We are often asked – Is subdividing worth it in New Zealand? Well, in our market, I can say that I have never seen a client lose value. Like everything, there is much more money to be made if you research the market well, take specialist advice early on and, dare I say it – time the market right.
The biggest advantage to exploit is to gain consent and construct the required services for your new section while the market is quiet and property prices (and construction prices and timeframes) have stabilised. Then you are ready to sell your section following the peak in interest rates. History tells us that in the following years, reducing interest rates fuel a big rise in property prices.
As a general rule of thumb, the selling price of a section or lifestyle block is made up of three components – It is said that the value of a section can be made up of one-third land cost, one-third development costs and one-third profit.
For those who already own the land, you are generally aiming to sell off some land that is vacant and otherwise nonproductive. Therefore, the land cost can be relatively minor, providing the potential for maximum gross profit. If the subdivision is well planned and does not destroy the ambience of the remaining property, the subdivision is not likely to impact too negatively on the value of your retained land.
So, financially, it is mostly well worth it, and you could possibly double your investment if the project is managed well.
Subdividing is a complex process, requiring resource consent from your local council. Whilst numerous rules and regulations must be considered and complied with, a competent subdivision project manager can expedite the process for you.
Council will require the certification of a stable building site and the construction of safe access from the road. They will also require connections to be established to water, power, stormwater, wastewater and the internet, as appropriate. This all requires tight management and regular supervision to avoid delays, potential rework and cost overruns.
With a competent project manager from an experienced specialist subdivision company behind you, all you need is patience, time and money. There are indeed rewards to be reaped.
If you are considering subdivision either for profit, or to perhaps provide some flexibility in managing or exiting your farm or land holding, please feel free to give us a call.