New investment idea! Will it work?

Lately it appears every Tom, Dick and Achmad, wants to be a property developer.

Further the governments are pushing for cheaper properties and cheaper rentals.

I wonder if this would allow land holders to cut larger multilot subdivisions with a view to selling a 900 metre block suitable for 4 townhouses (they are allowed on a 225 m per home basis)
So rather than selling each 320 metre block for $440k, selling each 900 m block for $1.2 million to small developers who want to try out an affordable development.

Would it work?

 

Smaller developments cost more /m² than larger projects IMHO.

 

Yes but small builders want to do their own developments in quiet times. Simply to keep their contractors and staff busy. They don’t want to start with huge make or break developments

 

Often there will be a clause in the planning permit that says no further subdivision of lots.

Secondly, the servicing requirements (particularly drainage and sewer) would need to accommodate the fully developed lot, meaning that initial developer would need to invest more.

However, typically there is a medium density component to most estates which is generally sold as a superlot to a developer.

A couple of smaller estates I have recently worked on have an astrix or hatch on the endorsed development plan which denotes that it can be a multi-unit development.

There is also money to be saved if you say buy a 600sqm corner lot off the plan and get property service connections prior to engineering documentation as it is cheaper for the civil contractor to do it initially.

 

Councils are under state pressure to reduce lot sizes and increase density in some areas (eg near transport links). This does not mean one on one developer deals. It means a development approval may allow smaller land lots, overlapping eaves and density and the whole of site would be planned.

Land developers are often not permitted to have large lots. Its just not allowed to subdivide a new subdivision. Its planned from day one. The masterplan includes each small lot and duplex approval etc But the master developer may sell a line of small lots (or a big space) to a small building developer to shift volume and give charecter. Or sell of all the corner lots to a dual occupancy specialist. Land developers know builders want a line and will have partners that want this land lined up before day one. Its gold. Often the deal with the small builder is that sewer and some connections arent yet done unlike the small blocks. They dont wait for mugs who dont have a license and experience.

 

There are actually plenty of land estates in Perth that currently do this. They will nominate certain lots in the structure plan to be Group Housing and leave them at a larger size for someone else to develop

The plus for the land developer is that they don't need to run multiple services to the lot as that becomes the small developers issue.

Here is a Perth example - 2138, 2139, 2179, 2180, 2189 and 2190 are group housing lots. https://satterley.com.au/documents-...nt-local-development-plan-approved-280417.pdf

 

That’s pretty much what I want to do. I am looking at 9760 square metres of land allowing for 38 dwellings.

 

The problem for the small developer is that in 80% ++ of these cases the land developer is using the margin scheme on selling the land so the small developer that buys it therefore cannot and has to pay full GST on their end product (be it smaller lots of land or dwellings)