potential.

The suburb, just 7km from the CBD, has an array of different sized blocks, solid retail facilities and great public

transport options.

Most properties are not demolition protected.

5. Corinda

Corinda’s elevated streets — some with city views — and scarce character-home protection make it appealing for building new homes.

Demand for the suburb feeds off its highly desirable neighbours of Chelmer, Graceville and

Sherwood, which are areas with predominantly character protected homes.

Blocks of about 600 sqm are achieving prices of about $650,000, but the median value of

homes in the suburb is $850,000.

6. Gordon Park

Gordon Park has proportionally more character housing than the other suburbs, but there

are pockets of demolishable homes with excellent buy/build/sell price disparity.

The suburb is close to infrastructure and services, Kedron Brook, and retail hubs such as Lutwyche shopping centre.

The parkland lifestyle also attracts family buyers, which is bolstering the value of newly built

homes relative to older stock.

(Source: Buyer’s agent Melinda Jennison)

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