Pamela is part of a $55m mega-lot – but she’s not smiling

Pamela Massie Greene is one of four Rose Bay home owners who recently banded together to form a mega-lot that has sold to a developer for almost $55 million.

But she’s not happy about it.

It’s not about the money. Massie Greene felt like she had had no choice but to sell her home of the past 26 years, given her sunny backyard is set to be built out by a block of apartments over the back fence.

“What’s happening here is an absolute disgrace,” said the long-time local. “This was the best street in Rose Bay, and it’s all going to be handed over to developers to be turned into Lego blocks with none of its original character.”

Massie Greene will move to an apartment in Vaucluse, long before the mega-lot is due to settle in 18 months, but she fears for the area given the loss of trees and the traffic congestion she expects will follow the construction of what is slated to be hundreds of apartments.

Across town, Marrickville resident Greg Cheetham isn’t tempted by developers offering to double his home’s value after a rezoning.

“We don’t want our house to be part of a 15-storey development, but we also don’t want to be the hold-out among our neighbours. We wouldn’t do that to them, but we’d rather not have to sell at all,” said the 66-year-old Cheetham.

Complicating matters for Cheetham and his wife Lindy Pollock is the legacy that selling up would leave on the heritage of the neighbourhood and homeowners across the road who haven’t been rezoned.

Their home is included as a key site in the Inner West Council’s Fairer Futures plan, backed by the Labor-dominated council to make room for 30,000 extra homes.

It has effectively rezoned Cheetham’s home of the past 30 years from low density to R4 high density, and incurred a 36 per cent increase in annual rates.

The state government’s planning laws – best known by their acronyms LMR (low- to mid-rise development), TOD (transport-oriented development) and HDA (Housing Delivery Authority) – are aimed at opening bastions of low-density living to make way for 377,000 more homes.

While homeowners weigh up whether to sell or stay, Planning Minister Paul Scully said his government didn’t have that choice. “We have to build more homes,” he said.

“For too long, we have not been building enough homes in NSW and this has led to Sydney becoming the second-least affordable city on the planet. Twice as many young people are leaving NSW as are arriving. We couldn’t keep doing the same thing we have done for years and expect a different outcome.”

In the nine months since the LMR housing policy was launched, there have been more than $1 billion in land transactions in 171 designated areas.

Many of those homes are expected to be built in local government areas like Mosman and Woollahra, where developers are keen to capitalise on high-end values and the fact that 30 per cent or more of housing is now covered by the various rezoning rules.

In Rose Bay, eight mega-lots of more than 30 houses and two blocks of apartments have sold in recent months to developers for an estimated $500 million. A handful more are in due diligence.

“Rose Bay will become a new, village-like version of Bondi Junction,” said Josh Punin, of Biller Projects.

Local Liberal MP Kellie Sloane said she had heard from a lot of Rose Bay residents saying they didn’t know whether they should sell their homes or stay put. “It seems like this arbitrary approach to planning here where there’s this desperate drawing of circles on maps,” she said.

Among recent sites that have been pegged for redevelopment in Mosman are a row of five houses on Awaba Street, for which Metis Developments has agreed to a total price of $40 million, and another five houses on Balmoral slopes optioned to the James Packer-backed Time & Place development company for an estimated $120 million to make way for 60 apartments.

“A lot of people will make a lot of money from development sites that the government has rezoned or will rezone, but for those left behind, their lives are going to be a misery,” said Woollahra councillor Mary-Lou Jarvis. “It’s setting neighbour against neighbour as one looks to sell out and the other is faced with being built out.”

It’s a familiar story to Professor Simon Pinnegar, of the UNSW School of Built Environment, and co-author of the Reassembling the City research project.

“The story of mega-lot sales tends to always start and end with a group of neighbours who band together to sell, and are delighted that they’ve won the lottery in terms of sale price. But we didn’t hear a lot of those stories,” said Pinnegar.

“In reality, it is usually a long, hard slog in which neighbours might fall out, questions are often raised about the leadership and trust is lost in the group.”

Options, options

While the intention of the housing reforms is to stimulate the construction of more apartments, they are yet to materialise.

Australian Bureau of Statistics figures reveal NSW led a 6 per cent drop nationwide in the number of dwellings approved for construction in August.

“Feasibility is a fundamental problem. High construction costs, stretched labour capacity and tight lending conditions mean many projects that might make sense on paper can’t yet proceed in practice,” said Property Council of Australia NSW executive director Katie Stevenson.

“Developers are ready to deliver and are backing the state government’s reform agenda, but the economics are still extremely challenging.”

The Agency site acquisitions specialist Greg Golfin said in the two years since TOD was flagged, the industry had become awash with speculators shopping for options.

It isn’t just mega-lots – single houses on a large block will do.

In Rose Bay, a house on Ian Street set on almost 2000 square metres, owned by the Eftimiou family, has a put and call option on title for a $50 million sale based on a deposit of about 2.5 per cent to development company Positive Investment Enterprise.

In Darling Point, the mansion of businesswoman Virginia Nemeth has an option from Knox Group in a deal worth a potential $42 million.

“I predict a lot of these supposed super sites will never go ahead,” said Sotheby’s Michael Pallier. “The amounts being promised don’t stack up, and owners are signing up to sell the option on their house for only 2.5 or 5 per cent over two years because they’re happy to take the deposit and sit on it.”

In Woollahra, the streets around a proposed railway station are yet to be rezoned to make way for 10,000 homes, but that hasn’t deterred prospectors.

Within weeks of the announcement, locals like magazine publisher Michael Downs were inundated by agents and developers hoping to negotiate an option on their homes. An initial option fee of $5000 was soon increased to $50,000.

“It’s not worth the paper it’s printed on,” said Downs.

“People are just hedging their bets. They’re trying to lock in these deals for a few thousand dollars, but then you are locked into that deal for two to three years, so you’d have to be a fool to sign one.”

Downs will be very keen to hear from developers once he knows what the new zoning rules will be.

“Obviously, I’m hoping the development does come through because it all increases the value of my land,” he said. “Call me greedy, but I’ll take the cash. I’ll take the money and run.”

He’d better hurry. Jones Lang LaSalle director in capital markets Harry Sullivan said the market for site acquisitions across Sydney had already contracted since its peak in February, when some developers were being presented with 15 to 20 site amalgamation opportunities a week.

“As more of these sites have come up, developers are more cautious about what they’re spending, and that has seen prices tempered.”

Now, proposed mega-lots are going unsold. On Mosman’s Cowles Road, four mega-lots that had been listed this year in the tens of millions of dollars are either still for sale or no longer on offer.

Nor does being a part of a mega-lot automatically increase the value of a property. In Marrickville, a proposal was recently put together to assess the value of 15 houses on Cavey, Calvert and O’Hara streets if sold in one lot.

In the prospectus put together by Colliers, the site was given an estimated value of $45 million.

It was a disappointing sum for many homeowners, because smaller four-bedroom semis were valued as low as $1.65 million to $1.8 million, well below the suburb’s $2.06 million median house price.

The site doesn’t fall within council’s Fairer Futures plan, so homeowners would be better off selling individually.

Dulwich Hill’s grand design

Even once an option is agreed, not everyone comes out a winner.

In Dulwich Hill, three homeowners on a combined 1800 square metres backing onto a greenway corridor joined in 2017 to sell as one job lot to Novati Constructions boss Marco Novati.

At the time, Novati’s Castle Hill redevelopment of a $42 million site owned by 11 homeowners had been knocked back by council, and the Dulwich Hill site may have looked like a better deal, if a smaller one.

Novati set up a shell company to buy the three houses, each on an option fee of about $150,000 over three years, given an ultimate purchase price of more than $14 million. Two of the houses signed on, but a third house owned by Bruce and Karla Allan had different contractual terms.

The Allans agreed to a $3.5 million deal, of which $1.5 million would be vendor finance to be paid back within five years on 5 per cent interest a year, or the balance deducted from the cost of a four-bedroom penthouse in the development.

Three months after Novati purchased the Allans’ home, and took an option over the neighbouring houses, he resigned as a director of the company, replaced by Kobe Yuxiang Tang, a mortgage broker and former director of Henbon Australia, of Chinese development giant Henbon Tianfu Group.

Seven years later, the Allans’ former home has long since been resold by the shell company for $2.1 million, and they are yet to be paid back on their loan, prompting the Allans to launch legal proceedings in the Supreme Court.

The Allans say that given no development application was lodged, they never had any hope of buying back into their neighbourhood once it was developed.

Novati said he was obliged to guarantee the loan only if the requisite approvals were granted, and he said a deed of release had been signed releasing him as guarantor of the loan.

The dispute is set to return to court on October 28 ahead of a hearing date.

Meanwhile, one of the Allans’ former neighbours is relieved they never sold, and they are happy to have pocketed the option fee for their efforts.

The other neighbour, Gail Wassell, regrets it never eventuated. She would have liked to leave.

She hasn’t given up hope that a developer will come knocking again.

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