When buying a home, there’s a lot to consider. From size requirements and zoning laws to location and density, the list of things to look out for can be overwhelming. But don’t worry; we’ve got you covered.
Today, we are wearing our lending hat, and only looking at this from a lending appetite perspective. This isn’t property advice. You need a buyers advocate for that (we know a couple of guns if you need an intro).
In this guide, we’ll break down the key factors you should consider when purchasing a property, ensuring it won’t have a substantial impact on your ability to get a loan.
What Are Generally the Size Requirements of a Property?
One of the first things to look out for when buying a home is the size of the property. The general rule is that the property should be at least 50 square meters, including balconies and car parking, or 40 square meters if excluding these features. This ensures that the property has enough space to be functional for residential purposes.
If you're considering an apartment, note that properties in high-density buildings might have different size requirements based on the building’s classification (more on that later). Ensuring the property meets these minimum size requirements is crucial, as properties below these thresholds may not be considered acceptable for residential lending purposes, or the amount of lending you can get against them will be lower.
What Can the Property Be Zoned?
Zoning plays a critical role in determining what you can do with a property and its suitability for residential use. Generally, properties must be zoned for residential purposes or equivalent. This includes mixed-use zoning where residential use is allowed alongside commercial activities.
For example, properties above shops or in multi-story apartment complexes with retail spaces below can still qualify as residential, provided the residence is on a separately issued title. It’s important to ensure that the property’s zoning allows for residential use without any specific permits that could complicate the purchasing process.
Where Can the Property Be Located?
Location is always a top consideration when buying a home. Properties should ideally be located within a reasonable distance from urban areas, particularly if they fall under the category of rural or rural lifestyle properties. For rural properties, there are specific guidelines:
The property should be within 50 km of a provincial city with a population of over 20,000.
Alternatively, it should be within 20 km of a primary regional town with a population of over 10,000.
If you’re looking at a rural property, ensure it meets these criteria, as properties located too far from urban centers may not be considered acceptable for residential lending – and you may need to look at specific rural property loans.
What’s Considered High Density?
High-density properties typically refer to apartment buildings with a large number of units. Understanding whether a property is classified as low, medium, or high-density is important for several reasons, including financing and future resale value.
Low-Density Apartments: Less than 20 units.
Medium-Density Apartments: Between 20 and 50 units.
High-Density Apartments: 50 or more units.
When purchasing an apartment, especially in a high-density building, be aware of potential challenges such as higher body corporate fees and the impact on property value over time. High-density living can be convenient, but it’s essential to weigh the pros and cons.
What’s Considered Rural Property?
Rural properties, or rural lifestyle properties, can be an appealing option for those looking to escape the hustle and bustle of city life. However, there are specific criteria these properties must meet to be considered acceptable for residential lending:
The property must be less than 10 hectares (25 acres) in size, or less than 2.2 hectares (5 acres) if there’s no residence on the property.
The property should be capable of residential use without requiring specific permits.
It should not be a primary source of income, generating more than $50,000 per year.
These criteria ensure that the property is primarily for residential use and not for agricultural or commercial purposes.
What Else Do I Need to Look Out For?
When buying a home, there are additional factors you should keep in mind to avoid potential pitfalls:
Type of Title: Be cautious of properties with stratum titles, company share titles, or those classified as student accommodation, as these are often not accepted for residential lending purposes or restrict the lenders you can deal with.
Serviced Apartments: These are typically used for short-term accommodation and are subject to specific management agreements that can complicate ownership and financing.
Speculative Residential Properties: Avoid properties that are considered speculative, such as those part of large developments with multiple residences held by a single developer.
Finally, always ensure the property has basic utilities like power and water connected, and that it doesn’t fall under restrictive categories such as Rural Crown Leaseholds or properties designed for commercial use.
Why Due Diligence is Crucial
When purchasing a home, thorough due diligence is crucial. This means researching the property, its zoning, size, and location, and understanding the implications of these factors on your ability to secure finance.
Make sure to work with experienced professionals, such as buyers advocates, conveyancers, and brokers, who can guide you through the process and help you avoid common challenges.
If in doubt, get advice. Every detail matters. By doing your homework and seeking professional advice, you can confidently navigate the property market and make a purchase that will serve you well for years to come.
Comments