Question from Alan Thomson updated on 9th March 2007:
Our expert responded:
Not a lot is simple and easy when dealing with subdividing so I have enlisted the help of Chris Kitsen a Planning Consultant with Barry Satchell Consultants (www.bscl.co.nz).
He answers: Without knowing more about the land in question it’s not easy to give accurate estimates on costs. It is also dependent on where the land is. The costs in Auckland will be different from Hamilton for the same size land. If we make some assumptions and take it as a given that you have got as much information from the vendor and local Council as possible then your next step should be to get a feasibility study from your surveyor/resource management specialist.
You will need to tell them what you want to do with the site. Do you want to make vacant sections to sell or do the build yourself? Do you want to build first and then subdivide around the new buildings? It may be possible to create sections that also have the option for a minor dwelling unit. A Surveyor, generally within a team of engineers & planners, should be consulted early. The land title needs to be fully checked. This shows who the actual owner is, if the property/site is mortgaged, what covenants or easements there may be along with a range of other potential effects on further land development for the site. The surveyor or consultancy team would need to be contacted throughout the consent process, the build, and land title process. As part of a feasibility study they will be able to provide you with a range of options and potential costings for the site. It may be that due to the size of the site that the density rules can be relaxed if design aspects are considered with Council. This could mean an additional unit. This is dependent on a number of other factors within Councils District Plan that a Planner would be able to advise you on.
The study would also consider professional reports such as flood & soakage reports, arborist, geotechnical, urban design, engineering design & approvals, and any urban design/architectural reports that your process may require. The actual costs of subdividing are dependent on a variety of variables. Most consultancies will give fee estimates not a fixed price due to site variability and Council rules. This is because of the need to deal with so many different rules and regulations within a single Council. Each Council within a region will also have different rules and regulations about the same issues. Your main concern would be around timeliness and its relation to cost. When you sign that sale & purchase agreement you will have no idea how long the total process will take, you can only make assumptions and have your consultants go through a similar string measurement process on your behalf. The costs can of course be nailed down, but usually by then you have either bought the site or moved onto something with greater certainty.
The thing with subdivisions is of course the greater profit margin potential. So what about answering the question as to costs? In any Council you will have financial and development contributions and building levies. This can be as much as $20,000 per unit. Councils are generally in a full cost recovery mode at present and may charge you $4-5,000 for your 3-4 lot subdivision consent. A consultancy with surveyors, engineers and planners may charge between $15-25,000 for survey, engineering, council consent applications and for work up to applying for title. The associated drainage servicing costs are partly dependent on topography and available infrastructure. A rough guide for drainage servicing costs for four lots being approximately $30-50,000. This is not including the associated private drainage within each of the new lots. If you take the option to actually construct the houses there are additional costs which are probably easier to pin down. The subdivision process for four lots and three new houses may be $140,000. Ps if it was easy then everybody would be doing it. Get a good team.
Lisa is a Certified Financial Planner and a director of Acumen Inc, a financial services company offering a full range of services including portfolio management, investment advice, property investment advice and mentoring courses, insurance and mortgages.