There are tremendous savings to be made by building your new investment home rather than buying completed homes, even if brand new. At Law Property Australia, we have noticed our investment clients’ distinct preference for well located and planned house and land packages.
The first benefit of building is the savings in stamp duty. Law Property Australia only markets new properties in the Brisbane area, so our comments only relate to Queensland. As an investor in Queensland, there are no stamp duty rebates, and you will pay stamp duty on the full contract value for a completed home. For a house and land package, you will only pay stamp duty on the land. This can save you many $1,000’s.
Secondly, by buying the land and then building the home, you are effectively reducing the risk a developer would take by building the home up front. This therefore saves the amount that developer would include to compensate for that risk and will also save the equivalent of the developer’s holding costs which would have needed to be included in the price of a completed house.
On the downside, you will need to allow for the interest on the land during construction and for interest on the construction loan draw downs. It can be shown however, that real savings of many $1,000’s can still be achieved by using the home and land package alternative.
In the table below, we have compared the cost of a real house and land package in Brisbane to the same house marketed as a completed turn-key home. We have included stamp duty on the land and an estimate of interest payments on an interest only loan at 7.5%. The estimated listing price of the same house as a completed home could vary with different builders, but we believe that the figure of $495,000 is quite indicative of the figure most builders would apply to recover costs and include a reasonable amount for profit.
The table shows a saving of well over $20,000.
Another major benefit of building is that you can choose the exact design you prefer and have complete control over the type and level of fittings to be included in your home.