As Auckland's land and housing shortage continues, larger city-fringe and suburban sections are going to come under increasing pressure from infill housing, says Bayleys national residential manager Daniel Coulson.

Handled right, that subdivision can turn a big back yard into a bit of a money machine. But like everything, it's never as easy as you might think. Owners who want to sub-divide their section need to:

• Arrange finance (if needed)
• Get resource consent from their local council
• Prepare a survey plan
• Lodge the subdivision plan and get approval from Land Information New Zealand (LINZ)
• Obtain the new titles from LINZ
• Install driveways, paths and infrastructure such as power and sewerage
• Build the new home

Owners who don't want to put the hard graft in can make money by selling the entire section and letting someone else do work and take the risks. The home owner still makes money because subdividable land sells at a premium.


"Anyone looking to sell their home and section prior to being subdivided, could see higher competition for the overall property, as the market remains open to both developers and those wanting a family home on a large section," Coulson says.

"Couple this with avoiding the bureaucratic requirements of applying for the necessary consents to subdivide (homeowners) will see this as the quicker, easier and sometimes higher-value proposition.

"Of course, in this scenario you will need to leave your family home, which some owners aren't willing to do."

There are other issues. Homeowners who stay put and sell off the back section may find the enjoyment of their home blighted by the new neighbouring property.

"If landowners are looking to sell the vacant section, they may not have control over what is built next door to their home, unless they impose covenants on the section," says Coulson. "However, this could in turn affect the value of the section on the market."

If you build on the section and look to sell the finished product, things that may be important to you may not be important to the market, he says. "Anyone considering this path must be careful not to over-capitalise and wind up diminishing their return on the development."

Financing a subdivision can be tricky if you haven't got a lot of equity in your property, says Stuart Wills, director at Mortgage Link West.

The subdivision process can cost $50,000 before the first sod is turned thanks to fees from lawyers, consultants, surveyors, council, LINZ, engineers and accountants. Then there's the cost of building the new home, which in Auckland is likely to be $300,000 or more.


When doing the numbers, homeowners need to be aware it's likely they'll pay tax on their profits from the subdivision, especially if they sell the new home on within two years.