Next Property Workshop on 6th July 2024

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Minor Dwelling or Subdivision?

The introduction of the Unitary Plan means we have to consider an important choice between constructing a minor dwelling, or subdividing the property.

My general rule is to subdivide if you can instead of adding a minor dwelling, as by adding the minor dwelling, you only increase the cashflow, with little capital growth. Say a house’s value is 1M, adding a minor dwelling would cost roughly 200k and the value increases to 1.2M. However, if you subdivide, then the existing property would drop in value to, say, 850k, the new property would cost 450k to build (including council costs etc.) with the value getting to around 1M. You now have the total value of 1.85M with the cost of 1.45M and you’d have increased both value and rental income substantially.

As to whether a home and income estate still a good buy? It depends on your goals, you may pick up a return somewhere near 5% by doing nothing, relying instead on natural capital growth. However, buying a property which enables you to subdivide can not only provide a better rental yield, but the capital grows as well.

Buying a property which enables you to subdivide can not only provide a better rental yield, but the capital grows as well.

If the new zoning is the single house zone, then your only options are less flexible, and your best choice is likely to add a minor dwelling if you can.

~Lucia