Lower Inflation Sets the Scene for Subdivision (Apr 24)

The good news out recently is that we are seeing the back of high inflation. That will enable interest rates to fall in the coming months. With the annual rate down to 4% from over 7%, the Reserve Bank will feel more confident with its decision to hold the official cash rate (OCR) at 5.5% and, even better, should not need to raise it further.  So how does this affect subdivision and development?

The ability for people to take out a mortgage to purchase land or a house is controlled by the banks and their perception of one's ability to pay back the loan. Therefore, as interest rates track downward and repayment becomes achievable by more, demand for property will return and prices will rise over a period of time.

The increased demand and availability of finance at reasonable interest rates will allow those with saleable titles to sell.  With more confidence in the marketplace, subdividers will be able to more easily obtain finance and we will be heading for boom times again! We are already seeing signs that some banks are more relaxed in their attitude to lending.

The question is, ‘how long will it take for mortgage rates to fall?’ The answer is ‘about as long as it takes to carry out a subdivision’. The finance industry is betting on about a year at present, based on the term that people are fixing their mortgage for, and that is about the minimum that you would need to get a subdivision across the line with your local council.

So, those landowners getting advice on the process now, we believe, are doing the right thing. We know that it takes precious time to design, navigate the intricacies of council rules, secure the necessary professional reports, obtain the required consents and comply with all legal requirements. To take your subdivision through that process before everybody gets on the bandwagon, as will happen, is smart. You never know, the council might be able to fast-track it even!

Subdivision is a complex and time-consuming process, influenced by various external factors. However, by engaging a project manager through a local specialist subdivision company, you can position yourselves for success, ready to seize opportunities as they unfold. It will never get easier than today.

If you have considered subdividing to create sections for sale, land banking titles while the rules still allow it for future capital returns, or providing a section for your retirement or family we are more than happy to explore the options with you.  Feel free to give us a call!

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