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Differentiating in the Development Space: Owning Your Own Backyard

Drawing of a man with a cap, holding a beer in one hand, barbecuing sausages with another, standing in his own backyard. The lawn is tagged with a note that says Belongs To Mike.

“They like to know that when they’re barbecuing outside, they’re doing it on their own land.”
– Anthony DePalma

This bulletin is one about ownership, inspired by an article in The New York Times. The piece discussed the supply of property in New Jersey and how developers were pivoting from condominium townhouses to fee simple townhouses; in other words, from property with more common areas and regulations to property that passes on more control to the individual.

Had the location not been revealed, one would almost mistake the article for a report on the current state of housing in Australia. In fact, it was published in 1985. Over 30 years later, Australia is observing the same shift in new developments. The more things change, the more they stay the same.

Despite the success of condominium town-house projects throughout the state, growing numbers of developers find that many people still resist the idea of buying a house but not the land on which it sits. They find that for a whole range of buyers it makes a big psychological difference to know that the grass in the backyard is theirs.

In response, builders are now offering the same types of contemporary town-house projects that have proved so popular over the last 10 years, but with fee simple ownership rather than the condominium form.

With an oversupplied market for new dwellings, some developers are looking at townhouse projects instead of an apartment building to provide a point of difference. These developments sometimes have owners corporations that have very little upkeep, or none at all. Some non-active owners corporations only require insurance over common driveways.

Common reasons buyers tend to avoid more involved owners corporations include:

  • “Tragedy of the commons”, with common areas being exploited and poor financial management
  • Restrictions on the unit holder, such as how to use the balcony, to whom the apartment can be leased to, etc.
  • Unwanted bureaucracy and regulations
  • Owners corporations that turn into political parties

You might get away with taking the quarter-acre block away from the average Australian, but you’d be hard-pressed to find an Australian happy to give up control over their own patch of land, no matter how small.

While owners corporations are a necessary invention, the less intervention and control exercised by the body, the better it is for many Australians. It may help developers to get hard-to-come-by sales in a more competitive environment for new property.

Original article:
Fee-Simple Town Houses Gain in Appeal by Anthony DePalma
Published November 3, 1985 in The New York Times
http://www.nytimes.com/1985/11/03/realestate/fee-simple-town-houses-gain-in-appeal.html

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