Fibro home 45 Edgbaston Rd, Beverly Hills sold for $1.1 million.

The properties, along with many other styles of houses built for lower-income workers in the 1950s and ’60s, have been selling at hard-to-believe prices, often rivalling those for luxury homes.

Multi-million dollar prices over the past year were the result of heated bidding wars between investors, small-time builders and high-density developers, who prized the larger blocks with building potential.

“The older homes in areas like Granville, Dundas Valley and Merrylands are often on large blocks with lots of frontage, so there’s potential for building a mix of things,” said auctioneer Rocky Bartolotto.

His team at Auction Services has lowered the gavel on numerous fibro and weatherboard homes over the past year and has noted the auctions drew crowds that packed out the streets.

Another fibro home at 87 Station Street, Fairfield sold for $927,500.Source:Supplied

“Sometimes, the vendors didn’t even realise what they were sitting on,” Bartolotto said.

“Their areas had been rezoned but they didn’t know about it so they didn’t realise how much more valuable they were. They then sold for well above (the reserve prices).”

A dilapidated four-bedroom house was the latest knockdown home to leave real estate pundits stunned after fetching nearly $1.8 million above reserve at auction last week.

The deceased estate in Marrickville became a battleground for developers who pushed the price past the $2.1 million reserve, eventually going under the hammer for $3.87 million.

The time capsule house now has a date with a bulldozer, with plans for the 860sq m block to be turned into a four level apartment block with up to a dozen units.

5 George St, Marrickville sold last week for nearly $1.8 million above reserve. Developers are often interested in properties next to existing unit blocks.Source:Supplied

Selling agent Michael Marano of Oxford Real Estate says it “was one of the hottest auctions” he’d experienced in his 37 year career in real estate.

A two-bedroom fibro cottage in Merrylands sold under the hammer on the same day for $1.2 million, smashing the reserve by $100,000.

The buyers are said to be planning to knock down the existing structure to replace it with two homes spread across the 910sq m block.

Selling agent Peter Tannous from LJ Hooker-Merrylands says the strategy of replacing older homes with duplexes is becoming more popular.

“Developers and builders will be interested as soon as anything comes up for sale with about 15m or more of frontage and a block size of 500sq m to 900sq m,” Tannous said.

House hunters inspect a fire damaged fibro house in the Mount Druitt area, which sold for nearly $400,000. Picture: Jenny EvansSource:News Corp Australia

The knock down and rebuild strategy has become increasingly common because of the profit potential: newly built duplexes will often sell for double what the developers paid for the original properties, Tannous adds.

At the more extreme end of the market, older unit blocks have also become prized properties for developers.

Real Estate Institute of NSW president John Cunningham says vendors can only expect to pocket windfalls from their homes if their local council had rezoned the properties for medium or high-density developments.

“Some sellers have been trying to capitalise on developer demand but their sales have fallen flat if the zoning didn’t work,” he said.

A good sign developers will usually be interested is if there are blocks of units next door, he adds.

Another factor that’s driven the increase in knock down and rebuild projects across Sydney is the poor condition of many of the city’s older homes.

Originally published as Owners sitting on big bucks but don’t know