The Melbourne property market’s future is up in the air – literally.
Traditionally, the property rights of a landowner extend not just to the surface of the land on title, but to the soil beneath it, and the air above it. At common law, this doctrine is expressed in the maxim ‘cujus est solum ejus est usque ad coelum et ad inferos’: ‘to whom belongs the soil, his is also that which is above it to heaven and below it to hell’.
However, as population and housing density increase in Victoria and across the western world, our thinking has had to evolve and become more creative. Enter ‘air rights’, an untapped commodity for developers and adjoining land-owners alike.
What are Air Rights?
Air rights are essentially the rights of an owner to control and develop a specific amount of unused air space above real property. Typically, the rights to the physical land described on title and rights to the air above that land are left as one, and this leaves potential for the current owner to further develop the land vertically. Increasingly though, developers are becoming aware of the possibility of purchasing air rights, particularly in areas of existing medium and high density housing and mixed use zones, as a means of significantly expanding the current stock of inner-city developable land.
Likewise, land-owners are awakening to the possibility of selling the development potential created by air rights to developers or adjoining landowners. For the land-owner, this can unlock additional equity in their property which may otherwise remain unrealised. For the adjoining owner, this can vastly expand the development potential of their own land in terms of net area, as well provide the potential for views that can never be “built out”.
Air Rights in Melbourne
In the last decade in London and New York, air rights have become the “reigning currency of the redevelopment realm”, with Donald Trump famously acquiring the air rights of buildings around Trump World Tower in Manhattan to maintain the tower’s views.
In Melbourne though, we are only now turning our eyes to the skies.
In 2012, for example, the developer of 18 Yarra Street in South Yarra bought multiple apartments in the adjoining low-rise building at 19 Yarra Street. In doing so, he essentially purchased the right to veto any attempt to sell or redevelop 19 Yarra Street, thus protecting 18 Yarra Street’s views.
In 2016, the rooftop and accompanying air rights of the heritage-listed Foy & Gibson factory at 68 Oxford Street, Collingwood was reportedly sold for over $1M, with the prize being a permit and designs for a multi-story penthouse.
In 2017, the owner of a yet-to-be developed top floor apartment at 31/300 King Street in the CBD, discovered that the accompanying air rights allowed for at least 10m (or two extra storeys) to be stacked on top, without the need for approval from the building’s body corporate.
And just this year, VCAT granted a permit for an eight-storey development on the land at 121-123 Commercial Road and the airspace over the railway on the Sandringham line. VicTrack, the owner of the majority of Victoria’s rail infrastructure and land, is looking at selling air space over suitable candidate railway stations, motivated at least in part by a potential source of funding for the level-crossing program.