All developers know how valuable the right block of land can be. Imagine if you were sitting on it. Subdividing the block your home sits on, or purchasing a block with a plan to subdivide, can be very profitable. It can also be complex, which is why it’s important to understand the process before you begin.
What is land subdivision?
Land subdivision simply means dividing a piece of land into smaller lots, each with its own title. These lots can then be sold or developed. If you choose to develop them yourself, you can then choose to either retain, sell or rent the properties you build out.
There are a number of benefits of subdivision, particularly in Perth, where the property market is still suffering from a housing shortage. Subdividing land can be very profitable if you sell off the land to a developer. It can also increase the value of the land, maximise its use or even allow a resident to downsize their property, without having to move.
Financial gain
Put simply, selling two houses is likely to net more profit than selling a single home. Subdividing land to allow multiple properties to be built, instead of just one, will make the owner a profit, through the sale of multiple properties.
Downsize without having to move
As homeowners with large family homes age, and adult children move out, their existing property can seem increasingly large for their changing needs. They might not be ready to move on, due to the cost and effort of moving or the memories that they would have to leave behind.
Subdividing land allows the block they have to maintain becomes smaller and more manageable while also making them an additional income. This is a huge benefit of living in a subdivision.
Maximise the use of your land
Subdivision also maximises its use, by allowing more people to live on it. With a shortage of housing supply, subdivision in Perth is a way to ease the city’s housing crisis.
Increase its value
Dividing a single property into lots increases the value of the land as it allows for diverse development so that the land’s usage can be optimised to meet local market needs. This makes the land itself more marketable, which also makes it more valuable.
While land subdivision can be extremely lucrative, it’s important to do your research and weigh up the pros and cons. It’s also important to make sure the land you select is suitable and be aware of the costs involved.
We recommend conducting a feasibility study to assess the suitability of the lot, as well as consulting an industry professional to make sure your proposal complies with the regulations of the area your lot is situated in. Lastly, as part of your due diligence, have a survey conducted by a licensed and registered land surveyor.
What does subdivision cost in Perth?
Every project is unique, with different requirements, quirks and costs, based on their size, location, complexity and location. From market research, the subdivision costs are likely to range from $30,000 to $100,000 but this can vary. It’s important to be aware of some of the major costs before you begin.
Titling the lot
In addition to all the fees payable for the surveyors, town planners, and lawyers involved in subdivision, there are also a number of costs related to titling each lot of your subdivision. The more separate titles that you need, the more expensive the process will be, although the profit you stand to make will be higher.
Tax implications
There are a number of tax implications involved in subdivision. You need to consider that if you sell the subdivided lots, any profit you make is generally considered a capital gain and you may be liable for Capital Gains Tax (CGT). You may be eligible for CGT discounts or exemptions depending on your circumstances.
Subdividing your land may also have implications for your land tax. If your subdivision is seen as a business activity, you will also be liable for GST. Tax is an ever-changing complex area, and it’s vital that you contact a tax specialist as part of your subdivision process.
Property subdivision projects can fall into distinct categories depending on the nature of the construction and the goal of the project. For instance:
Survey strata subdivisions
A survey strata subdivision means creating separate lots that all connect to each other. These grouped dwellings share common property such as utility connections, sewage systems, and driveways. Existing dwellings on a pre-existing block can be maintained in a survey strata subdivision.
Green title subdivisions
A green title subdivision, otherwise known as a "freehold" project, is a development of lots that don't need to adjoin with each other. There's no right of access from neighbouring free-hold lots, and common property is not permitted on a Green Title site. Each lot must come with its own independent street access and utility connections.
Built strata subdivisions
A built strata subdivision differs from a survey strata in a few subtle ways. Built strata projects refer to blocks wherein buildings form the boundaries of the lots created on a block. The dwellings here are built first, then the boundary services are completed, and titles are created. This is the opposite approach to a green title or survey strata strategy.
How long it takes to subdivide land in WA will vary, according to how large the project is, and where it’s located. The process commences when the developer submits their application to the Western Australian Planning Commission. WAPC has three months to reach a verdict on the Form 1A application form.
A developer also needs approval from the local government.
The speed at which local governments work can vary according to a range of different factors but it can take up to 12 months for this approval to be secured. Developers then have up to 3 years from the date of their approval to clear the conditions requested by local governments.
Once a clearance application form is submitted to the WAPC, it is often cleared within around a month, and settlement agents can then arrange for titles to be transferred with Landgate, which takes another 2-4 weeks.
While the process will depend on the project, there are various steps involved in the subdivision strategy that remain the same for many real estate professionals.
Assessing the Subdivision
A property subdivision always begins with an assessment of a lot of lands primed to be subdivided. A team of property experts and surveyors can assess crucial details like minimum land requirements, zoning, and block size to help advise developers on the potential of a subdivision block, using their knowledge of the surrounding market.
Consulting with Governments and Planning Commissions
During the initial assessment and surveying stage, a subdivision plan can be drawn up for the site in question, which will later be handed over to the West Australian Planning Commission and local governments to request permission to build on and alter the proposed block of land.
Subdivision specialists can work on behalf of developers to consult with the planning commission and local bodies to improve their chances of approval.
Each council has a unique set of requirements to consider alongside the standard planning commission guidelines, which means that expertise in this area is often essential to achieving approval.
Submitting Applications and Achieving Clearance
Once the subdivision application has been conditionally approved, developers will need to take additional steps to ensure that all the conditions of their approval have been carried out. This could include things like clearing out land, arranging demolitions, installing sewerage and power services, and overcoming various hurdles along the way.
Handover and Titles
After conditions have been successfully cleared for the lot of land, the final survey will be completed, and an application should be made for lot titles. The subdivision project will then be classified as complete, and developers will be able to follow through with their construction plans.
Subdivision can be a complex process because various regulations and zoning classifications within Australian suburbs are subject to change. It's important to work alongside a specialist in subdivision to improve your chances of success.
The subdivision potential of a block of land will depend on various factors, including the Western Australian Planning Commission Residential Design Codes (R-Codes), which stipulate the maximum number of dwellings you are legally allowed to build on a designated area of land, depending on how it is zoned. An experienced developer will be able to help you navigate the zoning process.
How to make money by subdividing
The best way to make money by subdividing is to do your homework. Study the market to make sure your proposed subdivision is meeting a need in the relevant area. Ensure you know the likely costs involved, and make sure you’re working with experts who understand the process and are experienced in your location.
Novus Projects combines the experience and skills of one of Perth’s leading residential home builders, with the precision of a commercial construction builder.
Through our close ties with Novus Homes, and our 30 years of experience in the residential market, we have the ability to successfully deliver your subdivision project.
Contact us if you have a project you’d like to discuss or you would like like further advice on how to subdivide land in WA, we’d be happy to help.