Property development in NSW: the crash course

Property development in NSW

Welcome to the crash course on property development in New South Wales. In the next twenty minutes we walk the whole journey: how the planning system works, how to find and check a site, how to run the numbers, how to secure the land, design it, get it approved, build it, finance it, and sell it. Nothing here is legal or financial advice. It is the map, so that when you talk to your planner, your lawyer and your banker, you know the territory.

Twelve stops, one road

Here is the road. We start with the rules, because in New South Wales the rules decide what a block of land is worth. Then finding and checking a site, the feasibility that tells you what you can pay, and the deal that secures it. Design and consultants, the approval pathway, the certificates you need before a shovel goes in, construction, completion and sales, money and tax, and finally the risks that catch people out. Let us begin.

The system

Chapter one: the system. Development in New South Wales runs under the Environmental Planning and Assessment Act of 1979. Everything else hangs off it: the state policies, the council plans, the approval pathways and the appeals. If you understand the layers, you can read any site in the state.

Four layers of rules

Four layers. State Environmental Planning Policies sit on top and override the local plan where they say so: the Housing SEPP, the Codes SEPP for complying development, and the hazards and infrastructure policies. Below them, each council's Local Environmental Plan sets the zone, the height, the floor space ratio, the minimum lot size and the heritage listings. The Development Control Plan adds the detail: setbacks, landscaping, parking, privacy. And the contributions plan tells you what you pay toward local infrastructure.

Zones that matter to developers

The zone is the first question. R2 low density residential is most of Sydney and, since 2024, allows dual occupancies state-wide. R3 medium density is where townhouses, terraces and small apartment buildings live. R4 high density is apartments. E1 local centres and MU1 mixed use allow shop-top housing: retail below, homes above. Employment zones generally do not allow new housing at all, so a cheap industrial block is cheap for a reason.

The rules that changed the map

Two reforms rewrote the map. The Transport Oriented Development provisions, from May 2024, allow apartments to 22 metres and a floor space ratio of 2.5 to 1 within 400 metres of 37 stations. The Low and Mid-Rise Housing provisions, from February 2025, apply within 800 metres of 171 nominated centres and stations: terraces, townhouses and manor houses in R2, and apartments of up to six storeys in R3 and R4. Add the in-fill affordable housing bonus of up to 30 percent, and a block that was worth one house can be worth forty homes. These are non-refusal standards: a council cannot refuse on height or floor space if you meet them.

Consent authorities

Who decides? Council planners under delegation handle most development applications. A Local Planning Panel of independent experts decides contentious ones, for example with many objections or a large variation. Regionally significant projects, generally over thirty million dollars, go to a Sydney or Regional Planning Panel. Complying development is certified privately, without a council assessment at all. And if you are refused or ignored, the Land and Environment Court hears the appeal.

Finding a site

Chapter two: finding a site. Experienced developers will tell you the site is the deal. A good site forgives an average building; a bad site punishes a great one. So the search is where the money is made, and it is where most newcomers spend too little time.

Read a block in five minutes

You can read a block in five minutes on the NSW Planning Portal spatial viewer. Zone first. Then the height of buildings map and the floor space ratio map. Then minimum lot size and the width you need for the housing type. Then heritage: a listed item is out of every uplift pathway, and a conservation area means council keeps discretion on character. Finally the distance to a nominated station or town centre, because that decides whether the 2025 rules apply.

Constraints that kill feasibilities

Then the overlays. Flood planning areas and overland flow paths add floor-level and evacuation requirements and can exclude a site from the new policies altogether. Bushfire prone land brings construction standards and asset protection zones. Acid sulfate soils and contamination from an old service station or dry cleaner mean testing and remediation. Aircraft noise contours exclude land near airports. On the ground: easements and sewer mains through the middle of a block, significant trees, slope, and orientation, which drives solar access under the Apartment Design Guide.

What the land has to be

Shape matters as much as size. Townhouses want twelve metres of frontage, terraces eighteen, and an apartment building needs depth for setbacks, deep soil and a basement ramp that is not half the site. Corner blocks give two frontages but two street setbacks. Most of the best sites in established suburbs are made, not found: two or three adjoining houses bought together. They must share a zone and the same rules, and you usually option them one by one, which is chapter five.

Finding sites before they are listed

Where to look? Listings are the last place a good site appears, because by then every developer in Sydney has seen it. Scan every house near a nominated centre against the rules. Watch the development application feed to see which streets are already moving. Talk to agents who specialise in sites and write to owners directly. Deceased estates, long-held holdings and tired houses on large lots are the classic targets. Our Development scanner does exactly this: it checks every house, joins the neighbours, and ranks what stacks up.

Due diligence

Chapter three: due diligence. You have a candidate. Before you commit money, you prove that the site can legally and physically do what the feasibility assumes. Every item here has sunk a project somewhere.

The documents to pull

Start with paper. A title search shows the registered owners, mortgages, caveats and covenants. The deposited plan and the section 88B instrument reveal easements and restrictions on use, like a single-dwelling covenant that can stop a townhouse scheme. The section 10.7 planning certificate from council states the zone, the policies that apply, flood and bushfire status and any road widening. Pull the sewer diagram and the utility locations. If the land is strata or community title, the whole scheme must agree to sell, which has its own rules and timelines.

The investigations

Then the ground. A detail and level survey fixes boundaries, levels and trees, and often shows the fence is not where the title says. Geotechnical bores tell you whether the basement is in sand or sandstone, and where the water table sits; a wet basement in rock can add millions. A stage one contamination assessment reads the history; stage two drills if there is a risk. An arborist reports on protected trees. And check services: a new substation, a stormwater outlet across a neighbour or a sewer upgrade can each be a six-figure surprise.

Pre-lodgement conversations

And people. A pre-DA meeting with council surfaces the issues early and goes on the file. A town planner gives you a written opinion on the pathway, the variations you will need and the risk. An architect's capacity study tests how many homes actually fit once setbacks, solar access and parking are drawn, which is usually fewer than the floor space ratio suggests. A quantity surveyor gives an order-of-cost estimate. And walk the street: who overlooks the site, who will object, and who might sell.

Feasibility

Chapter four: feasibility. The feasibility answers one question: what is the most I can pay for this land and still make my margin. Every number in it is an assumption, so the discipline is to make the assumptions explicit and to test them.

Residual land value in six lines

The residual method runs backwards from the end. Gross realisation: the number of homes times the price each will sell for, taken from comparable new sales in the suburb, not from the agent's hopes. Take off selling costs and the GST you will pay on the margin. Take off construction, basement parking, demolition, consultants, council and state contributions, and a contingency. Take off finance and holding costs. Take off the developer's margin, typically fifteen to twenty-five percent on total cost. What is left, after stamp duty, is the most you can pay for the land.

Where the money goes

Where the money goes. Apartment construction in Sydney runs four to six thousand dollars a square metre of gross floor area, more for small buildings and difficult sites. Every basement car space is sixty to eighty thousand dollars, which is why parking rates drive feasibility. Consultants and approvals take eight to twelve percent of construction. Council section 7.11 or 7.12 contributions plus the state Housing and Productivity Contribution add twenty to forty thousand dollars per new home. And a contingency: five percent is thin, ten is honest on an old building or rock.

Sensitivity and the three numbers

Then test it. Drop sale prices ten percent. Lift construction fifteen percent. Add six months of delay and the interest that comes with it. Watch three numbers: margin on cost, margin on revenue and return on equity. Lenders want a margin on cost of around twenty percent and will fund to a share of total cost, so the equity you need is the rest. If the project only works with the affordable housing bonus or a variation council has never granted, it does not work yet.

Securing the land

Chapter five: securing the land. The goal is control without cost: lock the site in while you spend the next twelve months proving it, and only pay in full when the approval is in hand.

Ways to hold a site

A call option gives you the right, not the obligation, to buy at a fixed price within a period, for a fee the owner keeps. A put and call option commits both sides and defers stamp duty until the option is exercised, which is why developers like it. A contract with a long settlement, or one conditional on development consent, does a similar job. A joint venture puts the owner's land in as equity and shares the profit. A straight purchase is fastest, ties up the most capital and carries the planning risk entirely on you.

Buying from several owners

Amalgamating two or three houses means several owners and one deadline. Option each house separately with the same expiry, pay a premium over what the house is worth alone, because the uplift is shared, and put confidentiality and a drop-dead date in every document. Expect the last owner to know they are last. On some streets, a collective sale through one agent, where all the owners market together, gets everyone a better price than holding out.

Conditions and traps

Protect yourself. Negotiate a due diligence period with the right to walk away. Get access for surveys, bores and later for marketing. The owner must sign the development application as landowner, so get that consent in the option. Lodge a caveat so the owner cannot sell around you. And tie your sunset date to a realistic approval timeline: a development application in Sydney takes six to twelve months, an appeal adds another six to nine.

Design and consultants

Chapter six: design and consultants. A development application for a residential building in New South Wales is a stack of a dozen reports around a set of drawings. Assembling and managing that team is a large part of the developer's job.

Who you need

The core team. An architect, who for apartment buildings must be registered under the Design and Building Practitioners Act. A town planner who writes the statement of environmental effects and argues any variation. A surveyor and geotechnical and civil engineers. Structural, hydraulic, electrical, mechanical and fire engineers. A landscape architect, an arborist, an acoustic consultant, a traffic engineer, and the energy assessors for BASIX and NatHERS. For bigger projects, add access, waste, wind and a quantity surveyor's cost report.

The Apartment Design Guide

Apartment buildings of three or more storeys with four or more dwellings fall under State Environmental Planning Policy 65 and the Apartment Design Guide. Seventy percent of apartments need two hours of winter sun, sixty percent need cross ventilation, and there are minimum internal sizes: thirty-five square metres for a studio, fifty for one bedroom, seventy for two, ninety for three. Many councils run a design review panel. Draw the building to these numbers from day one, because they set your yield more than the floor space ratio does.

Low-rise design controls

For houses, dual occupancies and townhouses, the Low Rise Housing Diversity Code and the council's DCP set the controls: private open space, landscaped area, deep soil, privacy, overshadowing and setbacks. Parking is usually one space per dwelling, less near centres under the new policies. And since 2025 the NSW Pattern Book offers pre-approved terrace, townhouse and manor house designs that can be certified as complying development in about ten days, which removes most of the approval risk for small sites.

Approvals

Chapter seven: approvals. There are two doors: a development application assessed by council, or complying development certified privately against a code. Which door you can use is decided by the site and the design, and the difference in time and risk is enormous.

A development application, step by step

A development application is lodged on the NSW Planning Portal with the drawings, the reports and the fees, which scale with the cost of works. Council notifies the neighbours, who have two to four weeks to object. Assessment follows: requests for further information, referrals to Sydney Water, the Rural Fire Service or Transport for NSW, and design review. Then a determination by staff under delegation, by a panel, or by the court. A consent comes with conditions, sometimes dozens, and those conditions are part of the cost.

Clause 4.6, section 4.55 and the clock

Two clauses do a lot of work. Clause 4.6 is the written request to vary a development standard such as height; it must show that compliance is unreasonable or unnecessary and that there are sufficient environmental planning grounds. Section 4.55 modifies a consent after it is granted, which is how you refine a design without starting again. On timing: if council has not decided after forty days, sixty for integrated development, the application is deemed refused and you may appeal to the Land and Environment Court. You have six months from any determination to appeal, and most appeals settle at a conciliation conference with an amended design.

The fast door

Complying development is the fast door. A registered certifier checks the design against the Codes SEPP and issues a complying development certificate: no merit assessment and no weighing of objections. It covers houses, dual occupancies, the Low Rise Housing Diversity Code and the Pattern Book designs. It is not available on heritage items and on some flood and bushfire land, and the design must meet every standard exactly. When it fits, you have an approval in ten to twenty business days instead of ten months.

Contributions and agreements

What you pay with the consent. Section 7.11 contributions are per-dwelling amounts set by a council plan, often twenty to thirty thousand dollars a home in Sydney. Some councils charge a section 7.12 levy instead, a percentage of the cost of works. The state Housing and Productivity Contribution applies on top. Larger uplifts may come with a voluntary planning agreement for public benefit. And affordable housing contributions apply in some council areas and on every Transport Oriented Development site. Price them all into the feasibility before you buy.

Before you build

Chapter eight: before you build. A development consent is permission in principle. Between the consent and the first concrete pour there is a second layer of certificates, registrations and insurance, and for apartment buildings the Building Commissioner is watching.

From consent to construction

First satisfy the pre-construction conditions: detailed stormwater, construction management, dilapidation reports on neighbours, sometimes a section 88B instrument to register. Appoint a principal certifier, who inspects at critical stages. Obtain a construction certificate confirming the detailed design complies with the National Construction Code and the consent; you can stage it, with early works first. Pay the long service levy, a quarter of a percent of the cost of works. Then give notice of commencement.

The Building Commissioner regime

Apartment buildings are class 2, and since 2021 they sit under the Design and Building Practitioners Act. Designers and builders must be registered, and the regulated designs for structure, fire, waterproofing and services must be declared and lodged on the Planning Portal before that work starts. You must give the Building Commission an expected completion notice six to twelve months before the occupation certificate, and the regulator can audit the building and stop an occupation certificate on a defective one. For buildings over three storeys, a strata building bond of two percent of the contract price is lodged against defects.

Cover and contracts

Insurance and the builder. Residential work up to three storeys needs Home Building Compensation cover through icare before work starts; buildings over three storeys are exempt and rely on the bond. Contract works, public liability and professional indemnity cover the rest. Choose a contract that matches the risk you want: fixed price, cost plus, or design and construct. Fix the programme, liquidated damages for delay and retention for defects. And check the builder: licence, references, financial capacity and how many other projects they are running right now.

Construction

Chapter nine: construction. Once you are building, interest runs every day and every change costs more than it would have on paper. The developer's role shifts from creating value to protecting it.

The monthly rhythm

The monthly rhythm. The builder submits a progress claim; your quantity surveyor certifies what is actually complete and the lender pays against that certificate. The Security of Payment Act is strict: respond to a payment claim with a schedule within ten business days or you owe the full amount. Price and approve every variation in writing before the work is done. The principal certifier inspects at the critical stages. And keep the discipline of site meetings, an updated programme and a cash flow forecast your financier trusts.

The usual troubles

What goes wrong. Latent conditions in the ground: rock, water, contamination, the footings of the building before. Design changes that ripple through five engineers' drawings. Builder insolvency, which is why the contract needs step-in rights and your security needs to be real. Neighbours, who have dilapidation reports, crane over-sail agreements, working hours and dust to complain about. Weather and supply delays. The contingency you set in chapter four is spent here.

Selling off the plan

Most apartment projects sell off the plan during the build. A display suite, renders and an agent on a success fee. Each contract carries a disclosure statement with the draft strata plan, by-laws and schedule of finishes, and buyers get ten business days to cool off. Sunset clauses let either side end the contract if the plan is not registered by a date, but since 2015 a developer cannot rescind without the buyer's consent or a court order. Pre-sales matter because the construction lender wants a share of the debt covered by exchanged contracts before it funds.

Completion and sales

Chapter ten: completion and sales. The building is finished. Now it has to become a set of registered titles that buyers can settle on, and that is a sequence with its own critical path.

From last inspection to settlement

The sequence. Final inspections, the fire safety certificate and BASIX compliance. The occupation certificate from the principal certifier, which for a class 2 building the regulator can hold. The strata plan is signed off by council or an accredited certifier as a subdivision certificate and lodged with NSW Land Registry Services. When it registers, the new titles exist and the off-the-plan contracts become unconditional. Buyers settle two to three weeks after notice, electronically, and the lender is repaid from the first settlements.

Defects and warranties

After the keys. Statutory warranties run six years for major defects and two years for everything else. For bonded buildings an independent inspector reports at fifteen to eighteen months and again before two years, and the bond pays for what the builder does not fix. During the initial period you still control the owners corporation, with duties to it. Hand over the building manual, warranties and as-built drawings. And release the builder's retention only when the defects period is clean.

Money and tax

Chapter eleven: money and tax. Development is a financing business as much as a building business. The structure you choose on day one decides your tax, your liability and whether a bank will lend to you.

Who funds what

The capital stack. Equity comes first: twenty-five to forty percent of total cost, yours or your investors'. Senior debt from a bank or a non-bank lender funds sixty to seventy percent of cost, with conditions on pre-sales, a qualified builder and a fixed price contract. Mezzanine debt or preferred equity closes the gap at a much higher price. The land is usually financed first, then the construction loan is drawn monthly against the quantity surveyor's certificates, with interest capitalised and the whole lot repaid from settlements.

What you pay along the way

Taxes. Transfer duty on the land, with surcharge duty for foreign purchasers. Land tax every December you hold the land above the threshold, and surcharge land tax for foreign owners. GST applies to new residential sales, normally under the margin scheme, which taxes the difference between your purchase price and the sale price. The profit on a development undertaken to sell is income, not a capital gain, so no discount. And since 2018 buyers withhold the GST at settlement and remit it to the Tax Office directly.

Holding the project

Structure. Most developers run each project through a special purpose vehicle, a company, often with a unit trust above it, to separate liability and bring investors in cleanly. Lenders still take personal guarantees and directors still carry duties. Get your accountant and lawyer involved before you sign the option, because duty, land tax and GST outcomes depend on who buys and when. And keep records for the warranty period and the Tax Office.

Risk

Chapter twelve: risk. Almost every failed project fails for one of a short list of reasons. Knowing the list is most of the protection.

How projects die

How projects die. Paying too much for the land on a feasibility that assumed the best case. Planning risk: a refusal, an appeal that takes a year, a policy that changes under you. Construction cost escalation and a builder that fails mid-build. The market: prices that fall between the day you optioned the site and the day you settle. And time: every month of delay is interest and lost margin, which is why the good operators are obsessed with the programme.

The habits that protect you

The habits that protect you. Buy on a conservative feasibility and run the sensitivities. Control the land by option until the approval is certain. Get pre-DA advice and a planner's opinion before you commit money. A fixed price contract with a builder who can finish, and a real contingency. Pre-sell enough to cover the debt, then build. None of it is glamorous. All of it is why the developers who are still here after three cycles are still here.

Start with the site

Where to from here? Start with the site. On this website, Development scans every house near a nominated station or town centre, applies the rules we covered, joins the neighbours and costs every option, so you see what a site could be worth before anyone lists it. The designer turns that into drawings, and the estimator turns the drawings into a cost. Thank you for watching, and good luck with your first, or your fiftieth, project.