Four reasons now is a great time to get big profits from small developments

Dominique Grubisa
Dominique Grubisa

Published 5:22 am 4 Sep 2020

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COVID-19 may have put housing prices into decline, but there’s still money to be made in the property market. By carrying out small strategic developments, you can manufacture equity independent of the overall market– and emerge from 2020 a winner. DGI Founder and CEO Dominique Grubisa explains more.

The economic downturn caused by COVID-19 has put many parts of the Australian property market into decline. Figures from property market analyst CoreLogic show there was a national drop in housing sale prices of 1.6 per cent in the three months to July, with Sydney falling 2.1 per cent and Melbourne 3.2.

Experts are tipping a far more dramatic plunge as the impacts of the second wave of the coronavirus come to bear. With the Australian economy taking a battering due to lockdown, the government set to scale back its JobKeeper scheme from September, and banks getting ready to put an end to mortgage holidays, increasing numbers of Australians will begin experiencing mortgage stress. Figures from research firm Digital Finance Analytics suggest that in July some 1.5 million Australian households were having trouble meeting their rent or mortgage repayments – a rise of 1.45 million from the previous month.

While it may seem like a perfect time to run headfirst from the property market, there is one form of property investment with the potential to deliver short-term gains – even now. Small scale developments – where investors strategically add value to a property or parcel of land rather than simply waiting for capital gains – offer a way to escape the current economic doldrums and emerge from 2020 financially better off.

DGI Graduate Karen Baldwin was able to execute 5 property deals in 5 weeks with up to a $600k profit potential.

Karen Baldwin

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Here are four reasons why you might want to look closely at small-scale development now.

1) There’s strong demand for land and sub-divided properties

The Morrison government has been extremely proactive in its efforts to boost the economy through stimulus payments. In June, it added the HomeBuilder scheme, providing $25,000 to Australians prepared to build a new home or substantially renovate an existing one. While the payment itself is unlikely to be of significant benefit to developers, the demand it is creating certainly will be. Figures from property website realestate.com.au show searches for vacant land surged 180 per cent following the HomeBuilder announcement, while enquiries to real estate agents about land jumped 60 per cent. Meanwhile, Housing Industry Association figures show new home sales leapt up 77.6 per cent in June following the HomeBuilder announcement. It all shows there’s a strong appetite for both land and home-and-land packages, which smart developers can exploit.

2) Governments are making it easier for developers

State governments around the country are doing their best to keep their economies ticking over. To assist business, some are slashing the red tape and waiting times around property development – making it easier to complete projects. In NSW, for example, the Planning Reform Action Plan aims to drop the time it takes to make decisions on rezoning from an average of 630 days to 439 days; for larger and regionally significant projects from 364 to 273 days; and for state significant projects from 118 to 98 days.

The government has also spent millions of dollars to enhance its ePlanning platform with the aim of ensuring councils can get online to quickly process development applications.

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3) Interest rates are at historic lows

If you’re seeking a short-term return on investment, banks currently aren’t the place to look. With interest rates at historic lows, most term deposits are paying a pittance, while the share market continues to be hard to read and subject to wild swings. By contrast, low-interest rates provide a real advantage to property developers. Low rates can help lower capital costs on a project, potentially increasing profitability.

4)You can manufacture equity independent of the market

Perhaps the greatest benefit of undertaking a small development is having the ability to defy the overall property market and create something from nothing. Generally speaking, successful development involves seeing the potential of a property or piece of land and carrying out alterations that enhance its value. You then sell and reap the benefits. On a small scale, this might involve purchasing and subdividing an existing block, demolishing an existing structure or developing a greenfield site. You might see the project right through to its completion or sell half-way through to another investor or builder. Whatever the arrangement, knowing the market and understanding what the end customer wants is more important than temporary fluctuations in the price of housing. In this case, business acumen truly can triumph over tough economic conditions.

So, don’t write off the property market as an investment opportunity just yet. By implementing the right strategy on a small development project, you could be significantly wealthier this time next year.

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DOMINIQUE GRUBISA
Lawyer, Asset Protection Specialist and Property Educator

Dominique Grubisa is a practicing lawyer with over 25 years experience. She is a property investor and developer, an entrepreneur with businesses in Australia and Southeast Asia, a speaker, educator, writer and published author.


This column has been written for general information purposes only. It is not intended as legal, financial or investment advice and should not be construed or relied on as such.

About DG Institute

Founded in 2009, DG Institute strives to empower everyday Australians to grow and protect their wealth. Our goal is to provide direction, motivation and inspiration to our clients and help them perform at their very best. We do that through our professional services, in addition to teaching them how to grow their wealth through property and business education.


This column has been written for general information purposes only. It is not intended as legal, financial or investment advice and should not be construed or relied on as such.

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