How to Assess Development Potential on a Property

Joel Hynes
Nov 13
5 min read

Understanding Development Potential in the Illawarra

In a market where space is limited and housing demand remains strong, understanding development potential has become a significant advantage for both buyers and investors.

Whether you're considering a dual occupancy, subdivision, or townhouse project, the ability to assess a property's potential before you buy can make or break a deal.

In the Illawarra, opportunities exist across a mix of established and emerging suburbs — from Corrimal and Woonona, where R3 zoning supports medium density, to Albion Park and Calderwood, where new land releases are driving fresh development.

At The Shoreline Agency, we work with clients who want to move beyond standard purchases — helping them identify sites with long-term value, development flexibility, and realistic feasibility.

Here's how to approach your next property with a developer's mindset — calmly, strategically, and with local knowledge on your side.

Start with the Fundamentals: Zoning, Size, and Shape

Before you start sketching plans or running profit models, begin with the basics: what the planning rules actually allow.

1. Zoning and land use

Every property in the Illawarra sits within a specific Wollongong or Shellharbour Local Environmental Plan (LEP) zone.

This determines what type of development can occur.

The key residential zones are:

R2 Low Density Residential: Suited to single homes, granny flats, or (in some cases) dual occupancies.
R3 Medium Density Residential: Allows for townhouses and small unit developments (typically up to two or three storeys).
R4 High Density Residential: Permits apartment buildings and mixed-use developments, usually close to town centres or rail hubs.

You can check zoning on the NSW Planning Portal or the local council website using the property address.

Local insight: Areas like Corrimal, Fairy Meadow, and Figtree are experiencing an increase in R3 rezoning activity, while the northern suburbs, such as Bulli and Woonona, maintain a mix of R2 family zoning and potential for small-scale dual occupancy.

2. Minimum lot size and frontage

Each zone has a minimum lot size and frontage requirement for subdivision or multi-dwelling projects.

For example:

Dual occupancy (attached or detached): often minimum 600m² with 15–18m frontage.
Townhouses (R3): may require 700–1,000 m² or more, depending on layout and access.

If a block falls slightly short, you may still have options — but development will likely require a variation (known as a Clause 4.6 request) and supporting justification.

3. Shape, slope, and access

A block's shape and topography are just as important as size. Irregular or sloping blocks may reduce usable land or increase construction costs. Easy access for vehicles and services (driveway gradients, stormwater, and sewer) can make or break a development's feasibility.

Example: A rectangular, near-level 700m² lot in Woonona with 18m frontage is ideal for a dual-occupancy or townhouse pair. The same block on a steep incline might require retaining walls, which can limit profitability.

Scaffolds are being erected on a house under construction.

Check the Constraints and Feasibility Early

Once you understand what the planning rules allow, the next step is assessing what's practically and financially feasible.

1. Site constraints

Even if zoning supports development, constraints can limit what's achievable. Always check:

Flood and bushfire overlays
Heritage or conservation listings
Easements (e.g., stormwater or sewer lines)
Tree preservation orders
Driveway or access restrictions

These can all add time, cost, or complexity. A quick review via the council's online mapping tools or a Section 10.7 Planning Certificate (available from the council) will identify these constraints.

Local insight: Parts of Thirroul, Towradgi, and Lake Illawarra are situated within flood-prone zones, which can impact floor heights and stormwater design. In hillside areas like Mount Pleasant or Keiraville, slope and retaining costs are the key constraint.

2. Development controls

Each council's Development Control Plan (DCP) outlines specifics such as:

Building heights and setbacks
Landscaping and private open space
Parking and driveways
Site coverage (percentage of land that can be built upon)

Reviewing the DCP helps confirm whether your concept (e.g., two townhouses or a subdivision) fits within local policy — before you spend money on design or DA lodgement.

3. Feasibility assessment

Feasibility is where many buyers overestimate returns or underestimate costs.

A practical feasibility check should include:

Acquisition cost: purchase price + stamp duty + legal fees
Build cost: based on local builder rates (use $2,200–$3,000 per m² for mid-tier construction)
Consultant fees: town planner, surveyor, architect, engineer
Finance costs: interest, holding, and contingency (allow 10–15%)
Sales value: conservative estimate based on recent comparable sales
Profit margin: most developers target a 15–20% minimum margin on the total development cost

If the numbers don't stack up with realistic assumptions, the deal is likely not viable.

Example: A dual occupancy project in Albion Park might cost $1 million all-in and resell for $1 million, offering an achievable and steady profit margin.

The same build in Thirroul, while delivering higher sales prices, may face increased design and compliance costs due to slope and zoning limitations.

Look Ahead: Market Demand and Long-Term Potential

Assessing development potential isn't just about what you can build — it's about what the Market actually wants and how it's likely to evolve.

1. Buyer and tenant demand

Before committing to a development, understand who your end buyer or tenant will be.

In the Illawarra, demand is strongest for:

Townhouses and duplexes in coastal suburbs like Woonona and Bulli
New homes in family areas like Calderwood and Flinders
Low-maintenance villas and apartments near Wollongong and Shellharbour CBDs

If your proposed product doesn't align with local demand, even a well-executed project may struggle to achieve its target pricing.

2. Infrastructure and amenity pipeline

Future infrastructure is a major driver of long-term potential.

Track projects like:

The M1 Mount Ousley Interchange and F6 Extension, improving connectivity
Shellharbour City Centre expansion
University and health precinct growth in Wollongong

Proximity to these hubs enhances both livability and resale appeal.

3. Exit strategy

Even if you're developing for personal use, always consider resale. Ask:

Will this design appeal to the broadest Market segment?
Does the area support ongoing capital growth?
How will local supply and zoning changes affect value in five years?

Local insight: In 2025, the strongest Illawarra projects strike a balance between design quality and simplicity — duplexes and small townhouse clusters that seamlessly integrate into existing neighbourhoods.

Overly ambitious designs or large-scale concepts often face longer approval times and higher risk.

Putting It All Together – A Step-by-Step Process

When assessing development potential:

Confirm zoning and permissible uses via the NSW Planning Portal or council.
Check minimum lot size and frontage requirements.
Identify physical constraints, such as slope, access, easements, or flood overlays.
Review DCP controls for setbacks, height, parking, and landscaping.
Run a basic feasibility using conservative build costs and resale estimates.
Validate demand with local sales and buyer profiles.
Consult professionals early — a planner, builder, and buyer's advocate.

This process helps you move from speculation to strategy — and make confident, informed property decisions.

Ready to Explore Development Opportunities?

If you're considering buying a property with development potential in Wollongong, Shellharbour, or Kiama, getting the due diligence right upfront can save you thousands — and uncover opportunities others miss.

At The Shoreline Agency, we help buyers: