Townhouse Project Feasibility: How to Test a Site Before You Buy
A townhouse project is feasible when the number of dwellings the planning scheme will allow, sold at realistic prices, covers every cost and still leaves a profit that justifies the risk, at the price you are paying for the land. Planning comes first because it sets the yield, and yield drives every other number. In Brisbane and South East Queensland, that means testing the site against the council’s planning scheme before the numbers are finalised, which is the stage where we work with developers and owners at Urbanza Town Planners.
TL;DR
Feasibility answers one question: what can this land be worth to you once the dwellings, costs and profit are subtracted from the sales revenue?
Planning decides yield. A site that supports six townhouses and a site that supports four can be the same size but produce very different land values.
Use the residual land value method: total revenue, less all costs excluding land, less required profit. Compare the result with the asking price.
Stress test the result. A 10 per cent fall in sale prices hits the land value far harder than 10 per cent, because profit is what is left over.
Get the planning assessment done before you sign a contract or while conditions still protect you, not after.
Table of Contents
What a townhouse feasibility study actually tests
A feasibility study is a decision tool, not a report to file. It tells you whether to buy, what to pay, or whether to walk away. The NSW Government’s Housing Kit sets out a five-step method for financial feasibility: work out the site yield under the planning controls, estimate future revenue, identify development costs and timing, set the required developer profit and contingency, then subtract total costs (excluding land) from total revenue to reach a residual land value. That value is compared with the market price of the land.
The method is the same in any state. What changes is the planning scheme that sets the yield. In Queensland the scheme is the local council’s, so a site in Moreton Bay, Brisbane or Logan is tested against different rules, and the same block type can give different answers.
In plain terms, you are asking four things:
How many townhouses can legally go on this lot, and by what approval pathway?
What will each one sell for?
What will it cost to get from the bare site to settlement?
After profit, what is the most the land can be worth to me?
Step 1: Work out the yield from the planning scheme
This is the step most spreadsheets skip, and it is where feasibility most often fails. A calculator can assume six townhouses. The planning scheme decides whether six is possible.
The controls that usually decide yield on a Queensland townhouse site are:
Zoning and the scheme’s intent for the area. Some zones are built for multiple dwellings and some are not. A town planner reads the zone and any overlays together.
Minimum lot size and frontage. Frontage affects driveway design and how many dwellings can face the street.
Height, setbacks and site cover. These set how much building fits on the lot.
Car parking and access. Driveways and manoeuvring areas take land away from dwellings.
Overlays. Flooding, bushfire, heritage, character and vegetation overlays can reduce yield or change the design.
Approval level. A proposal that meets the scheme’s acceptable outcomes is generally in a different position from one that needs a council judgement call. That difference shows up in time, cost and risk.
Do this assessment against the actual planning scheme for the specific address, not against general rules of thumb. Rules of thumb such as “you need 600 m² for two dwellings” are starting points, and they fall apart at the first overlay.
Our site feasibility assessment guide for Brisbane developers walks through what we look at on a site before anyone commits. Our own approach is practical and commercially focused: we guide clients from the initial site investigation through to lodgement, tailored to the requirements of the local council.
Townhouses, dual occupancy or subdivision?
The same lot can often support more than one type of project, and each has a different feasibility profile.
Option | Typical thinking | What drives the numbers |
Dual occupancy or duplex | Two dwellings, simpler build, lower cost | Lot size, frontage, whether the scheme allows two dwellings |
Townhouses (three or more) | More dwellings, higher revenue and funding need | Yield, parking and access layout, infrastructure charges |
Subdivision (land split) | Creating lots to sell or build on | Minimum lot size, frontage, servicing, approvals |
If your land might suit a split, our guide on whether you can subdivide your property in Queensland explains the thresholds. Testing all the options on one site before choosing is a normal part of a sound feasibility.
Step 2: Estimate revenue honestly
Revenue is gross development value (GDV): the total you expect from selling every dwelling. Be conservative here, because the whole result leans on it.
Use recent sales of comparable new or near-new townhouses in the same suburb, not the suburb median for older houses.
Match the product: bedrooms, car spaces, land area and finish level.
Allow for selling costs such as agent fees and marketing, which come off GDV.
Use sale prices that reflect the time the project will actually finish, not today’s market, if the build and approval will take a year or more.
A useful habit is to put a price range in rather than a single price, then run the study on the low end.
Step 3: Build the cost stack
Costs fall into groups. Missing a group is the commonest cause of a feasibility that looked good and a project that did not.
Land: the purchase price, stamp duty and legal costs. In the residual method, this is the answer you are solving for.
Planning and approvals: town planner, architect, engineers, surveyors, specialist reports and council application fees. Our guide to development application costs in Queensland sets out what makes up this group.
Infrastructure charges: Queensland councils charge for the extra demand each new dwelling places on water, sewer, roads and parks. This is a per-dwelling cost and can be significant, so check it against the council’s current charges for the exact site.
Construction: the build itself, plus site works, driveways, services and landscaping.
Finance: interest and lender fees during the build.
Holding costs: rates, land tax and insurance while the project runs.
Selling costs: agents, marketing and legal costs at settlement.
Contingency: an allowance for the things nobody has priced yet.
What construction costs look like
Build cost is the largest line, so it deserves care. One Australian builder’s 2026 cost guide puts townhouse construction at about $2,720 to $3,184 per m², with most projects landing between $400,000 and $700,000 per dwelling before land. Site conditions, design complexity, finishes, council requirements and access all move the figure. Treat published averages as a sanity check, and base your feasibility on a quote or a quantity surveyor’s estimate for your actual design.
The Housing Kit gives sensible advice on detail: it says a feasibility should not over-focus on every small cost item, as long as overall estimates are reasonable and come from good sources, and it warns that padding contingencies too heavily can hide the true viability of a project. Aim for realistic, not inflated.
Step 4: Calculate the residual land value, with a worked example
The core formula is simple:
Residual land value = GDV − all costs (excluding land) − developer’s profit
Here is an illustrative example. The figures are assumptions chosen to show the method, not Brisbane market data, and your project will differ.
Four townhouses, each sold at $1,250,000.
Item | Amount |
Gross development value (4 × $1,250,000) | $5,000,000 |
Construction (4 × $600,000) | $2,400,000 |
Professional fees and approvals (10% of construction) | $240,000 |
Contingency (5% of construction) | $120,000 |
Finance | $200,000 |
Selling costs (3% of GDV) | $150,000 |
Total costs excluding land | $3,110,000 |
Required profit (20% of GDV) | $1,000,000 |
Residual land value | $890,000 |
A quick check on the sums: $2,400,000 + $240,000 + $120,000 + $200,000 + $150,000 = $3,110,000, and $5,000,000 − $3,110,000 − $1,000,000 = $890,000.
That $890,000 is the most you could pay for the land, including stamp duty and legal costs, and still hit your profit target. If the owner is asking more, the project does not meet your target on these assumptions. You can negotiate, change the design to lift yield, or walk away.
Profit can be expressed on GDV or on cost, and lenders and developers use both. Decide which you are using and state it, because 20 per cent on GDV is a different figure from 20 per cent on cost.
Step 5: Stress test before you commit
A single result is a guess. A feasibility becomes useful when you change the inputs and watch what happens.
Using the same example:
Sale prices fall 10%. GDV drops to $4,500,000. Selling costs fall to $135,000, profit at 20% becomes $900,000, and residual land value drops to $4,500,000 − $3,095,000 − $900,000 = $505,000. A 10 per cent price fall removes $385,000 of land value, which is 43 per cent of the original figure.
Construction costs rise 10%. Construction becomes $2,640,000, fees $264,000 and contingency $132,000. Total costs are $3,386,000, and the residual land value is $614,000, a drop of $276,000.
The lesson is that land value absorbs every error. If your purchase price assumes everything goes right, a small slip erases the profit. Test the price, the build cost, the timeline and the planning outcome, and only proceed if the project still stands at the weak end.
Timing and cash flow
Profit matters, but so does when money moves. Funding is usually at its highest before settlements begin, so the peak cash requirement, not the final profit, is what your equity and lender must cover. Build the cash flow quarter by quarter, and see how timing pressure affects the project in cash flow in construction. Approval time belongs in the model too, because every extra month of holding the land costs interest and rates.
Our guide to the Queensland development application process explains the stages and where time is usually lost, so you can put a realistic timeline into your study.
Where feasibility goes wrong
Assuming yield before checking the scheme. The number of dwellings is a planning outcome, not a design wish.
Overlays found late. A flood or bushfire overlay discovered after settlement changes the design and the budget.
Using today’s prices for a project that will sell in two years.
Leaving out infrastructure charges or specialist reports.
Treating approval as certain. No planner can promise it. A well-prepared application gives you the best position, and the study should still show what happens if conditions or timing change.
Thin contingency on a site with difficult access or services.
Our perspective
Most feasibility problems we see begin before a single dollar is modelled. The yield on the page is not the yield the planning scheme will support, and everything downstream inherits the error. That is why we start with the site and the council’s requirements, then let the numbers follow. Our approach is practical and commercially focused: we want you to know what can be built, by what pathway, and what that means for the price you can pay, before you are locked in. We manage townhouse, dual occupancy, subdivision and commercial applications across Brisbane and South East Queensland, and we guide clients from the first site investigation to lodgement. A clear planning view early is cheaper than a redesign later. Jwal
Test your site with us
If you are weighing up a block, we assess the planning side of the feasibility: what the scheme allows, which approval pathway applies, and what that means for yield. We handle townhouses, dual occupancy, apartments, subdivisions and commercial projects, from the first site investigation through to lodgement. See our town planning services to find the project type that fits yours.
If your site is in the north of Brisbane or Moreton Bay, our page on a town planner in Caboolture explains when to bring one in and what to expect.
FAQ
How much does a townhouse feasibility study cost?
It depends on the site and how much planning work sits behind it. A basic desktop check is a smaller job than a full study with a planning assessment, cost estimates and a cash flow model. Ask for a scope that states exactly what is included before you start.
What profit margin should a townhouse project target?
Lenders and developers commonly look for a margin that covers risk, and 15 to 25 per cent is a frequently used range. State whether the margin is on GDV or on cost, because the two give different results. Your lender will set its own minimum.
When should I do a feasibility study?
Before you sign a contract, or while the contract is still conditional. The planning assessment is the part that most affects the price you can pay, so it belongs at the start, not after settlement.
Is a townhouse or a dual occupancy better on my block?
It depends on yield, cost and risk. Dual occupancy has a lower build cost and funding need, while townhouses spread land cost across more dwellings. Test both on the same site using the same assumptions, then compare residual land values and peak funding.
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