What you need to know before buying a house and land package
Buying a house and land package can make the dream of building your own home a whole lot easier and more affordable.
Things don't always go to plan, however, and delays and unexpected costs can arise.
The best way to prevent problems is to arm yourself with information: knowing what to check before you sign the contract, which builders to trust, and what financial support could be available can be game changing.
Housing estates have been growing in popularity since World War II, when rising real estate prices pushed first home buyers with growing families out of the inner city in search of their own 'quarter-acre block'.
Things have changed for the better since then, and house and land packages are no longer solely targeted at young families on modest budgets.
Housing estates have become less about cramming in as many homes as possible and more about creating a desirable place to live.
"Some of these estates were absolutely atrocious," says Steve Matsoukas, director at Loan Gallery Finance.
"The streets were narrow, the houses were small, and not a lot of thought was put into the liveability of an estate ... it was all about 'how many blocks can we cut this paddock up into?' Over the past few years, they've all gotten significantly better, and now they're actually taking out awards for design excellence."
Parklands, waterways, walking tracks and leafy streets abound, and estates are typically close to transport, schools and shopping centres.
A variety of designs and sizes have eliminated streets of cookiecutter houses, and they now suit a range of budgets.
While they still hold appeal for young families needing extra space, these estates also attract single people buying their first home, upsizing couples and retirees eager to escape the city and live out their golden years in peace.
Who benefits most from house and land packages?
Rob Douglas, CEO of McDonald Jones Homes, says the people who can benefit most from a house and land package are investors and those building or entering the housing market for the first time.
"Having the house and land package combination minimises the work people have to do, and everything is packaged upfront, making it as easy and as stress free as possible for those looking to build," says Douglas.
McDonald Jones Homes, the largest home builder in NSW, has adapted its designs since the pandemic to accommodate demand for flexible living spaces, home offices and study nooks, and solar/electric vehicle chargers in garages.
Douglas says buyers are also looking for a design that flows and a seamless transition between indoors and out.
"Mum and dad want a place they can retreat to, so we ensure the main bedroom delivers that aspect. Then it's all about the living areas, be that indoor or outdoor spaces. Open-plan living, an alfresco area for entertaining and a home theatre are now common design features in today's floorplans."
House and land buyers are also looking for plenty of natural light within the home and a central kitchen with an island bench and butler's pantry.
"Homes today need to be good to look at and easy to live in," says Douglas.
"They need to combine practicality, functionality and style."
Tips to avoid disaster
- Check what's included in the package price - landscaping, driveways and fencing are not usually covered.
- Find out what grants and subsidies you may be eligible for and when they expire.
- Use a well-established company with transparent costs and itemised inclusions.
- 4. Build in a buffer to allow for delays and unexpected costs.
- 5. Check that the builder is registered and has domestic building insurance.
- 6. Don't hand over the final payment until all defects have been remedied.
Steve Matsoukas says first home buyers are often surprised at the small deposit they need to buy a house and land package.
The Australia-wide Home Guarantee Scheme has made it possible for first-timers to break into the market with as little as a 5% deposit. Through the scheme, the Federal government provides a guarantee for up to 15% of the purchase price, helping those with a limited deposit to avoid lenders mortgage insurance.
"The saving for a typical client is between 3% and 4% of their loan amount, or between $18,000 and $24,000," says Matsoukas.
"When the guarantee scheme was first announced, it was targeted at Australian citizens who were first home buyers specifically.
"From July 2023, it has been expanded to include permanent residents as well as those who have not owned property in the past 10 years.
"The thinking behind allowing those that hadn't owned property in the past decade was trying to help those who have gone through something like a divorce or a business failure rebuild their lives and to provide a safe and secure place to raise a family."
The average price of a house and land package in a greenfield estate (a newly released block of land in a residential, industrial, commercial or agricultural zone) is around $750,000, says Matsoukas, with a typical first home buyer needing a deposit of between $41,000 and $54,000.
"It's eminently achievable for most people buying their first home, and a far cry from the ludicrous amounts generally touted in the general media as a minimum deposit amount."
First homeowner grants and stamp duty concessions, which vary by State and Territory, can provide significant extra assistance.
Case study: Home sweet home
Even if there are hiccups along the way, few things beat the feeling of living in your own newly built home.
For Brad, 31, and Joel, 29, securing a corner block for their dream house was the easy part, but throw in a pandemic, global supply issues and unprecedented demand, and getting that home built took much longer than they anticipated.
COVID had already taken hold when Brad and Joel decided to take advantage of a government grant and build a house in Mount Duneed, Victoria.
Their H&L Victoria house and land package allowed them to customise the layout and select the tiles and cabinetry they wanted for their Hamptons-style four-bedroom home.
From the time they signed the contract to the day they moved in, it took a frustrating two-and-a-half years, which meant camping out at a family member's home for a year longer than planned.
They had no complaints about their experience with H&L Victoria, a new home broker, but once the land was titled and the builder stepped in, their problems began.
"Their customer service was absolutely horrific," says Brad, referring to Escape Homes. "I'm an understanding person, things happen, but there was no clear communication, no empathy, no apology for the delays and they'd rarely tell you what they were waiting on or give you any timeframes."
Brad understood the company was facing building material delays and shortages and had an overload of builds on its books, but having to put their lives on hold for an unknown period, with intermittent, vague contact from the builder, took its toll.
Like many others facing the same delays, they relied on H&L Victoria to step in and push the builder to finish the home.
"H&L Victoria honestly did everything in their power to make our experience good, but by the time we moved in, we weren't even excited," says Brad.
"We were exhausted, and we were so over waiting." Despite the delays and frustration, they were satisfied with the quality of the build and have been living happily in the home for almost a year.
"At the end, we were defeated, but this is our genuine dream home," says Brad. "We love it."
How to afford a house and land package
The time it takes from signing up for a house and land package contract to the day you move in can be lengthy, but this wait can also be a blessing.
Australia's new open banking policy allows you to see all your bank accounts on one real-time dashboard and to share your banking details with a third party, such as a mortgage broker or financial adviser.
Some mortgage brokers work closely with their clients to help them get clear on where their money's going, and how they can reach their savings goals faster.
It can take up to a year for a block of land to be titled, says Matsoukas.
"In that time, we help clients get a better understanding of what's happening to their money, and potential places where they could save so they have as much as possible when they get into the purchase."
House and land packages are generally purchased with a construction loan, which is interest-only until fully drawn.
Possible rate cuts ahead
Although building material prices have stabilised in Australia, they are still about 33% higher than before the pandemic, according to Housing Industry Association senior economist Thomas Devitt.
"Home building costs increased significantly during the pandemic, as the whole developed world experienced the same housing and renovations booms as Australia."
Instead of spending their money on travel, entertainment and dining out, people across the globe funnelled that money into their homes.
"There was also a broader desire for space and amenity during the pandemic, given how much extra time we were all spending at home, and that drove demand for new and renovated housing.
"The whole world was scrambling for building materials at the same time, while global supply chains were struggling to turn back on after earlier pandemic shutdowns."
To make matters worse, land costs also surged during the pandemic as people sought larger lots (a reversal of the trend of previous decades) further out of the city, says Devitt.
Capital city lot prices increased by 22% in just 18 months (September 2020 quarter to March 2022 quarter), while regional lot prices increased by 36% over the same period.
By the end of 2024, Devitt says interest rate cuts and extra government support for home buyers may make things easier.
What can go wrong with house and land packages
While house and land packages provide plenty of benefits - a seven-star eco home oriented to the block, a streamlined building process (no need to deal with council approvals) and more affordable pricing than a knockdown-rebuild or buying/renovating an existing home, there can be downsides.
Matt Turner, managing broker at GSC Finance Solutions, says the high cost of land and building materials means house and land packages do not currently provide as much value for money as they did before the pandemic, but this situation will likely be temporary.
Doing your due diligence will prevent some of the problems that can arise between signing the contract and moving in, but Turner cautions that some issues will always be out of your control.
- The builder could go bust. When Porter Davis went into liquidation in March 2023, leaving 1700 homes unfinished in Victoria and Queensland, the government had to step in to refund home buyers. Although builders are required by law to take out domestic building insurance to protect their customers in case of liquidation, it doesn't always happen.
- Fixed costs aren't always fixed. Contract clauses can allow builders to pass on increases in the cost of materials to customers.
- Delays can drain your bank account. If you're paying rent as well as making mortgage repayments on the land and the first stages of your new home build, but the promised completion date comes and goes, it can be costly as well as stressful.
- Promised infrastructure and amenities don't always eventuate. Although developers have to deliver on the amenities outlined in their planning application to council, occasionally government funding is withdrawn for anticipated schools or infrastructure.
- Zoning laws can be changed. Changes to floodlines or zoning laws can mean your planned home falls through, which may not leave you out of pocket, but will set you back to square one. "We're not seeing many really positive experiences with house and land packages lately - there's been some huge delays - but I don't think that's going to be endemic of the industry going forward," says Turner.
Case study: Getting more for less
Buying a house and land package made sense for 28-year-old Shantelle Mckillop, who moved into her new home in Moe, Victoria, in July 2023.
"I originally wanted to be close to Melbourne but because I'm single and buying on my own, I kept getting priced out of the suburbs that I wanted to buy in," says the emergency services dispatcher.
"I have a big dog, so I didn't want an apartment."
Many of her family members live in Moe, two hours east of Melbourne, so when her mother suggested buying an affordable house nearby, Shantelle decided to go for it - she could always rent it out later if she wanted to move back to Melbourne.
Although she chose the smallest block on offer at Hunter Park estate, it was still much bigger than what she'd been looking to buy in the city.
With building materials already in short supply, she went with Metricon Homes, a large, established company she hoped would be unlikely to
run out of stock. The build went smoothly, and Shantelle and her dog, Miley, are enjoying their new home and big backyard.
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