Development Costs reallly digs into profits

[mlt]

Hi Fudge,
We have currently lodged a DA to turn our house into a duplex on the sunshine coast. We were told to allow 25k for infrastructure costs by council, our town planner and anyone else who wanted to put there 2 cents in. we eventually paid council $150.00 (approx) and they sent us a quote for infrastructure costs which came in at just under $7000.00. Big difference in costs. Fudge it may be worth your while to see if moreton bay council offers this service.
mlt

 

[Fudge]

Hi Fudge,
We have currently lodged a DA to turn our house into a duplex on the sunshine coast. We were told to allow 25k for infrastructure costs by council, our town planner and anyone else who wanted to put there 2 cents in. we eventually paid council $150.00 (approx) and they sent us a quote for infrastructure costs which came in at just under $7000.00. Big difference in costs. Fudge it may be worth your while to see if moreton bay council offers this service.
mlt

Yeah, I will look into it, but I have been told converting into a duplex (or other unit) is cheaper, but when you have a seperate dwelling, that is where the costs go up.

Do you ask the council to give you a quote for this service?

Do they go out and have a look at property?

F

 

[mlt]

Hi Fudge,
I went into council and paid the money and they emailed me the costs. Everything itemized. The quote is subject to any updates to the planning scheme.
No they didnt come to the property.
mlt

 

[mlt]

Fudge it may be worth your while to double check whether building a separate dwelling does cost more. We looked at purchasing a duplex block at creekwood (you would most likely know the estaste) and by the time we had done some research (2 days) the price had increased by 15k. The estate had forgotten to add the council infrastructure charges. This would amount to 7500k per unit which is similiar to our costings. Also bear in mind I have been told (Caloundra council) infrastructure costs have come down on the coast and have gone up inland.

 

[Sailesh Channan]

I agree with the original posters comments. Over the last two years we have found it very difficult to find viable sites to recommend to our clients.

This is largely to do with increasing site costs, stagnant end values and increased council fees and charges.

We are now also finding that if you need to know an estimate on sewer or storm water costs then you need to pay a fee to get an estimate. This process can also take weeks. Therefore, if you are trying to carry out due diligence before committing to a site then it you could be up for additional charges and then run out of time in your contract to carry out proper checks.

Over the years, the easier sites have been developed making developing a real mine field these days.

Therefore, patience is the key.

 

[Philip Thomas]

Australian Developer Contributions & Governments Role in Affordability

Developer contributions have been a sore point & a hot topic in Australia for many years.

If you look closely you will discover a key driver to the supply issue of new housing is state & local government taxes & contributions. Governments are heavily reliant on collecting various property taxes to fund their administration & community programs.

Real Estate demand is a function of supply at a specific price; the higher the price the lower the demand. So its not surprising that with the large amount of taxes & contributions that Australia has an affordability issue & major housing shortages in many parts of Australia.

If fees & taxes were reduced there would be more affordable development that would reduce the residential undersupply, increase building employment, reduce community issues relating to affordability & produce more fee & tax transactions for governments.

Currently NSW is one of the most expensive places to develop in terms of average developer contributions (Infrastructure & Sec 94) at around $35k per new lot. WA comes in second at around $25k per lot, followed by Qld. Vic sits around $19k, so its not surprising that things are going well in that state.

Most Local Government Areas will give you an indication of developer contributions over the phone or have the information it posted on their websites.

When you do your feasibility it is essential that include all your costs including developer contributions & taxes, fees & holding costs. The number of projects that I’ve seen that had a feasibility done on the back of a beer coaster is staggering. Maybe beer coaster feasibilities’ are OK for some in a rising market, but they are never a good way to manage your risk.

As a result of these government payments many developers have had to become more creative in their offerings, in a effort to reduce costs. Smaller lot sizes, higher density, smaller unit size, less parking, maintaining an existing residence, less expensive construction, faster planning, quicker build time etc can be important in reducing costs.

Bottom line however is that if governments want to stimulate more development & employment while addressing the affordability issue then they must look at reducing their property & development fees & taxes.

Philip

 

[mdesai]

Headworks cost

Many stalwarts here, so let me fire a question.

I've existing house on 1012sm block in Perth, the existing house is situated such I can put new house at rear in battleaxe format (without touching existing one) so that it can be subdivided in future either as SSP or green title.

I heard that new house can go on as a grouped dwelling (single owner - no subdivision at this stage). Do I still need to pay headworks fees for new house or new house can be connected to existing power, Water/Sewer connection in this case?

 

[Piston Broke]

The general public are convinced all us developers drive ferraris, smoke joints using rolled up $100 bills and drink champagne without our kellogs for breaky.

I reckon you do too

How can it be worth it?? (you must need to sit on the plot for a good while to increase value, or buy it for a steal.?F

There is a whole stack of big developers who made big payments (though they call them donations) with a huge back log of land to be developed.
How much does the small investor contribute to the political slush fund?
How much per dinner table have they paid?
How much per BBQ have they slushed?
And how much retainers do they pay the lobbyists?
Not much, and that's what they get in return.
The small fry are competition to be squeezed out, while the big ones get what they paid for.

And yes, many bought for a steal... but not just the property.


And in case you aint noticed yet, I'm against political donations which are really payments and bribes imo.

 

[Philip Thomas]

Group Development, Strata Development, Torrens Subdivision

Mdesai,

If you’ve got a 1012 sqm block in Perth, can maintain the existing residence & add a new residence then it sounds like a proposition to investigate further.

When they are talking "group development" this usually refers to a Strata Scheme. If you have the choice between a group development (Strata) or a straight Torrens subdivision (green title in WA) then in most cases you’d go for the straight Torrens.

Most people if they have a choice would prefer to live with 100% independence & not to live in a group (strata) development. Sure you can have a strata scheme with limited or non-onerous by-laws & can have virtually nothing to do with your neighbour, but there is still an attachment with group developments.

To build a second house with out any land subdivision is in most cases tricky. That is unless its done under a granny flat provision. If you do have 2 houses on a single lot then you cant sell then separately with out individual title.

To get individual title you need a strata or subdivision. This is usually where headworks & Developer Contributions come in.

Here the Authorities are collecting because of the additional pressure your new residence will be putting on existing infrastructure. They are also collecting because of the additional people you will be adding to an area that will use community services.

As mentioned before the exception is usually granny flats, that are intended to enable elderly family live independently with you.

To move this forward you may want to have a chat with a local Land Surveyor, as they are the experts on subdivisions. In relation to headworks fees have a chat to your duty planner at Council / Local Authority.

Philip Thomas