Buying a house-and-land package
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Find out the key things to think about when buying a house-and-land package and get to choose your house design.
Contents
- The importance of research
- Know your finances
- Getting the right type of finance
- Aim for no surprises
- Understand the detail
- Potential impact of site and location costs
- Matching the house design with your lifestyle
- What happens if you have already chosen your block of land?
- Signing the contract
- Approvals and timeframes
- Does a 'fixed price contract' mean you won’t be charged extra?
- Monitor the build
12 useful tips
Buying a block of land and entering into a contract to build a house is not the same as buying an existing home, whether it’s brand new or an older established property. Doing some upfront research and understanding the buying process is key to getting the best outcome for your budget – and your family.
Land developers and builders often work together to promote ‘house-and-land packages’, which are sold with a range of house designs for you to choose from. Alternatively, you can buy a block of land, and then enter a second separate contract with a builder to build a house.
Key benefits of buying a house-and-land package are that you get to choose your house design and internal fit out, and you may only have to pay stamp duty on the price of the land, not the value of the house.
Here are 12 useful tips to consider if you are buying a house-and-land package – or building a house on a vacant block you’ve bought separately:
1. The importance of research
Visiting housing display villages in new land developments is a great way to research house-and-land options and to compare them with the cost of buying an established home. A good first stop when visiting a new land development can be the developer/land sales office where you can review a map of the development, and find out about the types of public and community facilities that may be developed in the future. At display villages you will learn about the house designs available from different builders, what is possible to buy in your price bracket and you can get a feel for how different housing designs can suit you and your family.
2. Know your finances
As always when considering buying a house, confirming your budget and finding a design that is the best possible fit with the money you can afford to spend is critical. You should understand your borrowing capacity before you begin to discuss the building options you have available. Depending on your circumstances, you may be eligible for government grants designed to stimulate economic or construction activity. Many builders offer incentives, package deals and other promotions such as kitchen upgrades or landscaping, so it’s important to do your homework before you sign a contract for a house-and-land package.
It is also important to have a contingency budget for things that you have not thought of, or if something goes wrong. This should be at least an additional 5-10% of your total budget.
3. Getting the right type of finance
Finance for a house and land package is different to a standard home loan mortgage for an existing property. A construction loan is used when building a house-and-land package as it allows you to progressively draw down funds to meet ‘progress payments’ when construction milestones are met. Often accrued interest on the loan amounts drawn need to be paid as it is incurred whilst the house is being constructed. Talk to your lender or mortgage broker to make sure you get the loan product that matches what you are planning to do. And don’t forget to check your eligibility for the $15,000 First Home Owner Grant if you are buying or building, a new home.
4. Aim for no surprises
The more research you do and the more questions you ask, the more you will understand about the house-and-land buying process. Choose a building company you feel comfortable with based on upfront discussions with their staff to minimise the risk of surprises during the construction process of your new home.
Seek out feedback from previous clients (and perhaps online customer feedback) as an indicator of the builder’s credibility and the quality of completed work. If the builder is a member of an industry organisation such as the Master Builders Association or the Housing Industry Association this could be regarded as an indicator of their commitment to ongoing education and industry best practice.
5. Understand the detail
When you buy a block of land and enter into a contract to build a house, you will need to consider other factors beyond the floor plan and finishes of your new home.
- How long will it take a build a home?
- Can you make any changes to the house design, and will that be an additional cost?
- To save money, are you allowed to do some work yourself – such as landscaping?
- Is it a fixed price contract?
- What is excluded from the contract?
- Does the builder have a current Builders License?
- How long have they been in business, and can you see some examples of their work?
- How will payments be staged over the course of construction?
- Requirements around council approvals – who is responsible to lodge these?
- Are there any extra costs because of unexpected site conditions (such as more expensive costs for building foundations or retaining walls)?
- Exactly what is - and is not - included in the package such as finishes and fittings, stormwater plumbing, external paving and concreting, rainwater tank installation, supply of a front fence, landscaping.
- What kind of communications can you expect from the builder as the build progresses, and how often?
- Are there any special promotions or government incentives that you might be eligible for?
6. Potential impact of site and location costs
Not all land is created equal and depending on its location or soil quality, you might be required to pay additional building costs for bushfire or flood-prone areas or installing deeper footings for a sloping block or land with poorer quality soil.
A home on an exposed hilltop or coastal zone might require reinforced windows to cope with stronger winds. Talk to your builder about any of these potential extra costs before you sign a contract. The local council will also have information about local issues which could impact on the design and build of your house.
7. Matching the house design with your lifestyle
One of the biggest benefits of building a house is having the ability to tailor your new home to your lifestyle. Be sure to tell the builder if you want an outdoor eating area, a separate study, a games room or perhaps an extra-large kitchen. Many building contracts enable you to choose the quality of the paint finishes, kitchen appliances and bathroom fittings – from a ‘basic’ lower-cost option to a more expensive ‘premium’ range. You can also look at including features to improve the sustainability of your home such orientation, double glazing on windows, and extra insulation. As you discuss all these options, always check it is within your budget. When you visit a display village, the houses on show often have a higher specification, not the lower-cost option.
8. What happens if you have already chosen your block of land?
If you have already signed a contract to buy a piece of land, it is important that you provide all the relevant details to the builder such as the location, its orientation, the size (width and length) of the allotment and whether the block is sloping or flat. This will help the builder advise you of how to determine the most appropriate house design. Providing the builder or sales consultant with a copy of the land sale contract is often a good idea.
It is also important for the builder to know about any encumbrances (restrictions) that may affect your block of land – such as building façades and setbacks, building heights, roof pitch, plumbing requirements, stormwater easements or other obligations around front landscaping, installation of rainwater tanks, limits on the range of building materials and colour schemes of your house façade. Many larger housing developments have design encumbrances to ensure that their development has a uniform and cohesive appearance.
9. Signing the contract
House and land packages normally have a 2-part contract. The first contract is to purchase land from the land developer. The second contract is to buy the house from the builder, that they will build for you. A separate deposit is normally required for each contract. A conveyancer and your bank will help you work through the steps.
Before signing any contract, read it through carefully from start to finish and ensure that you ask questions on any aspects you do not fully understand. For house-and-land packages, it is critical to know whether it is a fixed-price contract and what is the process to make changes to the contract during the construction process – such as changing the quality of the kitchen appliances or adding a window or doorway.
It is also important to look closely at the final drawings that the builder asks you to sign off on, and make sure that they include everything you have discussed.
10. Approvals and timeframes
Obtaining all the necessary approvals for building a home can take anywhere from two weeks to 12 months (and even longer in some cases). At a minimum, you will need three approvals under the Planning, Development and Infrastructure Act 2016 – planning consent, building rules consent and final development approval. Some councils also require additional approvals for fire safety, electrical, water and gas, and building in specific locations along the coast or near the River Murray.
If you are building a home in a heritage area, you might also need to ensure your design complies with State and local heritage requirements. Your builder will be able to advise you about the approvals required and it is also recommended that you do your own research with the relevant local Council and State Government agency responsible for heritage and environmental matters.
11. Does a 'fixed price contract' mean you won’t be charged extra?
The short answer is no. The final contract price might be higher due to contract variations you will need to agree to in order to meet Building Code or Planning requirements, such as the builder having to install deeper footings for a sloping site. Variations can also occur when you as the purchaser change your mind about the house design or quality of fittings. Again, it’s best to talk to the builder upfront about any potential cost increases before you sign the contract for your new house-and-land package. Consider asking your builder about paying upfront for a soil report or fixing the footing costs, which can help to mitigate additional unforeseen costs.
12. Monitor the build
With a house and land package you should know exactly how your home should look. Confirm with your builder when you are allowed on site to inspect progress and ensure that everything is matching the drawings that you have signed off on. This will help to identify mistakes early which can be expensive to fix later.
Step by step process
- Determine how much you can afford for your new home and arrange for finance pre-approval from your lender. Ensure you have a 10-15% contingency available.
- Finalise your finance approvals with your lender.
- Engage a conveyancer to conduct a pre-purchase review of the property and contract.
- Sign contracts to purchase your land or house and land package and pay your deposit, or obtain your house construction quote from your builder.
- Hold discussions with your builder about the house construction contract and make sure you cover all variations and finishes that will be included in your contract. You will also need to make sure there is a soil test to allow for the cost of footings to be determined.
- Sign your construction build contract, and sign off on final drawings for the home.
- Council approvals are finalised (these are normally prepared and submitted by the builder).
- Finalise your home loan with your lender.
- Note the schedule for progress payments (drawdowns) from your bank to pay the builder as your home is built.
- Footings and Foundations Stage – slab poured and initial plumbing laid out. First drawdown payment is made to the builder.
- Frame Stage – the framework for the home is built, including roof trusses.
- Lock up stage – all external cladding and doors and windows installed to the point that the home can be locked up securely.
- Fixing Stage – internal cladding, carpentry, insulation, doors, skirtings, architraves, and waterproofing and tiling to wet areas are installed.
- Completion – trades install final fittings including electrical, plumbing, lights, switches, taps, showers, door hardware, walls painted, and floorings. Note that your hot water system will generally be installed at the very last minute before hand over to reduce the likelihood of theft.
- Final inspection and handover – final inspection of the property in conjunction with the builder to identify anything that does not meet your specifications or the contract. If you are happy you will be given the keys to your new home! If you are not satisfied it is important to not finalise handover until you are.
- Things that may happen after you get your keys: