Is There Anything Wrong With New House and Land Packages?

Rayson L.
Apr 26, 2022
15 min read

Updated: Jun 20

When it comes to house and land packages, opinions can be polarising. Some so-called "experts" advise against them, claiming house and land packages are to be avoided. While at the same time, you might have also heard how buyers who had bought one had NEVER regretted their decisions. Same product, two very different opinions. Is there any truth to any of these 2 very different buyer experience? What are the facts and myths that buyers need to know?

As independent Buyers Advocates in Melbourne, our clients frequently come to us with misconceptions about new house and land packages. While there are some truths, under specific circumstances, most beliefs are just misinformed or facts which had been manipulated to serve a sales agenda. Some of these stories can even be considered malicious. People who had regretted their House and Land purchase are more often than not, a classic case of parrot regurgitating what they've heard. Someone heard a bad experience and repeated the story to someone else, hiding some essential facts, sensationalised it and repeated it, without further disclosures.

So, let us get to the bottom of this and let's spend the next 5 minutes to sift through the noise together and uncover the reality.

House and Land Package vs Established House with Land

The first crucial distinction every buyer must understand, is the difference between a new House and Land package and an established house with land. These two may sound the same, but they are different. While both ultimately provide you with a house with a land, the market dynamics is different, and so is the buying process. Each option also has their own "ideal buyer" with different demographics and goals. So, before property buyers buy one, it is essential that they understand what the differences are, the market that they serve and buy these properties with their eyes open and arm themselves with the right information.

At Concierge Buyers Advocates, our buyer focused real estate buyers agents specialise in helping property buyers buy the right properties they want quickly and confidently, ensuring their interests are protected throughout the whole buying process. This article is put together to answer home buyers questions and it aims to give property buyers some fact based reasons why a new house and land home may be a viable option for them, and why it may not be the right type of property for them.

What is a House and Land Package?

First, let us discuss what types of properties are typically considered a house and land package.

A "House and Land Package" is simply a house with a land. It is very similar to an established (existing) house on a land. The difference is, with a House and Land Package, you typically buy a land, then you engage a builder to build a house on it. It is usually a 2-part contract. One purchase contract is for buy the land, and you need a separate build contract to build the house. You will also need two different mortgages or loans. One mortgage for the land, and a second loan (usually construction loan) to build the house.

But not all house and land packages are structured the same way. There are several variations with the land portion of a House and Land Package, depending on the developers, builders or marketers involved in the sale. Some common house and land package is put together includes:

Approved Builders with Curated Designs: Some developers, estates and land contracts may force you to build with one of their approved builders who have a selection of curated designs, to help maintain a certain "look and feel" within the estate.
Single Builder Requirement: Some developers may mandate that you only build with a specific builder.
Flexible Builder Choice: Some developers let you decide who you want to build with. You buy the land from them and you are free to select your own design from your preferred builder.

These conditions are typically outlined in the contract, and it’s crucial to thoroughly read and understand the contracts. If you’re unsure, you should always consult a property lawyer who is well-versed in the real estate industry to review the contract for you.

What is an Established House with Land?

In contrast to a house and land package, an established house with land is a single purchase of a property where the house is already built on the land. This type of property is can also be referred to as a resale home or a second-hand home.

When you buy an established house with land, the process is generally more straightforward. You make one purchase transaction, and you typically only need one mortgage for the property, not two. The house is ready for immediate occupancy, so you can move in right after the purchase is complete.

This option may appeal to buyers who prefer a quicker and simpler purchasing process or buyers who want to see and evaluate the home and its surroundings before making a decision. Established homes in matured housing estates also often come with matured landscaping and fully developed neighbourhoods, which can be appealing for some buyers.

What is the Problem with House and Land Packages?

There is nothing inherently wrong with house and land packages; they are simply designed to cater to different groups of buyers. House and land packages are often designed for first-time homebuyers or buyers with limited savings, offering a lower entry point into property ownership or property investment. Like any purchase, it is crucial for buyers to fully understand what they are buying.

The issue is, many buyers have been misled by property marketers and sales agents into purchasing house and land packages without proper consideration of the buyers' needs. It is not their fault though. Real estate sales agents and marketers are legally obligated to serve the interests of the sellers and developers, not the buyers. Real estate sales agents and project marketers' primary goal is to sell what they must sell, which may not necessarily align with what you need. And they have no interests to ensure the property aligns to your buying or investment goals.

This dynamics often lead to situations where buyers are pushed into purchases that don't meet their requirements. Sales agents are paid by the developers, and their priority is to meet the developers' interests. They do not usually have your best interests at heart because you don't pay them. They are paid by the developers and builders. Thus, they are legally required to look after their best interests.

To protect yourself, it’s essential to approach these purchases with a clear understanding of the product and it is also crucial that you assess if these new house and land packages aligns to your own needs. This article delve deeper into the legal obligations of sales agents and explain how you can ensure you are making informed decisions that best suit your circumstances

The Real Issue with House and Land Package

House and Land Packages are just a product range. There is nothing inherently wrong with them. The primary issue with house and land packages lies in the sales process, not the product. Buyers are unfortunately exposed to the sales tactics, when you buy direct from the project marketers or sales agents. Sales agents are there to sell these house and land packages, and they prioritize the interests of the sellers rather than the buyer. Their goal is to sell what they have available, often without thoroughly understanding the buyer's needs.

Sales agents are adept at convincing buyers that the product they offer is the right fit, even if it isn’t. If you're not paying for their services, they are simply selling you what they have, not what you need. As a result, buying directly from a sales agent or marketer can often lead you to buying unsuitable house and land packages. Very often, there could be better property options elsewhere, but these agents is not going to recommend them because they aren’t compensated to do so.

For instance, when a house and land package might not suit your needs at all, selling a new house and land package to someone looking for an established home is akin to selling an IKEA flat-pack dining set to someone who wants a ready-built set. The mismatch can lead to dissatisfaction and regret.

To avoid this, it is crucial to conduct thorough research and possibly seek advice from independent real estate professionals who understand your needs and work in your best interests. This ensures you are making an informed decision and selecting a property that truly suits your requirements.

Advantages of a House and Land Package

Why should buyers consider a house and land package in Melbourne? As mentioned earlier, House and Land packages are meant for a buyers with different needs. Here are some key advantages:

Lower entry cost. House and land packages are typically situated in new estates where land costs are generally lower. This makes it an affordable option for first-time buyers or those with limited savings.
Lower stamp duties. In Victoria, stamp duty is calculated based on the value of the land. Since you are purchasing vacant land, the stamp duty is significantly lower compared to buying an established house, resulting in considerable savings. If you are a first home buyer, you could be paying zero stamp duties.
Brand New House. One of the most appealing aspects of a house and land package is the opportunity to live in a brand new home. You can even change the floor plan and option it to your pleasure.
Modern Energy Efficiency Rating. These homes often come with modern features, including the latest 7 Star Energy efficiency rating. Additionally, buyers can often customize the layout and design to suit their personal preferences, creating a home that truly reflects their style and needs.

Considerations Before Buying a House and Land Package

Like anything, you should always know and understand what you are buying. And a house and land package is no exception. Here are a few things you need to consider.

Comparatively longer lead time. Unlike an established house, where you can take ownership of the house and move in within a couple of months, it could take up to a year (or two) before you move into your new home. You will usually need to wait a few months, to a year or 2 before the land is titled. Then, it is another 6 to 9 months for the build and a further 3 to 6 months for the paperwork, certifications and permits. There are some builders who can build in shorter time frame, and we have tested and confirmed 4 months is consistently achievable, by good scheduling of work. Ask us for me info.
Committing to a house you cannot see and feel. With a house and land package, you are committing to a property that you cannot see or feel until it is completed. Unlike an established house, you cannot walk through the space to get a sense of the layout and quality before you buy. This means that the final fit, finish, and quality might not meet your expectations. To mitigate this risk, you should choose your builder carefully and do thorough research. Online reviews and testimonials can provide valuable insights, though keep in mind that people are more likely to share negative experiences. Or if you are unable to do the due diligence on the builder, we might be able to recommend packages from our tried and tested builders. We scrutinise the builder's build quality, fit and finish, and we only recommend builders whom are up to our standards.
Most House and Land Packages are in new estates. And most of these new estates are in locations where amenities, shops, schools, transport might not be matured yet. They will be coming, just not now. It may also mean the traffic and public transport will be immature initially, and you will encounter frequent traffic jams, road works, unpredictable public transport (if any) for a while. But, as the estate matures, the situation and services will improve. Have a look at matured estates around Melbourne. We've yet to see one with bad traffic and transport. The best thing with a maturing estate? Price Growth! Your equity in the property will grow significantly, much more than other estates, because it is coming from a lower base and the price has a lot more room to grow. Read the phenomenal growth of newer estates such as Clyde and Tarneit.
You don't know the developer and builder. One of the biggest challenges for buyers is not knowing the developers and builders behind their new home. It’s crucial to research the companies you are dealing with. Ask around and look for feedback from other buyers. However, remember that big-name retail builders often outsource construction tasks to the lowest bidder for the job. This usually affect the quality, while making it difficult to coordinate tasks, thus leading to long build time. Smaller builders, on the other hand, might offer more personalized service and closer supervision of their contractors, often resulting in better quality. If you are unable to do the due diligence on the builder, we might be able to recommend packages from our tried and tested builders. We scrutinise the builder's build quality, fit and finish, and we only recommend builders whom are up to our standards.

Myths about House and Land Packages

Now, let's look at the facts and debunking the myths of house and land packages.

Myth 1: "You are Paying the Agent's Commission When You Buy a House and Land Package."

The Facts:

Sales agents or marketers for house and land packages are usually paid around $20,000 when they sell a house and land package. While some premium house and land packages or hard-to-sell old stocks may offer a higher commissions of around between $40,000-$60,000, these are the minority. The majority fall into the $20,000 range, and selling agents generally cover marketing costs of these house and land properties, not the developer. So, their actual income from selling one house and land package may only be around $15,000.

Despite some property "experts" claiming that buyers are footing the new house and land agents' commission, here is how the numbers compare to a typical established house:

House and Land Package: Considering an average house and land package costing around $700,000 in Melbourne, The $20,000 commission represents approximately 2.8% of the total price, an amount that the seller isn’t receiving.
Established House with Land of Similar Size and Condition: A comparable house in an established Melbourne suburb could cost around $1.5 million. With a typical 2% agent commission, this equates to about $30,000. Additionally, sellers incur marketing, advertising, and staging expenses that can add another $10,000–$20,000, totaling $40,000–$50,000 in selling costs. And these are deducted from the $1.5 million you paid for the property. These $40,000-$50,000 is what the seller isn't receiving. How does this compare to the $20,000 commission to the House and Land agent?
Established House with Similar Price: Now, what if we compare the $700,000 house and land pacakge to a similarly priced $700,000 established property? The selling price would include the 2% commission of around $14,000, plus marketing, advertisement, staging of $10,000-20,000, totalling $24,000-$34,000 going into the ads and agent commission. Strangely, this amount is very similar, if not more than the commission for a new House and Land package...

Looking at these comparisons, it becomes clear that the commission on a house and land package is on par with or even lower than that for established properties. While you may hear otherwise, the facts is clear. The commission paid to the house and land agent is not any higher than the commission and expenses paid to the sales agent of an established house.

Myth 2: House and Land Packages have Poor Value.

The Facts:

As discussed earlier, house and land packages cater to different buyers. The ideal House and Land buyers are owner occupiers who do not want to lock in too much cash in a home, and they do not mind staying a bit further away from the CBD. Buyers of House and Land Packages have never and should not be worried with yield or capital growth in the short term.

Most of these house and land packages are in locations which typically offers less yield and growth in the first few years of ownership, thus making them more suitable for owner occupiers than investments. But once the location and amenities matures, the growth is comparable than other location in the area. It is also not usual to see such new estates performing better than surrounding suburbs, as the properties are newer, with modern designs and have better facilities. And because they are more expensive, they tend to attract buyers with higher income.

Unfortunately, sales agents, being sales agents, do not consider if the property suits the buyer's needs. Many sales agents are promoting these packages as investment products, when they are not really designed to be one. Many agents disguise this with sneaky promotions such as "Guaranteed Rental Returns" or "Guaranteed Rental Yields" to promote these house and land packages as investment products.

Once these rental guarantees expire, some buyers may be disappointed if their expected returns don’t materialize, often blaming the product itself rather than the marketing agents who sold it under misleading pretenses. Unfortunately, the resulting negative experiences is often sensationalized, especially in the media, which favors headlines that attract attention.

What to Consider If You Already Own a House and Land Package

If you had purchased one of these packages, know that property value can still grow over time. Newer suburbs like Tarneit and Clyde, where house and land packages were once affordable, are now seeing established properties selling for $1 million or more—doubling their initial purchase price just five years ago.

If you are expecting immediate positive cash flow, or immediate equity growth, a house and land package may not be the best fit. However, if you’re looking for longer-term growth or you are an owner-occupier, these packages can offer excellent value. Recently, many of our clients’ house and land packages have seen increases of $20,000–$50,000 by the time construction is complete.

If you’re specifically looking for an investment-grade house and land package, we’ve identified a few that meet investment criteria—feel free to reach out to discuss them further.

Four Things You Should Do When You Buy a House and Land Package

With the considerations raised above, you should always take your time to do your research. These 4 pieces of homework will help ensure you know what you are buying:

Know the developer: Research the developer’s track record, reputation, and previous projects.
Know the builder: Investigate the builder’s experience, reliability, and quality of work.
Inspect finished products: Look at other properties built by the developer and builder to gauge the quality and craftsmanship. However, do remember that large retail builders sub-contract the constructions on a project basis. Thus, their quality can vary widely from build to build.
Ask tough questions: Don’t hesitate to ask detailed questions about timelines, costs, quality guarantees, and any potential issues.

Help with buying a House and Land Package

Navigating the process of purchasing a house and land package is daunting, but you don’t have to do it alone. Our experienced buyers advocates and agents are here to assist you every step of the way. We have carefully curated a selection of high-quality house and land packages, as well as off-the-plan properties, tailored for both home buyers and investors.

Why Choose Our Buyers Advocates and Agents?

Our team consists of experienced property professionals who are not only experienced in real estate but also knowledgeable in construction. When selecting house and land packages or off-the-plan properties, we go the extra mile to only recommend builders who can ensure quality and reliability. Here’s what sets us apart:

Thorough Vetting Process: We conduct comprehensive site visits to inspect the properties firsthand. This allows us to evaluate the build quality and ensure it meets our high standards.
Open and Direct Communication: We engage directly with management teams and key site supervisors of the builders. This helps us understand their construction processes and ensure they are capable of delivering top-notch homes.
Quality Assurance: Our selection process includes a thorough assessment of the builders' past projects, ensuring they have a proven track record of delivering high-quality homes.

Examples of Our Selected Packages and Sites

We have a range of selected house and land packages, many of which sell quickly due to high demand. Our website provides a glimpse of these options, showcasing the variety and quality we offer. However, this is just a snapshot, and there are many more properties that we have not yet listed.

Some examples of these selected packages and sites are here. There are many more which we have yet to list, as they sell fast. The site should give you an idea of what is available. Get in touch with us via Whatsapp or email to find out what's available and suitable for you.

Conclusion - House and Land Packages

In conclusion, the decision to purchase a house and land package depends on your individual circumstances and objectives. It may or may not be the right choice for you. At our agency, we understand the importance of ensuring that any property investment aligns with your goals.

Through detailed workshops and brainstorming sessions, we work closely with our clients to determine whether a house and land package is suitable for their needs. However, in general, here's what you should consider:

Yes, if:

Limited Funds: If you have limited financial resources, a house and land package can offer an affordable entry point into property ownership.
Desire for Homeownership: If you aspire to own your own home, a house and land package can provide the opportunity to customize a new property to your liking.
Comfort with New Estates: If you don't mind living in a new estate for a few years and are willing to wait for amenities to develop, a house and land package could be a viable option.
Long-Term Investment: If you're not concerned with short-term yield or growth and are looking for long-term capital appreciation, a house and land package may suit your objectives.

No, if:

Urgency to Move In: If you are unable to wait for the house to be built, a completed new home or established home would be a better option.
Investment Purposes: If you intend to use the property as an investment, particularly if you expect instant growth or positive cash flow, a house and land package may not be the best choice unless it's in a mature location.
Immediate Cash Flow: If you're seeking immediate positive cash flow or intend to manufacture growth through renovations or development, a house and land package may not meet your requirements.
Plan to Manufacture Growth: Obviously with new houses being brand new, and often built to maximise the usage of the land, there are not much allowance to value add and flip for a quick profit.

If you are still unsure if a house and land is right for you, we encourage you to reach out for a free consultation with one of our buyers advocates. We'll provide expert advice, explain the nuances of house and land packages, and help you determine the best property type for your needs and goals.

Get in Touch

To find out more about available properties and find the one that suits your needs, get in touch with us via WhatsApp or email. Our team is ready to provide personalized advice and guide you through the buying process, ensuring you make an informed and confident decision.