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Understanding the link between land zoning and property values

Zoning laws can have a major effect on a property’s value. For anyone who owns real estate or is considering acquiring a property it is critical to know the zoning provisions applicable to the property in order to maximise any potential returns.

How does zoning affect property value?

Put simply the zoning typically specifies the use of a property, whether it be for commercial, residential, industrial, mixed use, agricultural or recreational uses. It is crucial to understand the nuances of the planning laws that apply to a property so that you know the types of activity that are permitted. Properties with ‘upside’ potential are likely to be more desirable and may achieve a higher value than properties without any development potential.

What are the common types of zoning?

Zoning usually refers to the nature of a property and what can be built onsite. Zoning regulations basically define the legal uses for a specific neighbourhood to ensure complementary development is grouped together. Properties are zoned for residential, commercial, industrial, agricultural, or other specific purposes.  In Australia, zoning laws differ state by state and in NSW are administered by local governments. There are 128 local government areas in NSW. Every council and zoning category carries its own regulations that you will have to understand and adhere to in order to make a fully informed decision for your next property dealing.

According the to 2022 Census over 80% of land in NSW was zoned residential, with the following being the most common zonings: 

  • R1 – General Residential
  • R2 – Low Density Residential
  • R3 – Medium Density Residential
  • R4 – High Density Residential
  • R5 – Large Lot Residential
  • RU5 – Village

Can zoning change?

Zoning laws group parts of a city or town into specific areas for different land uses, and because zoning laws are subject to change, the value of your property could change if your location is re-zoned. It is fairly common for state and local governments to re-zone whole sections of land as cities and towns evolve and in addition spot rezonings of individual lots are also possible. An example in the media presently is housing affordability and the need to transform run down old shops on major roads to vibrant mixed use areas with apartments above to revitalise the area. Focus is now on places for us to work, live and play that are well connected and close by.

Visit the NSW Government Planning portal here to search for planning information about a property Welcome to the NSW Planning Portal | Department of Planning Housing and Infrastructure

Connect with one of our property experts at Independent Property Valuations to review your current portfolio or before you commit to a purchase so we can assist you in making an informed decision –