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Zoning in Australia ─ Part I: Understanding The Concept

The big four banks in Australia. Westpac, Commonwealth, ANZ, NAB.

At Acumen Finance we like to provide our potential clients with the best information available on the web, because, commercial property investment is our playing field ─ our team of experts know it like the back of our hands. So far in our commercial property series, we’ve covered the different types of property available, the types of lenders that’ll assist you in achieving your investment or borrowing dreams, and the rules and regulations surrounding commercial property investment in Australia. What we haven’t touched on, however, is property zoning, so we’re going to drop you a 101 on exactly that. 

You may have already heard of property zoning and, if you have, you might be like the majority in thinking… ‘what?’ The truth is, even some of the most money-orientated people have a very limited understanding of the concept, but it could well be a tool that can be leveraged to help you make smarter commercial property investment decisions. 

Whether it’s your first or your tenth property investment, let’s run through what we know to better understand how property zoning can benefit you on your investment journey. 

Zoning? What is it? 

Well, zoning refers to the nature of the property that you’re looking at investing in and its intended use. Regulations surrounding zoning assist in establishing order and defining the legally permitted uses for each type of property ─ of which there are three types. Zoning is such a need-to-know concept because it tells a lender, whether that is Tier 1, 2, or 3, what kind of property you are investing in and they can adjust their policies accordingly, depending on zoning. 

Did You Mention Zoning Categories?

  • Commercial
  • Business, and
  • Industrial

We did! When it comes to property acquisition, investors, borrowers, and lenders alike should know the most common zoning categories so that they can study the regulations surrounding them. The majority of zones (outside of the residential sector) fall into one of the following three categories: 

Just like the rules and regulations at auctions, the laws surrounding zoning categories differ depending on the state that you are in, and there is a chance that state-wide law may also allow local council zoning officers to influence the rules, too. Each category comes with its own regulations, and they must be adhered to, or else you may suffer a variety of financial repercussions, like fines. 

The Benefits

So, like any potential gold rush, you need to do some prospecting first ─ and, actually know what you’re looking for, of course. Once you understand zoning, you’ll be able to use it to negotiate the best financial arrangement for your needs on available property. Here’s a prime example: some buyers refuse to purchase properties that appear to be in the business or industrial zones. If you look closer, though, some of them could actually be zoned for residential use. One should never judge a book by its cover, as they say. 

The importance of this difference is that, if the property is zoned as ‘residential’, it’ll qualify for residential loan rates rather than commercial. Plus, you can stay there if need be. It could be that you find a property with favourable terms which others have overlooked simply because they thought that it would be zoned as X or Y. So, always check the land zoning status of a commercial property that you’ve taken a fancy to! 

If you do know the applicable zoning regulations for the commercial property that you’re looking to purchase and the land on which it sits, you’ll find that it’ll better prepare you for any potential financial surprises.

The Bad Side

Well, while there is always the good there is often the bad, so here’s the skinny. Picture this:

You find a dream residential property ─ it’s zoned as such, and you can picture your plans soaring into the sky on the back of the property. You snap it up as soon as possible and start to work on your ambitions. What you didn’t realise is the large plot of land next door has recently been re-zoned to ‘commercial’ and, within the month, a new supermarket is being built right next to your property. The dream, my friend, is ruined. So, yes, always check! 

And, if you’re looking to work on some commercial property development or renovation work, the applied zoning category may affect what you can and cannot do. You may, for example, be able to add an additional level to your property in one zone, while in another you may not because it’s in a heritage overlay zone, for example.

The Bad Side

Well, folks, that’s the end of Part I of our Zoning in Australia series. The experts at Acumen Finance are keen to bring Part II to your screens in the coming days, so keep an eye on the website! In the next part, we’ll be covering whether zoning can be changed unexpectedly by the powers that be, title considerations and the effects that they have on properties, and how to check your property zone, among a few little other gems. In the meantime, if you need any assistance with development finance, commercial land information, commercial mortgages, or advice on commercial land markets and development zoning, don’t hesitate to get in touch with us.

But, for now, we will bid you adieu.