What if the biggest opportunity — and the biggest threat — to your property portfolio isn’t interest rates, CGT changes, or immigration numbers?
What if it’s the way councils draw lines on maps?
The Grattan Institute has just dropped a major report arguing that Australia could knock more than $100,000 off the typical house price simply by changing how we zone our suburbs. No new taxes. No government handouts. Just letting people build the homes that are actually needed, where they’re actually needed.
For property investors, this isn’t just academic policy chatter. It could fundamentally reshape where the money is made — and lost — in Australian real estate over the next decade.
What’s Actually Being Proposed?
The Grattan Institute’s More Homes, Better Cities report lays out three core recommendations:
- Allow three-storey townhouses and apartments on all residential-zoned land in capital cities
- Permit six-storey (or higher) apartment blocks near major transit hubs and commercial centres, with streamlined approvals
- Use complying-development pathways for developments meeting pre-set design and safety standards — cutting out the slow, subjective council approval circus
Through their modelling, Grattan estimates these changes could deliver 67,000 extra homes per year nationally. That’s a massive supply boost concentrated exactly where demand is highest.
The Numbers That Should Get Your Attention
Here’s the current state of play:
- 80% of residential land within 30km of Sydney’s CBD is zoned for buildings of three storeys or fewer
- 87% in Melbourne — even worse
- Regional property prices have surged nearly 60% over the past five years to a median close to $700,000 (PropTrack, Feb 2026)
- Building a 3-bedroom home in South Australia currently costs $275,000–$327,000 (hipages, 2026)
- Building material costs have stabilised, with 3–5% increases projected through 2026 — roughly tracking inflation
- Buyer demand remains resilient, with open inspection attendance up 3% year-on-year nationally
The mismatch between where people want to live and what they’re allowed to build is staggering. Our capital cities are far less dense than comparable international cities like Toronto, Copenhagen, or Vienna — despite similar incomes and amenity levels.
Why This Matters for Value-Add Investors
If you’re playing the value-add game — buying properties with untapped development potential — zoning reform is the single biggest variable you need to watch.
The Upside: More Development Potential
Relaxed zoning means properties that were previously limited to a single dwelling could become sites for townhouses, duplexes, or small apartment buildings. If you own a 700sqm block in a middle-ring suburb that’s currently zoned for single dwellings, and that zoning shifts to allow three-storey townhouses as-of-right, your land value could jump significantly overnight.
This is the value-add sweet spot: buying before the rezoning wave hits your suburb.
The investors who made serious money in Sydney’s granny flat boom of the 2010s didn’t get rich because they built better granny flats. They got rich because they bought blocks in suburbs where the rules suddenly allowed a second dwelling. Same principle, bigger scale.
The Downside: Existing Stock Could Devalue
Here’s the flip side nobody’s talking about enough. If 67,000 extra homes hit the market each year in established suburbs, that’s a genuine supply increase in areas where scarcity has been propping up prices.
If you own a standard three-bedroom house in a middle-ring suburb and three townhouse developments pop up on your street, your property’s relative appeal as a rental or sale could take a hit. More supply in the same area means more competition for tenants and buyers.
This doesn’t mean values will crash — demand is still strong — but the days of lazy capital growth from simply holding an established house in a good suburb might be numbered.
The Strategy Shift
Smart value-add investors should be thinking about:
Land over buildings — If zoning opens up, the value shifts even more heavily toward the dirt. Corner blocks, large lots, and properties near train stations become goldmines.
Development-ready sites — Properties that can be subdivided or converted to multi-dwelling developments will command a premium. Start looking at what your council’s draft planning schemes say about future density.
Infrastructure corridors — The Grattan proposal specifically targets areas near major transit. Properties within 800m of train stations or major bus routes are the prime targets for upzoning.
Regional caution — Regional areas won’t benefit as much from urban zoning reform. With prices already up 60% in five years, the growth story there is more about remote work trends than planning changes.
State-by-State: Where Are We At?
Zoning reform isn’t happening uniformly across Australia. Here’s the current lay of the land:
New South Wales
NSW has been the most progressive on secondary dwellings. The Housing SEPP already permits granny flats on many residential lots, and the state government has been pushing complying development pathways. Expect NSW to move first on broader upzoning if federal pressure mounts.
Victoria
Victoria’s planning system is notoriously complex, with significant council discretion. The state government has flagged density reforms, but NIMBYism in leafy eastern suburbs remains a massive political barrier. Melbourne’s 87% low-density zoning stat tells you everything about the gap between rhetoric and reality.
Queensland
Queensland recently amended its rules to allow secondary dwellings to be rented to anyone — not just family members. That’s a quiet revolution for granny flat investors. Brisbane’s post-Olympic infrastructure spend could accelerate zoning changes.
South Australia
SA’s planning reforms through the Planning and Design Code have already streamlined some approvals, but density remains politically sensitive. Adelaide’s relative affordability ($275K–$327K for a new build) means the pressure for reform is less acute than in Sydney or Melbourne.
Western Australia
WA has been slower on zoning reform but the NDIS housing boom — including a recently approved $5 million, 22-unit SDA development in Balga — shows that density is coming whether suburbs like it or not.
The Political Reality
Let’s be honest about the politics. Zoning reform sounds rational on paper, but it runs headfirst into the most powerful force in Australian politics: homeowners who don’t want change on their street.
The Grattan Institute’s proposal has been called both “visionary” and “reckless” — sometimes by the same people. Community resistance to density is real, and local councils are elected by existing residents, not future ones.
But the political winds are shifting. With housing affordability dominating the national conversation, the federal government actively considering CGT changes, and an election looming, both major parties are under pressure to do something tangible on supply.
The question isn’t whether zoning reform happens. It’s when, and how fast.
What Should You Do Right Now?
If you’re a property investor watching this space, here’s the practical playbook:
Audit your existing portfolio — Check your local council’s planning scheme for any draft amendments or strategic plans that flag increased density. These documents are public and often signal changes years before they happen.
Look for upzoning candidates — Large blocks (600sqm+) in middle-ring suburbs near train stations or major shopping centres are the most likely targets for density increases.
Don’t panic-sell established houses — Zoning reform, if it happens, will take years to filter through. Supply doesn’t appear overnight. But do factor slower capital growth into your projections for single-dwelling properties in areas likely to see competition from new developments.
Consider pre-development acquisitions — Buying a property with future development potential before zoning changes are locked in is where the real upside sits. This is classic value-add: buying the opportunity, not just the building.
Watch the May budget — The federal government’s housing announcements in the upcoming budget will signal how serious they are about supply-side reform. Tax changes (CGT, negative gearing) combined with zoning reform would be a one-two punch that reshapes the investment landscape.
The Bottom Line
Zoning reform is coming to Australia. The only questions are how aggressively, how quickly, and which suburbs first.
For value-add investors, this is both a massive opportunity and a wake-up call. The strategies that worked in the era of artificial scarcity — buy and hold in a good suburb, wait for capital growth — may not be enough anymore.
The investors who’ll thrive in the new landscape are the ones who understand planning, watch for rezoning signals, and position themselves to profit from density rather than fight it.
As always with property, the money is made in the research, not the renovation.
This article is general information only and does not constitute financial advice. Property investment involves risk, and past performance is not indicative of future results. Consider seeking advice from a licensed financial adviser before making investment decisions. The author and Bush Digital Guides are not licensed financial advisers under the Corporations Act 2001.
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