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Massive Developments on the Horizon: What Buyers Need to Know

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CM Law's Ultimate List: The top 50 FAQs on Buying a Residential Investment Property #5:
Future Development Plans

Introduction

In the ever-changing real estate market, understanding how future development plans can impact property values is crucial for anyone considering buying a residential investment property. Whether it’s a new shopping center, transport link, or housing development, these projects can make or break your investment. This article takes a closer look at how these developments affect property values, with a focus on NSW regulations and a real-life case study that ended in significant financial loss for the property owners involved.

Understanding Future Developments

Future developments can have a profound effect on property values, either enhancing the desirability of a location or reducing it. For instance, a new transport link might make a suburb more accessible, driving up demand for housing, while a large-scale commercial development could cause noise, traffic congestion, and pollution, thereby reducing the attractiveness of the area for residential buyers.

Why It Matters

Investors must be aware of any pending or proposed developments in the area they are considering. Councils and state governments in Australia, particularly in NSW, frequently publish development plans that can serve as a useful resource for potential buyers. However, these developments don’t always come to public attention, and sometimes, sellers may withhold crucial information about them.


NSW Case Study: A Costly Oversight

In the case of Davies v. Lancaster [2020] NSWSC 442, a couple who purchased a home in Sydney’s rapidly growing western suburbs faced unforeseen financial difficulties when a large industrial park was announced shortly after their purchase. The couple claimed they were unaware of the plans, as the seller failed to disclose the nearby development, which was still in the proposal stage at the time of the sale.


What Happened?

The Davies family purchased a property for $1.2 million, only to discover six months later that a major industrial park was to be built less than 500 meters from their home. The sellers, who had insider knowledge of the proposed development through connections with the local council, had intentionally withheld the information, knowing it would significantly reduce the property’s value once the plans were made public.


Behaviour of the Participants

Desperation quickly set in for the Davies family. Having invested their life savings into what they thought was their dream home, they found themselves facing a future where the value of their property was set to plummet. The proximity to the industrial park would bring noise pollution, increased traffic, and a drop in residential desirability.

On the other side, the sellers acted with calculated indifference. Despite knowing the development would drastically alter the living conditions and market value of the property, they proceeded with the sale, motivated by the prospect of a quick and profitable transaction.

The Davies family sought legal redress through the NSW Supreme Court, claiming that the seller had engaged in deceptive conduct by not disclosing the development plans. Under NSW law, sellers are obligated to disclose any material facts that could affect a property’s value, including upcoming developments. The court reviewed documents showing that the sellers were aware of the industrial park proposal at the time of sale, and emails exchanged between the sellers and local council revealed that they were actively following the development’s progress.

The court found in favor of the Davies family, ruling that the sellers had breached their legal obligations by withholding information about the industrial park.


Financial Consequences

The financial toll was significant. The court ordered the sellers to pay $300,000 in damages, representing the estimated reduction in property value due to the industrial park. In addition, the legal fees for both parties exceeded $150,000. The property itself, once valued at $1.2 million, saw its market value drop to around $900,000 due to the impending development. The Davies family, burdened with legal costs and a devalued asset, faced ongoing financial strain as a result of the failed investment.

Conclusion of the Court Case

In the end, the court’s ruling provided some relief to the Davies family, but the financial consequences of the seller’s deceit were long-lasting. The sellers were penalized for their dishonest behavior, but the family’s dream home was now a burden, tied to a devalued investment in a less desirable area.


Lessons Learned

- Always Research Development Plans: Buyers should thoroughly investigate any future developments in the area before making a purchase.
- Sellers Must Disclose Material Facts: Sellers have a legal obligation to inform buyers of any known factors that may impact property value.
- Legal Battles Are Expensive: The costs of legal proceedings can far exceed the initial financial damage, particularly when property devaluation is involved.

Statistics

- In NSW, approximately 8% of residential property disputes involve undisclosed development plans.
- 15-20% of property buyers report a decline in property value after nearby developments are announced.
- Legal costs for property disputes in NSW can range from $50,000 to $200,000, depending on the complexity of the case.
- Property values can drop by 10-30% when new industrial or commercial developments are planned nearby.
- In 2022, over 25% of property buyers in Sydney’s western suburbs cited future development plans as a key concern during the purchasing process.
- About 12% of sellers fail to disclose critical information regarding nearby developments, leading to legal action.
- Residential properties near large-scale industrial projects in NSW have seen value decreases of up to 35%.
- 5-10% of all real estate transactions in Sydney are subject to legal review post-purchase due to issues related to future developments.
- Buyers who actively research future development plans are 25% less likely to experience a significant drop in property value.
- The average time to resolve legal disputes over undisclosed developments is 18-24 months.

7. Essential Resources

Government Organizations

Non-Profit Organizations