6 min read
Posted on January 1st, 2022
Whether you’re buying to live or buying as an investment property, a house and land package has many attractive features and benefits. However, in our experience, there is a lot of confusion around this property type. From ‘price baiting’ to ‘2-part contracts’ – there are many details to be aware of before you decide to buy a house and land package.
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Housing estates – from subdivisions to masterplans
When you’re buying a house and land package, you’re generally looking at buying into a ‘land estate’. These estates can vary from:
- a small subdivision in an established area, with around 10-20 blocks of land.
- a medium subdivision of about 100 blocks of land (perhaps formerly a farm)
- a masterplanned community of 1000+ blocks of land; these would generally include new parks, schools, shopping centres or community centres
In a small sub-division, the amenities are usually already in place as it is likely to be in a well-established suburb. In a masterplanned community these would form part of the planning, so you are very clear about what amenities will be available and where they are located. In a medium subdivision these amenities would not typically be included so you will have to do more research to ensure your home will be located in convenient distance to schools, transport or retail.
If you buy early on in a masterplanned community, you may need to wait for all the amenities to be completed, but pricing will likely be cheaper. On the other hand, if you wait till everything is nearly or at completion, prices will likely increase, but you have the certainty and convenience straight away.
What is a ‘house and land package’?
Within a land estate you will be able to purchase a block of land on which to build a house. You can either do this ‘DIY’, where you purchase the land first, then you decide on a house and builder and any other inclusions you need.
The other option is to buy a ‘house and land package’ which typically is all inclusive with everything from the land to the house to the window-blinds.
Purchasing a house and land package is quite different to the process of buying an off the plan apartment or townhouse.
In these cases, you would sign one contract, pay your 10% deposit, and then 2-5 years later, your apartment is completed, and you pay the remaining amount and settle.
For house and land, it’s a 2-part contract.
- The first contract is to purchase land from the land developer – with a 10% deposit
- The second contract is to buy the house from the builder – usually a 5% deposit
Most of the time, the developer and builder are two different entities. The developer would provide design guidelines, which your builder will follow.
How long does ‘house and land’ take to buy and build
Depending on the land estate, your land could be ready to ‘buy and build’. I.e. You purchase your land and can settle immediately, and once council building approvals are in place (usually within 1-2 months) you can go straight to construction with your preferred builder.
Often, however, there could be a period of 6 months to 2 years between when you pay your deposit on the land in the estate, and when all the relevant infrastructure (for example, sewerage) in the estate has been developed.
Only after the infrastructure is in place, can the developer register the land titles. And only after your title is registered, can you settle on the land, pay your remaining land cost (and stamp duty) and then proceed to council approval and construction.
A single level house usually takes about 4-7 months to build with 5 key stages of construction completion:
- Slab
- Frame
- Enclosed (windows & doors)
- Fixing (internal fixtures and fittings)
- Practical completion.
House and land buyers typically apply for a combined loan for both the land & building the house. At land settlement, the remainder of the land contract price and stamp duty is due, and the bank will release this portion from your approved loan amount. Once construction commences, the builder will issue an invoice at the end of each construction stage (as outlined above). You will need to pay your portion first (i.e. the difference of the remaining build contract price and loan amount) if applicable, and then the bank will release their portion of the funding towards each progress payment.
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What are the benefits of buying a house and land package?
House and land is a popular option for first home buyers and upsizers. For first home buyers, buying a house and land package can come with certain government incentives, such as first home buyer grants or lower stamp duty fees which are generally applicable to new or off the plan property.
Upsizers are typically those who are moving from an apartment or townhouse and need more room for a growing family.
For investors, it makes sense to add properties with higher land content as part of a diversified portfolio and tenants are likely to be families, and particularly young families.
More specifically, house & land can offer significant stamp duty savings, as stamp duty is payable on the land value only (not the house).
For example: NSW house & land vs new apartment
| House & Land package | New Apartment | |
| Land cost | $400,000 | N/A |
| House cost | $300,000 | N/A |
| Total cost | $700,000 | $700,000 |
| Stamp duty payable | $8972 (on land value only) | $26,932 (on total value) |
Finding the best house and land
In our experience, finding the best house and land options comes down to fundamentals like a great location: proximity to transport, retail, education and other quality amenities. Parks or playgrounds can be a key factor as well, given that housing estates appeal to families.
While location is important, it is quite possible to find two housing estates right next door to each other which are completely different in terms of quality and feel.
The difference is that the best housing estates are well planned, with good design guidelines in place. Some may include an annual ‘community fee’ of around $300 but this contributes to the landscaping and gardens which results in a nicer neighbourhood and community. A great housing estate will attract a majority of owner occupiers as well.
Key considerations or factors to look out for:
1. Bait-pricing
Is your house and land package all-inclusive or are you being caught out by ‘bait advertising’? It’s all too common to see big billboards promising house and land packages for $400,000, only to discover that key costs like fencing, flooring, landscaping or driveways are additional – potentially bringing the total up to $500,000+. Ideally what you want is a ‘turn-key’ package, complete with blinds, appliances and clothesline – ready to turn the key and move in.
2. Do you know when the land titles are going to register
Is the land ready to ‘buy and build’ or do you need to factor in a waiting time before you can settle the land and start construction?
3. When does construction commence and how long will it take?
When will your builder commence construction after settlement of your land and how long is construction? Are there any penalties in place? For example, builders will typically state in the contract that the construction must be completed in X number of days. If they go over, they would need to pay you a daily penalty. (Though there are some caveats, such as wet weather)
4. Cost of ‘cut and fill’
If the block of land you purchase requires levelling (cutting into one side and filling in the other to level it out), some builders don’t include this in the price, and it could cost an additional $10,000+
5. Build pricing
It can be tricky as a buyer to understand how build pricing works overall. For example, you could get two quotes with identical inclusions, but one may be $20,000 more. However, that $20,000 may be for service you can’t see upfront, such as quality control, having staff in place to manage any issues. The adage ‘you get what you pay for’ can be key.
6. Cashflow during construction
Keep in mind that as soon as you settle your land, you will start to pay your land mortgage, and then as you pay each stage of the build cost, you are paying interest on this as well, along with council rates. During this period, you won’t have a tenant, so you need to ensure you have cash on hand to handle these expenses. That said, you will be saving money in stamp duty (as it’s only payable on the land value) and the interest you are paying on your mortgage will be tax deductible.
7. Quality and legacy of developer and builder
Know the developer and what they’ve delivered before. Drive through their other estates and see what the look and feel, and quality is like. Research your builder; builder quality and finance can vary so you want to know their financials – though this can be hard to ascertain as a buyer. Instead you can research what else they’ve done, how many homes they’ve built previously, or annually to help guide you.
At Ironfish, we have an in-house property selection and research team which monitors the market and identifies great housing estates and house and land packages for our home buyers and investors.
As part of our service to customers, the property team conducts a rigorous due diligence process, covering off all the above considerations, along with many more, to make the purchase of house and land as simple and convenient as possible and to provide additional peace of mind for buyers.
If you’d like to learn more about our pre-selected house and land package recommendations, simply book in a free appointment below and one of our experienced strategists will be in touch with more details.
This article is intended to provide general information only, current at the time of first publication. It does not constitute any financial advice, offer, contract or inducement to buy. Investors are expressly recommended to do their own due diligence in relation to any investment decision they make and seek independent financial advice.
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