Should You Buy House or Land First? …And Why?

8th May 2023

Finance & Budgeting Pre-Construction Legal & Contracts

Discover whether you should buy a house or land first when building your dream home. This guide explores budgeting, site costs, and expert tips to help you make the best decision.

Building your dream home starts with a crucial question: should you buy the house or the land first? This decision can significantly impact your budget, timeline, and overall success. By making the right choice, you can avoid costly mistakes and set yourself up for a smooth and enjoyable building process. In this detailed guide, we’ll share insights from the Home Building Hub podcast with Colin Bischof and Darren Brennan to help you make an informed decision.

Why This Question Matters

Choosing whether to secure the house or land first impacts:

• Your Budget: Misalignment between land and house costs can lead to financial strain.
• Feasibility: The size, shape, and conditions of the land determine the type of home you can build.
• Timeline: Market conditions may pressure buyers into hasty decisions, increasing the risk of errors.

Colin and Darren emphasize that the answer isn’t one-size-fits-all. Instead, success lies in researching and coordinating both house and land together.

The Importance of Researching House and Land Simultaneously

When starting your home-building journey, here are three key reasons to research both house and land together:

1. Avoid Costly Mismatches

• Purchasing land without consulting a builder could leave you with a block that’s unsuitable for your dream home.
• Factors like block size, slope, orientation, and easements significantly influence construction feasibility and costs.

Example: Darren shared a story about buyers who thought they had purchased a "flat" block of land, only to discover it had a six-meter slope, making construction impractical. They had to resell the block, losing time and money.

2. Understand Total Costs

• Builders factor in site costs like leveling, retaining walls, and engineering requirements, which depend on land features.
• Site costs can vary significantly, even between blocks on the same street. Consulting a builder early ensures you’re aware of these costs upfront.

3. Leverage Builder Expertise

• Builders and their sales consultants have access to:
• Detailed land updates and availability.
• Engineering plans outlining land conditions.
• Relationships with developers to find blocks that fit your desired house design.

Common Pitfalls When Choosing Land First

1. Overlooking Land Conditions

• Buyers often purchase land without understanding conditions like slope, fill, or compliance requirements such as the Small Lot Housing Code (for blocks under 300m²).

2. Budget Misalignment

• Spending too much on land can leave little room in your budget for the house and upgrades you want.

3. Rushed Decisions

• Hot markets may pressure buyers to secure land quickly, leading to mismatches between the block and the preferred house design.

The 5-Step Process to Avoid Mistakes

Follow these steps to make a well-informed decision:

Step 1: Finance First

• Determine your maximum borrowing capacity and comfortable repayment budget.
• Consult a mortgage broker to explore available grants or incentives.

Step 2: Consult a Builder Early

• Share your budget, needs, and preferences with a builder’s sales consultant.
• Builders can guide you toward land options that align with your desired home design and overall budget.

Step 3: Visit Land Estates

• Tour estates and blocks recommended by your builder.
• Evaluate location, amenities, future infrastructure, and block orientation.
• If the land is titled, stand on the block to assess its suitability firsthand.

Step 4: Evaluate Total Package Costs

• Work with your builder to finalize a house-and-land package price, including:
• Base home costs.
• Site preparation and compliance fees.
• Additional charges like stamp duty, council levies, and utility connections.

Step 5: Act Quickly but Thoughtfully

• Once you’ve aligned the house and land with your budget and preferences, act quickly to secure the opportunity.
• Markets can change rapidly, and hesitation could result in missing out.

Key Considerations for House and Land Packages

1. Market Conditions

• Hot Markets: Expect pressure to act fast due to high demand.
• Slow Markets: Take your time, as you may have more flexibility to negotiate and hold land while finalizing plans.

2. Titled vs. Untitled Land

• Titled Land: Expect pressure to act fast due to high demand.
• Untitled Land: Offers more choice and time to save but could delay your build.

3. Engineering Plans and Site Costs

• Request an engineering plan to identify potential challenges like slope and soil quality.
• Builders can interpret these plans to estimate site costs more accurately.

4. Compromises Are Common

• Most buyers will need to balance trade-offs, such as:
• Choosing a smaller home for a premium block location.
• Opting for a larger home in a less central estate.

Real-Life Examples and Lessons

• Example 1: A couple rushed into purchasing land without consulting a builder and later discovered their dream home wouldn’t fit. They had to resell the block, incurring unnecessary costs and delays.
• Example 2: Another buyer saved thousands by consulting a builder first, who identified a block with lower site costs just across the road from a more expensive option.

Key Takeaways

• Consult a builder early to ensure the land suits your preferred house design and budget.
• Understand site costs and land conditions before making a purchase.
• Avoid rushing into decisions; align your choices with long-term goals.
• Use expert advice to navigate market conditions and land availability.

For more insights, listen to the full episode: Should You Buy House or Land First? …And Why?