Calculating Your Finances for a House and Land Package

Let’s find out if a house and land package is right for your budget

A house and land package is a combo-deal that includes both a block of land and a suitable house for it. They’re becoming increasingly common in Australia as developers such as Satterley transform available land into beautiful masterplanned communities, with amenities, green spaces and infrastructure all factored in at the design stage.

As a first-time buyer, a house and land package could be a great first investment. But we recognise that financing one might seem more complex than just buying an established house.

Today, we’re going to break down the costs of a house and land package to help you understand the steps and proceed with confidence on your land buying journey!

Pull quote: When you buy an established property, you get what you get.

BUYING A HOUSE AND LAND VERSUS ESTABLISHED REAL ESTATE

When you buy an established property, you get what you get. Someone will have lived there before, so the property will be in whatever state they left it. A house and land package, being a newly constructed building, is the home that you make it. You’ll choose your house from a list of suitable designs, and if available, make some customisations to ensure it’ll meet your needs.

Due to these key attributes, there may be some price differences:

1. Maintenance: Established houses may come with hidden costs, such as repairs, general improvements (like repainting) or pest control, depending on how the previous occupants treated their home. Newly built homes typically don’t require these, and you should have a warranty on the property in case of any defects in the construction itself.
2. Quality: Some first-time buyers find house and land packages to be their way into buying a modern house, whereas their peers are moving into properties from the 1980s in order to cut costs. The price point for land can be low relative to established properties, which lowers the bar for entry into a contemporary house. That said, this is not guaranteed, and depends on your local market. If you compare prices, you should quickly start to see if this will be applicable to you – just remember to factor unseen costs into the price of an established property, as these may mean that even if a house and land package has a higher price, it’s better value in the end.
3. Incentives options: Some developers and builders offer incentives for new buyers, which could reduce the price on your purchase. An example of an incentive could either be a discount on the purchase price, or an incentives package that gives you extra inclusions. We cover ‘inclusions’ in more detail below.

Some people find building a home makes it easier to access modern conveniences compared to buying an existing property.

Construction costs of a house and land package

There are a few extra steps to building a home on land you’ve purchase compared to just buying an established house, but these aren’t scary! Just a bit more to learn.

Pull quote: Build a home may require a ‘construction loan’, that is, a loan provided to you in stages (not a lump sum) and paid to a builder as the construction of your home progresses.

Your home loan: You’ll need a loan that covers both the land and house. In some cases this may require you to look at a construction loan, that is, a loan provided to you in stages (not a lump sum) and paid to a builder as the construction of your home progresses; on an as-needs basis.

This can actually be a good thing: Having your loan provided over time means you may pay less interest at first, as the initial borrowing amount is smaller than a complete loan (and interest is, of course, a percentage of the total loan amount, so the smaller the loan, the smaller the interest).

When you buy a house and land package, though, you can often get your land and the construction bundled together so the process will be like getting a single home loan. While this may mean you sacrifice the interest benefits of separate loans, it is much simpler and may be more suitable for first-time buyers. We advise you talk to a financial professional before making the decision as to which is right for you.

Construction schedule: Construction takes time. If you’re paying rent elsewhere, there may be a window where you have to pay your loan and also your rent. One way to balance this out could be to factor rental payments into the mortgage itself. Another might be to try an interest-only loan (a loan where you pay only interest, not the principal on the loan itself) for a set period of time to reduce costs. We’d urge you to speak with a financial adviser before deciding on this, to ensure you make a move that’s best for you.

Siteworks and inclusions: New home packages need to factor in tests, siteworks and inclusions. Tests here mean things like soil tests, contour surveys and similar. Siteworks refers to work done on the land, like flattening. Inclusions are what’s included in the house package you’ve chosen – examples could include driveways, landscaping, kitchen fixtures, carpets and so on. Anything not in the contract will be something to add to your mortgage, but luckily many good house and land packages include a raft of inclusions. Always check these out before buying!

Government concessions

Finally, as you are a first-time buyer building a new property you may have access to government concessions that other buyers might not.

To use an example, the First Home Owners Grant in WA is not available to buyers of established properties, reserved instead for new homes or those building new homes. That grant could get you upwards of $10,000 in a lump sum payment.

Stamp duty concessions may also apply. Stamp duty is a tax paid when a property title changes ownership, and can sometimes costs tens of thousands of dollars. Across the country, concessions (maybe even exemptions) are available for buyers who meet eligibility requirements. In Victoria, for example, if your new property is valued at less than $600,000, you could be exempt from stamp duty.

Your local state government will have the information you need here. Simply Google “[your local state] stamp duty concessions” to find this information.

Quick summary: Calculating your finances for a house and land package

Compare prices

1. Established properties may have unseen costs to cover after you move in.
2. House and land packages offer a degree of customisability and reliability.
3. Check what is included in your build contract (e.g. siteworks, inclusions).

Get discounts

1. Check with your developer or home builder to see if they offer any deals.
2. See if you are eligible for your local FHOG scheme.
3. See if you are eligible for stamp duty exemptions or concessions.

Sort your loan

1. Remember to factor rental payments into your mortgage.
2. An interest-only loan may help you cover the costs of the construction period.
3. Seek financial advice before making a decision; suggestions in this article are of a general nature only.

Pull quote: Arguably, a house and land package can be good for any buyer who wants a home that’s their own.

So who is a house and land package good for?

Arguably, a house and land package can be good for any buyer who wants a home that’s their own. That said, we often find they’re particularly good for first-time buyers and budding families, because of the comfort and convenience versus price point.

While we can’t guarantee prices of course, the quality of life in a masterplanned community is highly sought after by a lot of Australians. The proximity to key amenities, thoughtful green spaces, community spirit and many other factors make these estates enjoyable places to live.  They’re more than just zip codes in an unending urban sprawl because they were carefully designed and are managed with compassion by experts. There’s someone to talk to when you move in, someone to host or help you host events, and then there’s the general vibe of living in a modern, friendly community.

Having life’s necessities on your doorstep may also help you save money in the long run – imagine the fuel you’ll save driving a shorter distance to schools and shops, and the convenience of living close by all those parks, playgrounds and free community events! For many, these conveniences make life in a masterplanned community much happier.

If it sounds like a house and land package will suit your budget and lifestyle, you can take the next step right here with Satterley. Check out our lots for sale today!