There are tremendous savings to be made by building your new investment home rather than buying established. At Law Property Australia, we have noticed our investment clients’ distinct preference for well located and planned house and land packages.
It is worthwhile considering the whole rationale for choosing to build an individual house over other property investment alternatives. Firstly, in any property investment, the land component is critical. The building component depreciates and over time requires increasing amounts of maintenance. On the other hand, the land, if well located, will continue to increase in value. The land component in an apartment development will, by necessity, be very small. Hence the rate of growth is often limited by the small land component. With an individual home located on its own block of land, you maximise the growth potential of the valuable land component.
This effect will become more important in capital cities like Brisbane, where developers are finding it increasingly difficult to purchase and develop land close to the city.
The second benefit derived from building a new property rather buying established is that you will maximise the depreciation deductions, particularly the larger percentage deductions available in the first five years from the ‘plant’ component of the building. Your quantity surveyor will set all this out clearly in the depreciation schedule you should request on completion of the construction.
Another 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.
Finally, 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. The final major benefit 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.
At Law Property Australia, we have a number of good value home and land packages from just over $350,000 that have only recently been listed. You can find them at: http://www.lawpropertyaustralia.com.au/HouseLandProperty-List.php
If you are at all concerned about the building process, have a look at this issue in some detail on the Law Property Australia web site at: http://www.lawpropertyaustralia.com.au/ConcernedAboutBuilding.php