As of February 28, this year, the New South Wales State Government made what could be considered one of the biggest changes that could affect the property market. Today I’m going to go through how these changes could affect you, where these changes come into force, should you buy, should you sell, what the coming election will do to these changes plus so much more.

So, we have a lot to unpack. But before I do, if you’re new to me, hi, I’m Niro. I talk about all things related to the Australian property market and the economy. So, if that is of interest, hit that subscribe button. Apartment buildings of up to six storeys, terraces and townhouses will be encouraged around 171 suburbs in New South Wales, with Sydney’s North Shore including Willoughby, Mosman, Roseville and Pimble most affected by the changes. The Minsk government’s new policy aims to deliver 112,000 new homes by overriding council restrictions to allow terraces, townhouses and low-rise residential flats in areas currently zoned R1 or R2 and medium rise apartments on R3 and R4 zoned land within 800 metres or 10 minutes walk of town centres and stations.

Now, while 112,000 new homes sounds like a high number, it’s actually nowhere near enough. Over five years, the reforms will provide just one third of NSW’s share of the Albanese government’s target of building 1.2 million homes by 2029, with Australia’s biggest state Aiming to build 377,000 homes in that time.

So, we need to build 377,000 homes. We’re only building 112,000 homes. So, what this means is that on a macro level, New South Wales will still have an undersupply of properties. However, when we look at on a micro level basis, which means looking at where these changes are actually going to come into force, are they a good thing or are they a bad thing?

Well, as always, it just depends on where you sit. If you’re someone who’s thinking about buying a property in these areas where they’re looking to increase supply, and if your aim is capital growth. Then you might want to reconsider because remember capital growth comes from demand being higher than supply and if in these areas they end up building so many properties and the key phrase there is if they end up building as many properties as the men’s government is planning on doing so and I’ll share with you in a moment another I’ll constraint that may stop the men’s government hitting that target.

But again, if they end up building these number of properties, you could end up in a situation where certain pockets of certain suburbs around Sydney and regional new South Wales are oversupplied because they just end up building so many properties in those areas.

Secondly, what you will see is that some of these suburbs will actually change in their nature. They’re going to go from low density properties to having now a lot more high density properties in that area, which will again, change the whole dynamic, potentially change the whole feel of the suburb and how much people actually want to spend to live in those areas. So, you do need to consider these factors if you’re thinking of buying for long term capital growth.

Now, of course, if you’re a developer, that changes the game totally, right? You may be able to buy multiples of these properties or even buy just one and then with the rezoning, put multiple dwellings and sell for a profit. So really depends on what your goal is and what you’re trying to do. Now, if you’re someone who already owns a property in these locations, then do you consider selling?

Well, first you need to confirm. Whether your property is affected by these new changes, I’ll go through some of the suburbs where these changes are coming into force shortly, but if it is, you might be able to partner with your neighbour, potentially then sell your property as a development site to developers.

So, it does always matter where you sit. There’s something else though to consider because who’s in favour of this and who’s against this actually comes down to a few other factors. But before I go into that, let me now share with you some of the areas that are most affected by the Minns government’s changes.

Of the 171 centres, Sydney’s north accounts for almost a third of all those affected. 34 are on the North Shore, including 5 in Hornsby, 8 in Karingai, 8 in North Sydney, 7 in Ryde, 3 in Willoughby, and 1 each in Lane Cove, Hunters Hill and Mossman. Nine are on the northern beaches, including Balgaula, Dewy, Forestville, Manly, Manlyvale, Monavale and Warringah Mall.

Seven are in the Hills District, including Borkham Hills, Castle Hill and Kellyville. Just three are in Sydney’s eastern suburbs, Double Bay, Edgecliff and Rose Bay. Seven are in central Sydney, including Surrey Hills and Oxford Street. Interestingly, the Blue Mountains, Hawkesbury and Wollondilly local government areas were excluded from the reform.

Due to the extent of bushfire and flood hazards, but it’s not just areas around Sydney that are affected. Many regional markets are also going to be affected by this. For example, in Newcastle around Adamstown Station, Hamilton Station, junction Fair Shopping Centre, these are all areas where the rezoning is going to take place.

You’ve also got places in Shoalhaven down south. and Lake Macquarie up north as well. So, if you’re thinking about buying an investment property in New South Wales, you really need to understand whether these zoning laws affect the area that you’re targeting and also how they might affect the area. And if you look at then who might be against these schemes versus who’s going to be for them, an interesting divide appears.

What we’re seeing is that Perhaps members of the older generation who are more established, they’ve already got homes, their homes are heritage listed, or they’re in locations where there’s heritage homes nearby. They seem to be against these schemes because they are concerned that the Minns planning changes could change the nature of their area.

Which is something I mentioned earlier on the flip side, though, we are seeing a lot of younger people being very pro these planning changes. It’s going to increase the supply of housing, giving more options for people and potentially allowing people to get into a property more quickly than previously.

So now, if we look at this, though. It does paint an interesting question. You have perhaps, if I were to just generalise, members of the older generation maybe being slightly against these schemes, members of, say, the younger generation being more pro these schemes and wanting these planning changes to come into force.

Now, we have a federal election that’s about to happen, and although I’m talking about this on a state level, what I’m about to share will affect state elections going forwards as well. Federal election 2025 will be the first vote where Gen Z and Millennials outnumber baby boomers at the ballot box. So why does that matter?

Well, if you have a change in the demographic of people who are voting, and we now have a majority of younger people voting in the elections, what they want is actually going to outweigh what, say, the older generation wants. So that’s important because these planning schemes that have first been announced by the New South Wales Premier, as I said, I expect other states will release their version of this as well.

Well, the younger generations are going to be in favour of it because it helps alleviate, at least to a certain level, the housing crisis. Remember I said, New South Wales is looking to build 112,000 new properties, which is great, but they need over 300,000. They’re still well short, but at least it’s better than nothing.

So, I expect you will see that more people are going to be in favour of these schemes versus against. From an investment perspective though, you do need to be careful, as I said earlier on.

However, there’s one more thing to consider. Housing developers say they can’t afford to build in TOD precincts. Developers claim the Minns government’s plan to fix the housing crisis is set to fail, with new analysis revealing the construction industry would lose money on the projects. So, what this means is that even though there might be all these new rezoning laws, and it might be easier from a council perspective, the cost of construction could still be an obstacle that’s too high to overcome.

Have a look at this example. Here we have a developer or builder quoting what it would cost to rebuild for a particular project. He says the cost of land for say 2,000 square meter block in Homebush will be $11.8 million. You’ve got all your purchasing costs like stamp duty, etc. Nearly $600,000. The interest on land while they’re building will be $1.6 million over say two years. Then you’ve got your development costs, construction, marketing, all of that, $33 million. The interest on the development cost for 18 months is 7%, that’s $3.4 million. So, in total, the cost of the project according to this particular bill, it’ll be over $50 million. But they’re only going to sell and make $44 million.

So, they would make a loss of over $6 million. Who do you think is going to be willing to take on a project where they’re going to lose $6 million? Right now, this is just one particular builder, but from my investigations, I do understand that many builders don’t think these changes are going to necessarily be feasible, at least not on maths.

So, the interesting thing is that whether these planning changes will actually lead to meaningful changes and results in terms of addressing the housing crisis, that is yet to be seen. However, from an investor perspective, buying in these areas is something you need to be very, very careful about, because supply and demand metrics may compromise your capital growth going forwards.

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Financial disclaimer: I am not your financial advisor and the opinions I share in this video are purely my opinions. This is not to be considered personal advice as it is general in nature.