The question of whether to purchase a block of land with the view to building a house down the track, or buying an existing, ready-built home, seemed to have strong arguments on either side–after all, buying a known quantity was a strong incentive for playing it safe.
My final decision came down to being pragmatic–a plot of land gave me greater flexibility, was more affordable and with thoughtful development through a quality home builder, had the maximum capacity for capital growth. Allow me to explain…
Affordability
The cost of buying an established home, especially in major capital cities such as Melbourne and Sydney, has never been so high. However, a far smaller commitment of funds is required to secure a vacant house block, enabling you to get on the property ladder with substantially less financial stress.
The purchase of a block in a well-serviced area with existing amenities or one that has been earmarked for substantial infrastructure growth is an investment in the future.
Stamp duty savings on land is also a major consideration since tax is paid based on the purchase price–lower outlay means lower tax.
Set and forget
Many of the arguments surrounding buying an established property centered on the capacity to lease it out to a tenant. The issue with this scenario was the minuscule return I would be getting compared to my major outlay of money. In researching the subject, I encountered numerous horror stories about deadbeat tenants destroying properties or not paying the rent.
Lower overheads
Aside from the occasional lawn mow, my land pottered quietly along. The rates were manageable due to it being an undeveloped block.
Maintenance costs on older established homes can be a constant drain on resources. I knew when I decided to build, my house would be new and covered by a warranty. The scenario was similar to buying a used car compared to purchasing new.
Transparency
Aside from easement issues that can exist with any property, the land is basically ‘what you see, is what you get’.
Property such as houses, units or flats, can hide a multitude of issues surrounding plumbing, wiring, subsidence, infestation and structural integrity. These problems can be the source of substantial out of pocket expenses over and above the initial purchase price.
Capital growth
With the price of real estate doubling approximately every eight years in Sydney, purchasing a block at today’s market prices gives me a foothold on the property ladder. By the time I had saved enough to begin building my new home, the median house price had risen and thus the value of my new home had increased proportionately.
Flexibility
Buying now and building later provided me with far greater scope to plan, save for and design a home perfect for my lifestyle. Rather than adapting myself to home, I had the pleasure of building a truly customized house.
Take out the competition
My initial sojourns into the established real estate market opened my eyes to how much competition there is for well-located homes. By purchasing a block of land in an up and coming area, I had the luxury of taking my time in the selection process–able to research the local neighborhood and community before committing myself.
The purchase of a reasonably sized block in a suburb surrounded by schools, transport, and medical facilities is a wise investment. It is a blank canvas on which to design and build your dreams from my experience, my plot of land was a down payment on my future–my nest egg waiting to hatch into a beautiful, forever home.
Author: Justin Jersey