In Property Development circles, it's basically accepted that a bigger house sells for more. Although you can interpret that to mean extra floor space, which it can, I'm talking more generally. For example, a 3 bedroom house usually sells for more than a 2 bedroom.
Now, I know there are times when the demographics of an area may dictate otherwise, but as a general rule of thumb, it works.
Therefore it's quite logical to think that adding a 2nd storey to the properties in your development means you can add more space and rooms. The obvious conclusion is that it's a good idea because the property will be worth more, and you'll make more profit.
But is that always true?
Let's start at the beginning - the development site. Now, I don't think I need to pretend to have incredible insight if I say that the trend over the last few decades is for blocks of land to be smaller. Definitely a case of stating the obvious.
The whole "quarter acre" vision is long gone in Australia, with most people not that interested in looking after a big block. Families with kids may still want some outdoor space, but even so, they're happy to settle for less.
The only problem is, another common trend is bigger houses. We've added in things like ensuites, media rooms, home office space, a butler's pantry... the list goes on.
So now we have houses that are getting bigger to accommodate all the extra spaces we want, but the land to build the house on is shrinking. Plus there are often open or garden space requirements on the site, creating a situation where a house can only occupy quite a limited percentage of the available space.
Which is why 2-storey homes are becoming standard in many areas of Australia.
Councils love them (mostly!) because they can fit more homes into a development and so collect more rates.
Developers love them because they sell for more.
Buyers love them because they can have all the rooms they want for their stuff and still have some space out the back for a backyard or al fresco area.
Case closed? Not quite.
I'm not denying that everything I've just written is true. But I do want to go back and take a second look from a Property Developer's point of view.
Near the beginning I mentioned demographics, so let's look at that more closely, as it's really important to understand them for your area.
Demographics are a snapshot of the types of people moving to the area, who are the buyers for your product. Now, if the local demographic is families, they may be very keen to snap up a 4 bedroom, 3 bathroom 2-storey home with all the bells and whistles.
But what if the area is attractive to downsizers? Stairs are definitely not on their list of desirable features, and who wants to clean all those extra rooms when your bones are aching? They'd be much happier with something smaller, single level and easy to look after.
Now, one thing you could do if it's an upmarket area where people have cash to splash, is install a lift. Or even design the property so that a lift can be added in the future. Given the trend for 2-storey properties that include a basement car park, lifts are a lot more common than they used to be.
Which all sounds fine, until you think about my next point - building costs. You'll often hear me say "just because it's developable, doesn't mean it's profitable".
So while adding a lift makes a property more appealing to an older demographic, the fact is that it costs money. And that comes out of your profit.
Okay, you're saying, no lift, I get it. The thing is, lifts are very much a luxury item. Whereas right back at the basic level of overall building cost for the property, choosing a 2-storey is going to cost you more.
It takes a while to get your head around this fact. Thinking logically, a house that's 300 square metres is still 300 square metres whether it's spread out across one storey or compacted into two storeys, right?
In fact, it would make sense savings could be made by having everything in a more compact space.
But no matter how logical that conclusion might seem, it's wrong! There are two main reasons why.
First up, engineering. Houses weigh a lot, and when you put half of the house on top of the other half, that weighs twice as much (okay, not exactly, but just go with it!). So the engineering required to ensure the "stuff" that goes on at ground level is sufficient to hold all that weight without the house turning into the Leaning Tower of Pisa, is extensive.
It's also the case that many Councils aren't very keen on "box on box" type dwellings. By that I mean a dwelling where the external walls run in a straight line from top to bottom. While extra engineering might be required, it's reasonably straightforward to calculate the stresses involved.
No, more and more Councils are pushing for upper storey "articulation" to reduce the bulk of 2-storey dwellings. This means that the upper storey is slightly smaller than the one below, so you don't end up with one flat wall.
Other designs incorporate cantilevered balconies that extend out from the dwelling. Great for lifestyle, but imagine how much MORE time is required to work out all the engineering requirements. Time is money!+
The second big reason - building costs. The slab will need to be more expensive to allow for the extra weight. The lower storey needs to hold up the top storey, so will have to be built to a higher standard. Pipes have further to travel to reach the ground. And the cost of scaffolding - ouch!
Back to reality. As I said earlier, with smaller lot sizes, going to a second storey is almost unavoidable in many areas. Nevertheless, it's important to always stick by the concept of finding the highest and best use for the property - involving the least amount of time, the least hassle, and resulting in the most profit.
And highest doesn't always have to mean 2-storeys! Do your numbers, because you might just find that the cost of going to 2-storeys isn't rewarded by a big enough gain in the resale price to justify the expense.
Now, I know there are times when the demographics of an area may dictate otherwise, but as a general rule of thumb, it works.
Therefore it's quite logical to think that adding a 2nd storey to the properties in your development means you can add more space and rooms. The obvious conclusion is that it's a good idea because the property will be worth more, and you'll make more profit.
But is that always true?
Let's start at the beginning - the development site. Now, I don't think I need to pretend to have incredible insight if I say that the trend over the last few decades is for blocks of land to be smaller. Definitely a case of stating the obvious.
The whole "quarter acre" vision is long gone in Australia, with most people not that interested in looking after a big block. Families with kids may still want some outdoor space, but even so, they're happy to settle for less.
The only problem is, another common trend is bigger houses. We've added in things like ensuites, media rooms, home office space, a butler's pantry... the list goes on.
So now we have houses that are getting bigger to accommodate all the extra spaces we want, but the land to build the house on is shrinking. Plus there are often open or garden space requirements on the site, creating a situation where a house can only occupy quite a limited percentage of the available space.
Which is why 2-storey homes are becoming standard in many areas of Australia.
Councils love them (mostly!) because they can fit more homes into a development and so collect more rates.
Developers love them because they sell for more.
Buyers love them because they can have all the rooms they want for their stuff and still have some space out the back for a backyard or al fresco area.
Case closed? Not quite.
I'm not denying that everything I've just written is true. But I do want to go back and take a second look from a Property Developer's point of view.
Near the beginning I mentioned demographics, so let's look at that more closely, as it's really important to understand them for your area.
Demographics are a snapshot of the types of people moving to the area, who are the buyers for your product. Now, if the local demographic is families, they may be very keen to snap up a 4 bedroom, 3 bathroom 2-storey home with all the bells and whistles.
But what if the area is attractive to downsizers? Stairs are definitely not on their list of desirable features, and who wants to clean all those extra rooms when your bones are aching? They'd be much happier with something smaller, single level and easy to look after.
Now, one thing you could do if it's an upmarket area where people have cash to splash, is install a lift. Or even design the property so that a lift can be added in the future. Given the trend for 2-storey properties that include a basement car park, lifts are a lot more common than they used to be.
Which all sounds fine, until you think about my next point - building costs. You'll often hear me say "just because it's developable, doesn't mean it's profitable".
So while adding a lift makes a property more appealing to an older demographic, the fact is that it costs money. And that comes out of your profit.
Okay, you're saying, no lift, I get it. The thing is, lifts are very much a luxury item. Whereas right back at the basic level of overall building cost for the property, choosing a 2-storey is going to cost you more.
It takes a while to get your head around this fact. Thinking logically, a house that's 300 square metres is still 300 square metres whether it's spread out across one storey or compacted into two storeys, right?
In fact, it would make sense savings could be made by having everything in a more compact space.
But no matter how logical that conclusion might seem, it's wrong! There are two main reasons why.
First up, engineering. Houses weigh a lot, and when you put half of the house on top of the other half, that weighs twice as much (okay, not exactly, but just go with it!). So the engineering required to ensure the "stuff" that goes on at ground level is sufficient to hold all that weight without the house turning into the Leaning Tower of Pisa, is extensive.
It's also the case that many Councils aren't very keen on "box on box" type dwellings. By that I mean a dwelling where the external walls run in a straight line from top to bottom. While extra engineering might be required, it's reasonably straightforward to calculate the stresses involved.
No, more and more Councils are pushing for upper storey "articulation" to reduce the bulk of 2-storey dwellings. This means that the upper storey is slightly smaller than the one below, so you don't end up with one flat wall.
Other designs incorporate cantilevered balconies that extend out from the dwelling. Great for lifestyle, but imagine how much MORE time is required to work out all the engineering requirements. Time is money!+
The second big reason - building costs. The slab will need to be more expensive to allow for the extra weight. The lower storey needs to hold up the top storey, so will have to be built to a higher standard. Pipes have further to travel to reach the ground. And the cost of scaffolding - ouch!
Back to reality. As I said earlier, with smaller lot sizes, going to a second storey is almost unavoidable in many areas. Nevertheless, it's important to always stick by the concept of finding the highest and best use for the property - involving the least amount of time, the least hassle, and resulting in the most profit.
And highest doesn't always have to mean 2-storeys! Do your numbers, because you might just find that the cost of going to 2-storeys isn't rewarded by a big enough gain in the resale price to justify the expense.
