SYDNEY (REUTERS) - When Mr Ron Buxton bought his sprawling five-bedroom property in Sydney's Castle Hill for A$87,000 (S$89,350) in 1979, his was one of only two houses on a dead-end street, ringed by orange groves.
With Castle Hill now a bustling commuter suburb earmarked for re-zoning, Mr Buxton and his neighbours have clubbed together to offer their homes as a development block for apartments, banking on a multimillion dollar payday thanks to a surge in Sydney house prices and an acute housing shortage.
"We started getting phone calls from agents and developers to help us sell the property but we decided we'd help ourselves," Mr Buxton, 73, said. "We'll certainly get better than open market individual sale."
The trend has surged in the past year with home owners increasingly taking the initiative themselves rather than waiting for approaches from developers, real estate agents say. Developers such as Stockland and Mirvac are also reaping the rewards, boosting profits as new apartments are snapped up.
Sydney's population of 4.5 million people already spreads over 1,600 sq km, twice the size of New York City. With the population expected to rise by 100,000 a year for the next 20 years, urban planners say higher density living is key to providing enough housing.
"There is an affordability challenge and the only way to address that is supply. This is one of the ways that supply is starting to get freed up," Stockland CEO Mark Steinert said. "I think there will be more of this," he said, expecting the residential business to drive further earnings growth over the next five to six years.
Approvals for multi-unit projects climbed 28 per cent nationally in the past year to record highs, raising hopes that the extra supply will help dampen potentially dangerous house price rises.
Developers need at least 4,000 sq m of land for an apartment building, so owners who can club together can command significant premiums.
Mr Keiron Stedman, project marketing specialist at Ray White Castle Hill, is grouping about 47 home owners in Sydney's Hills District, one of the western suburbs popular with commuting workers and now developers.
"If you sell together as one development parcel you can generally get a higher price. Ultimately you can get double, triple or sometimes even five times your residential value by taking this approach," he said.
Last December, five mostly older standalone brick homes in the same suburb sold for a record A$20.5 million, which at A$4 million each was almost four times what the owners could have expected from individual sales.
Record house prices have worried regulators who fear the market may be entering a bubble and could potentially hurt the country's banking system - heavily reliant on mortgages - and, in turn, the economy, if it bursts.
Australia's banking regulator is forcing banks to slow down lending to home investors to an annual growth of under 10 per cent.
"Sydney can keep building for a couple of years without going into over-supply," said Dr Kim Hawtrey, associate director with BIS Shrapnel. "But developers should be careful not to follow that strategy too far and not to pay too high a price and find that they get caught."