Here’s what you need to know about subdivision costs and how much it will cost you to subdivide your block.
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It’s possible to make a substantial profit subdividing land, but it’s important to understand the cost to develop land for subdivision before purchasing property. Find out about subdivision costs around Australia and compare state regulations with Savvy. We can help you compare the cost of investment and property development loans so you’re able to make informed financial decisions about the best lender for your financial needs.
The cost to develop land for subdivision will vary depending on which state you live in, the zoning of your land, the aspect and the size of the parcel of land you own. The larger the parcel of land, the more it’s likely to cost to subdivide. Similarly, if your block is steeply sloping, is an awkward shape or has significant trees on it, expect the estimated subdivision costs to rise.
If you’re hoping to construct more than four dwellings on your land, you’ll need to look at a commercial property loan to finance your subdivision, rather than a standard home loan, investment property loan or construction loan. The estimated subdivision costs for large multiple residence developments can amount to hundreds of thousands of dollars.
Although there are many variables which can affect the cost breakdowns of land subdivisions in Australia, they all share similar basic costs, which will include:
For a standard one-to-two lot subdivision, which involves dividing one larger residential lot into two smaller ones (with one existing dwelling in place) expect to pay:
Because subdivision costs are so varied and depend on individual circumstances and location, it is impossible to predict a subdivision cost breakdown until a site survey has been carried out to identify any issues which need to be taken into consideration.
For this reason, it is vitally important to ensure your property development project is carefully planned to ensure a profit can be achieved once all development costs have been absorbed.
Yes – this is crucial before deciding to purchase land to subdivide. A project feasibility study carried out at the start of the project could save money being wasted on a concept that isn’t going to produce a return on investment (ROI). Many investors make the mistake of concentrating on the cost to develop land for subdivision, rather than starting from the viewpoint of ‘is it possible to make my subdivision profitable?’ If the feasibility study shows a ROI of less than 15% to 20%, the viability of the subdivision should be carefully considered, as this leaves little room for error and presents a highly risky investment.
Yes – it’s a great idea to apply for loan pre-approval if you intend to buy a residential block intended for subdivision. During the pre-approval process, your lender may want to see your subdivision feasibility study to check the project has a fair chance of making a profit. Although loan pre-approval doesn’t guarantee your final loan application will be approved, it should certainly give you a fair idea about your borrowing power. Use Savvy’s borrowing power calculator to work out how much a lender may be prepared to loan you for your subdivision project.
Yes – each state and jurisdiction have regulations about the minimum lot size that can be created by subdivision. The zoning of the land you intend to purchase will also have a bearing on the lot size permitted.
For example, in NSW, blocks zoned as residential must be a minimum of 400m2 (or the minimum lot size permitted by the local council, whichever is greater). Blocks must be at least 12m wide. For dual or multiple occupancy blocks where one dwelling is located above another (for instance, where apartments are proposed) the block must be 15m wide (according to planning regulations current in 2022).
It’s very important to consider significant trees on undeveloped land because the preservation of these special trees has to be taken into consideration when planning how to subdivide. If there is a significant tree present on the block, it can add substantial cost to a subdivision project.
The definition of significant trees varies from state to state and their management is the responsibility of local councils. A multitude of heritage and planning regulations govern the treatment of land on which a significant tree is growing and that legislation sometimes overlaps, causing legal confusion.
However, if a tree has a trunk circumference of 3m or more, it’ll probably be considered significant in most states. If a tree is considered significant, it can’t be removed or damaged in any way and a Tree Protection Zone (TPZ) will apply around the tree to protect its root zone. Typically, a TPZ will be in the region of a 15m to 30m radius from the tree’s trunk. Within this zone, no structure may be constructed or surface disturbance is allowed. For example, you can’t pave the ground or pour cement for a car park or patio in a TPZ, as this earth covering could impact the water which percolates down to the tree’s roots, starving it of natural rainwater.
Quantum Savvy Pty Ltd (ABN 78 660 493 194) trades as Savvy and operates as an Authorised Credit Representative 541339 of Australian Credit Licence 414426 (AFAS Group Pty Ltd, ABN 12 134 138 686). We are one of Australia’s leading financial comparison sites and have been helping Australians make savvy decisions when it comes to their money for over a decade.
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© Copyright 2024 Quantum Savvy Pty Ltd T/as Savvy. All Rights Reserved.
© Copyright 2024 Quantum Savvy Pty Ltd T/as Savvy. All Rights Reserved.
Quantum Savvy Pty Ltd (ABN 78 660 493 194) trades as Savvy and operates as an Authorised Credit Representative 541339 of Australian Credit Licence 414426 (AFAS Group Pty Ltd, ABN 12 134 138 686). We are one of Australia’s leading financial comparison sites and have been helping Australians make savvy decisions when it comes to their money for over a decade.
We’re partnered with lenders, insurers and other financial institutions who compensate us for business initiated through our website. We earn a commission each time a customer chooses or buys a product advertised on our site, which you can find out more about here, as well as in our credit guide for asset finance. It’s also crucial to read the terms and conditions, Product Disclosure Statement (PDS) or credit guide of our partners before signing up for your chosen product. However, the compensation we receive doesn’t impact the content written and published on our website, as our writing team exercises full editorial independence.
For more information about us and how we conduct our business, you can read our privacy policy and terms of use.
