The term ‘house and land package’ seems self-explanatory, however, understanding what it encompasses is vital. There are many multiple ways people can go about buying or investing in a home. One of which is to purchase a house and land package, which is where the buyer buys a block of land and the construction of a home in one process. Even though the buyer is purchasing the house and land simultaneously, they are still separate contracts. When advertised, a package is displayed with a single price – which includes the land price as well as construction costs. Buyers can then mediate with the property developer to determine if they want to stick with the standard design of the home or any additional features. This easy and cost-efficient process is why so many Australians are investing in home and land packages.

Understanding the housing industry

The housing marketing within Australia fluctuates greatly. External factors such as interest rates, government policies and population of certain cities all play a role in deciding whether or not to make the investment. Organisations such as Domain and Plantation Homes are at the forefront of the housing industry, due to increased demand across Australia. Research suggests that due to COVID19, buyers’ desires were changing. The national general manager of Burbank Homes Louis Sultan reported that ‘the number of upsizers has increased by almost 40%’. This trend indicates that buyers are opting for larger homes in comparison to the generic homes sold with house and land packages. More specifically, ones with bigger office spaces to combat with fears of impeding lockdowns.

Another key contributing factor is determining who is purchasing these house and land packages. In 2021, the home building industry was inundated with house and land sales. This can be directly related to the federal governments HomeBuilder grant, which has become increasingly popular. Specifically among young Australians purchasing their first home and families looking to expand. Up to the value of $25,000, the grant was utilised by more than 109,000 people before being ended in April 2021. With the housing markets fluctuation, this economic incentive gave young people the push to invest in a package. These external factors provide undeniable reasoning as to why buyers were rushing into the house market and purchasing house and land packages.

Traditional purchasing methods VS house and land packages

1. Buying an existing home

The fastest way to acquire a house is to buy one that has already been built. The purchasing process is typically simple: Buyer finds a house they can afford, then:

• Contact the real-estate agent, agree on a price & exchange contracts

• Get home-loan from the bank (if necessary)

• Account for any renovations/specifications of the buyer

• Move in within as little as six weeks

2. Designing your own home

Arguably the slowest method of buying is to purchase a vacant block of land and design your own home from scratch:

• Find a block in the buyers’ ideal location

• Agree on a price (not including the cost of the house)

• Research home layout/designs and employ a builder and designer

• Wait for the developer to build the home

• Whole process can take a couple of years, or longer

3. House and land packages

When placed in comparison to the previous two alternatives, purchasing house and land packages is the simpler of the three overall:

• Research developers and a location that suits the buyer

• Select home design and determine any additions or variable features

• Organise approval of home loans and determine if eligible for government grants

• Wait for developer to build the home

• Move in anywhere between 6-12 months

Pros and cons of house and land packages

Pros

• Clear upfront price – An important consideration for buyers who have pre-approved finances are on a strict budget.
• Saves time – It takes a long time to build a house from scratch, or even find a new home that is perfect for you. The process can take as little as six months if there are no customisable changes.
• Less maintenance – New houses require very little upkeep on behalf of the homeowner. Elements such as fixtures, fittings and structural elements will also be under warranty for a set number of years. Ultimately providing peace of mind for the buyer/investor.
• Stamp duty saving – Only pay stamp duty on the value of the land, opposed to purchasing an existing house where you pay both the house and the land.
• No hidden costs – There is a fixed price with no financial surprises. If you want the extras, you simply pay for them.
• Ideal for an investment property – The home will tend to have up-to-date features with everything in new condition, making it ideal for rental tenants.
• Capital gains – The equity in the home is likely to rise faster than if an established home was purchased.

Cons

• Small lot sizes – Many house and land packages are built on small lots as a trade off for the small price tag. While there are varied sizes of land blocks, price becomes an increasing factor for buyers.
• Location – In order to combat the low price, the outskirts of a town are typically ideal for house and land packages. This can be potentially inconvenient for buyers. These usually take place in housing estates, which consist of small blocks of land that can be close together.
• Lower yield – The value of homes in suburban areas (typically housing estates) tend to rise at a slower rate due to a lack of surrounding infrastructure and weaker economic drivers.
• Paying with no rental income – It is important to consider the large amount of time during construction. This leaves the buyer paying for the home without rental income and possibly supporting another property.
• Timing delays – Construction delays due to weather, material shortages or unforeseen circumstances with labour such as COVID19.

Final thoughts on house and land packages

Determining whether house and land packages are a ‘good’ or ‘bad’ investment, has been investigated throughout the previous talking points. While all of these points are valid and important to consider, it is ultimately up to the personal preference of the buyer. In comparison to alternatives, purchasing a house and land package is cheaper and requires less maintenance over time – simplifying the process. House and land packages are also ideal for investors that intend on purchasing a second or third property. This is due to there are no hidden costs, a guarantee to find rental tenants and a saving on stamp duty. Also, as a young person attempting to purchase their first home, a house and land package is ideal due to the lower costs, assistance from the government and low maintenance.

If you are an investor or young person – we recommend that house and land packages are the perfect fit for you.

To find out how PiPr can assist you, please contact us here. We’re always happy to have a chat.