Sydney neighbours are banding together to sell land directly to developers and commercial agents, rather than selling their homes individually to local real estate agents, meaning a price share slump for the real estate agents and astounding offers for the sellers.
One of the perpetrating suburbs at the moment is Castle Hill, which was revealed to have an enormous sector of its residents band together in 2016 to offer their homes up as a ‘megalot’ to developers in hope for millions in return. There is, however doubt surrounding the sellability of such an expensively large piece of land. Some Castle Hill house owners are rejecting the money altogether, in favour of keeping their beloved living space.
In August 2016, Domain reported that almost 90 homeowners in Castle Hill had joined the ‘megalot’ which would sell for approximately 350 million dollars altogether, three and a half times the 25 homeowners that were in the pact in May the same year had expected to sell for: 100 million dollars, as reported by The Sydney Morning Herald. This would mean that each seller would receive about 4 million dollars, 4 times the median house price for the area. Motives leading to the big decision include the proximity to the Castle Hill Metro train station development and NSW Government’s Urban Activation Precinct Plan for Sydney Metro Northwest.
The drop in listings in Castle Hill has had an effect on the success of real estate agents for the area, John McGrath blaming his company’s financial issues on Castle Hill and other nearby areas belonging to Mcgrath’s Smollen Group such as Epping on this decline, caused by increasing popularity of ‘megalot’ plans within those neighbourhoods specifically.
Although JLL’s head of metropolitan sales, Sam Brewer, had endorsed the idea of a megalot in it’s early May stages, confident about its potential for success, some doubts arose in August, when the group was more than triple the size. Savills Sydney’s residential site sales director Stuart Cox said that the area would be far too big to afford for development and that the sellers as a group were “really limiting the buying pool”, as a more popular area size to develop was that of 5 to 10 houses and it would not be efficient for developers to have to work with so many individual, single dwelling houses.
Cox said he believed that the 9 hectare space could take six to eight stages to build, which he did not believe would be considered worth the 350 million dollars to be spent on attaining the land. managing director of CBRE Western Sydney Frank Oliveri supported this notion, suggesting that “generally getting all owners on the same commercial terms at the same price is somewhat difficult” and is another concern for the ‘megalot’ group. Oliveri also mentioned the risk of developers attempting to buy a block of land before it has been rezoned. Without the promise of approval, the developers may see trouble and pull out and the sellers may end up trapped by contract with the developer without knowing if the developer will even be able to finish the project.
The large scale amalgamation of 90 could not encompass every house in close proximity to the train station development as some had their own valid reasons to want to stay. Outside of the group’s plan, developers offered a woman in her eighties called Ruth a 26 million dollars for her land but were turned down time after time as she cherished her Castle Hill home far too much to let it go, no matter the price they offered, saying “I don’t care if they offer me 50 million.” Ray White Castle Hill agent Kieron Stedman said that Ruth “probably has the highest-value property in Castle Hill” because her site could likely provide developable space for buildings twice the density of neighbouring blocks that had already sold. Ruth admitted that because she was not selling like most of her neighbours were, it might become a lonely area, but she said she wouldn’t mind as it would still be such a significant site in relation to her memories of living there.
The Castle Hill ‘megalot’ deal took 12 months to arrange before being offered to developers in the second half of 2016, the homeowners having signed a Memorandum of Understanding (MOU), which Oliveri said would “give a bottom line for the selling price, a bottom deposit and also suggest that longest settlement they’re willing to accept.” Real estate agents will suffer but the advantage will be in the hands of those who are selling for four times what they might otherwise achieve, while others who would prefer to stay, like Ruth, will remain admirably strong in keeping their property, despite the financial advice they have been given, which has not accounted for each individual’s personal values.