While the trend toward apartment or townhouse living is on the rise, many Australians still yearn for the comfort and privacy of a nice family home with a backyard.
Whether you’re buying a home for your family or as an investment property, a house and land package offers a number of appealing features and benefits that are worth considering. However, in our experience, there is a great deal of ambiguity surrounding this type of property. There are numerous details to be aware of before making the decision to purchase a house and land package, ranging from ‘price baiting’ to ‘2-part contracts.’
HOUSING ESTATES – FROM SUBDIVISIONS TO MASTERPLANS – ARE BECOMING INCREASINGLY POPULAR.
The majority of the time, when you purchase a house and land package, you are looking to become a part of a “land estate.” These estates can include any of the following:
1- A small subdivision in an established neighbourhood, consisting of approximately 10-20 blocks of land.
2- A medium-sized subdivision consisting of approximately 100 blocks of land (perhaps formerly a farm)
3- A master-planned community consisting of more than 1000 blocks of land, which would typically include new parks, schools, shopping centres, and community centers
WHAT IS A ‘HOUSE AND LAND PACKAGE’ AND HOW DOES IT WORK?
Purchasing a plot of land in a land estate will allow you to construct a home on the property. The ‘do it yourself’ option allows you to purchase the land first, then choose a house and builder, as well as any other inclusions, before completing the rest of the process.
The other option is to purchase a ‘house and land package,’ which is typically all-inclusive and includes everything from the land to the house to the window treatments.
The process of purchasing a house and land package differs significantly from the process of purchasing an off-the-plan apartment or townhouse.
In these situations, you would sign one contract and pay your 10 percent deposit, and then, 2-5 years later, your apartment would be completed, and you would pay the remaining balance and complete the transaction.
A two-part contract is used for the purchase of a house and land.
1- The first contract is for the purchase of land from a land developer, with a 10% percent down payment required.
2- The second contract is for the purchase of the house from the builder, with a deposit of approximately 5%.
The majority of the time, the developer and the builder are two separate businesses. In this case, the developer would provide design guidelines, which your builder would then adhere to.
HOW LONG DOES IT TAKE TO PURCHASE AND CONSTRUCT A “HOUSE AND LAND”?
In some cases, your land may be ready to ‘buy and build’ depending on the land estate. If you purchase your land and can settle immediately, you can proceed to construction with your prefered builder as soon as council building approvals are in place (which is usually within 1-2 months).
However, it is common for a period of 6 months to 2 years to elapse between the time you pay your deposit on the land in the estate and the time that all of the relevant infrastructure (for example, sewerage) in the estate has been developed.
The developer will not be able to register the land titles until the infrastructure has been completed. It is only after your title has been registered that you will be able to settle on the land, pay the balance of your land costs (including stamp duty), and then proceed with council approval and building.
In most cases, a single-level house takes between 4 and 7 months to construct, with 5 major stages of construction completion:
- Slab
- Frame,
- Enclosed (windows & doors)
- Adjustment (internal fixtures and fittings)
- Completion in the real world.
House and land buyers typically apply for a single loan that covers both the purchase of the land and the construction of the house. It will be necessary to complete land settlement in order to receive the remainder of the land contract price and stamp duty, after which the bank will release this portion of your approved loan amount. Once construction has begun, the builder will issue an invoice at the conclusion of each stage of the construction process (as outlined above). In order for the bank to release their portion of the funding towards each progress payment, you will need to pay your portion first (which is the difference between the remaining build contract price and the loan amount, if applicable).
IN WHAT WAYS DOES PURCHASING A HOUSE AND LAND PACKAGE BENEFIT YOU? 
House and land packages are a popular choice for first-time home buyers and downsizers alike. For first-time home buyers, purchasing a house and land package may be accompanied by government incentives such as first-time home buyer grants or lower stamp duty fees, which are generally only applicable to newly constructed or off-the-plan properties.
In most cases, those who are upsizing are those who are moving from an apartment or townhouse and require more space to accommodate a growing family.
As part of a diversified portfolio, it makes sense for investors to include properties with higher land content. Tenants in these properties are likely to be families, with children being the most prevalent.
More specifically, the purchase of a house and land can result in significant savings in stamp duty because stamp duty is only payable on the land value (not the house).
CHOOSING THE MOST SUITABLE HOUSE AND LAND
For us, the most important factors in determining the best house and land options are basic factors that include proximity to transportation, retail, education and other quality amenities. Parks or playgrounds can also be important considerations, especially in housing estates that cater to families.
However, while location is important, it is possible to find two housing estates that are right next door to each other but are completely different in terms of quality and feel from one another.
There is a distinction in that the best housing estates are meticulously planned and adhere to strict design guidelines. While some subdivisions may charge an annual community fee of approximately $300, this money goes towards landscaping and gardens, making the neighbourhood and community a more pleasant place to live. A fantastic housing estate will also attract a large number of owner-occupiers as well as renters.
Because it is likely to be in a well-established suburb, the amenities in a small subdivision are usually already in place when it is built. In a master planned community, these would be considered as part of the planning process, ensuring that you are completely aware of the amenities that will be available and where they will be located. Because these amenities are not typically included in a medium-sized subdivision, you will need to conduct additional research to ensure that your home is located in a convenient location in relation to schools, public transportation, and retail.
If you purchase a home in a master planned community early on, you may have to wait for all of the amenities to be completed, but the price will almost certainly be less expensive. Alternatively, if you wait until everything is nearly or completely finished, prices will almost certainly increase, but you will have the security and convenience of knowing what you are getting right away.
Help is available: With the assistance of one of our knowledgeable and competent professionals, you can receive tailored assistance throughout the entire home-buying process.
