House Behind a House: Sub-dividing

All your subdivision questions answered by Dean O'Rourke - Executive General Manager | Building Operations WA, ABN GROUP

Sub-dividing your block can seem daunting, especially if you are a first-time developer, so it's important to understand what's involved before you start making those big decisions.

Here are some key Q & A's to give you more of an understanding of the process.

  • What properties are best suited to subdivide?

If you have a large block with the right zoning, retaining your current home and building a house behind it is a great way to build wealth through property.  But the first step is to make a call to your local Council to check the Residential Planning Codes (R-Codes) specifications.

Following that, you need to cross reference the R-Code with the size of your block to see if you meet the minimal lot requirements for a subdivision. If you keep your existing house and build a new property behind it, you also need to have a three metre minimum access for the driveway.

The next step is to speak to an expert.  Property development is not for the fainthearted and it can be easy to misinterpret the R-Code specifications. Plus variances between the town planning schemes of local authorities can also be confusing.

A professional company will assess the viability of your project and advise on the best possible development solution for your block.

  • What areas have the highest demand for in-fill housing?

Put simply, Perth is at a stage where the demand for subdivided blocks close to the city is huge, particularly houses within a 20km radius of Perth. They are essentially those most in demand because many Western Australians who work in the CBD don't want to spend hours commuting.

Suburbs close to the CBD, including Bayswater, Morley, Maylands, Mt Hawthorn and Innaloo are seeing a great deal of building activity.

 

  • What are some of the factors driving the trend to subdivide?

Subdivisions are becoming more common due to higher land prices and low vacancy rates within the rental markets.  When you have strong demand for housing but are faced with a lack of land supply and increased land prices, subdividing is a very attractive proposition.

And there are various factors influencing the current trend to subdivide larger home blocks, including the opportunity to make a profit by selling a parcel of land or two, or free up the equity in a family home to use in retirement.

Some homeowners are also considering the investment opportunities linked with subdividing, and others may have grown up in an area and, as a result, want to stay in the suburb to remain close to parents and family members.

In addition, many families have a preference to live in smaller homes and be closer to the CBD to enable them to spend less time travelling back and forth to work.

This trend is evidenced in the findings of The Housing We’d Choose, a recent report developed jointly by the Department of Housing and the Department of Planning.

Released in May 2013, The Housing We’d Choose confirms that location drives housing choice when people have a realistic budget to work to. In the housing preferences and trade-offs section of the survey, 75 per cent of people nominated location as the key factor, over and above housing type and house features.

The report also reveals that 44 per cent of people prefer a three-bedroom home. Interestingly, the percentage increased only slightly when budget was an issue.

 

 

  • Is it more profitable to build a house on the subdivision and then sell it, or are people generally better to sell the block bare?

This is a challenging question as it really does depend on an individual's finances.  

The bottom line is that homeowners will realise more potential if they are able to subdivide and build a house on the block, as opposed to selling the parcel of land separately.  This latter option means owners need to find a buyer with a vision for what can be built on the land, and also someone who is happy to rent while they build their own home.

By comparison, the decision to build enables people to control what is constructed in their backyard.  What's more, with building a house on the block and then selling it, homeowners can wrap the subdividing costs into the build costs.

 

  • Generally speaking, how much can a property owner expect to profit from sub-dividing the spare land on their block?

Again, this is a difficult question to answer because there are so many variables. Basically, the more equity a home owner has in their house, the better they will do in terms of profit.  

It also comes down to location, location, location too.  If you're in an area that is in high demand and you subdivide, you are in a great position to maximise your return on investment.

 

  • I'm sure the profit made depends on a variety of factors - what are some of the factors that can affect how much money can be made from subdividing 

Firstly, it’s important to flag that the property development process is a lot more complicated than just building a home on a standard suburban block. My advice is, before you call the Bobcat, do your homework to ensure you maximise the success of your development.

Also, consider engaging a professional company to assess the viability of your project and then have a design team create the best possible development solution for your block. Avoiding costly mistakes by engaging an expert is how you will make the most profit from your subdivision.

  • Is sub-dividing land a straight forward process? Why / Why not?

There are a number of different ways to subdivide your block. You need to decide which of these options best fit your situation.

  • Battleaxe: A division of the existing block, creating a rear property with side driveway access.

  • Side-by-side: A length-wise division allowing two homes to have street frontage.

  • Multi-unit: House: Anything over two dwellings including a triplex or quadruplex.

Basically, subdividing can be relatively straightforward for people who are experienced or have carefully done their homework.  Importantly, it usually takes six months from when the process begins to obtaining two titles for your block.  However, if there are any hiccups along the way or something is not accounted for, then the process can get bumpy.

That's why people choose to engage companies like Dale Alcock Developments who look after the entire subdivision process, including council approvals, R-Codes, home designs, regulatory authorities and even find out if there are road widening plans for your street.

 

  • What is your top advice for a home owner who is considering sub-dividing?

Put simply, I'd say it's all about communication. Talk to the professionals, talk to friends who have subdivided and talk to the council.  Basically do your research and homework before you make any decisions.  

  • What are the biggest mistakes people can make? 

When you lead a busy lifestyle, juggling work and family, the last thing you have time for is spending hours pouring over confusing documents and worrying about the fine print, including annoying red tape.

The bottom line is that getting out the Bobcat before doing the appropriate research or due diligence is a mistake.  It's not as simple as identifying a spare 300sqm in your backyard and visiting new homes in display villages. Being informed really is the key when it comes to subdividing.

 

All quotes attributed to:  Dean O’Rourke, Executive General Manager (Building Operations WA), ABN Group

For more information about subdividing, call us on 9242 9250.