Professionals Armadale Real Estate
19/193 Jull Street Armadale
What isn’t there to love about a newly built home, your own input, ideas and designs all coming together before your eyes. Exciting thought? Well yes…….and no!
House and land packages can be tempting for sure but who wants the delays and the long wait, the hidden costs etc involved? I know of a personal friend who signed up 2.5 years ago and his pad has only just gone down. Delays with approvals from the council etc. Now that would be a rarity I am sure, but he is now having to find an extra $25,000 on top of what he signed up for, the tiles have changed price along with a lot of materials, the choices he made are now no longer available, the bricks he loved, they aren’t making anymore, yet, when he signed up, in 2014, they were and his budget allowed for what he signed on the dotted line for. Frustrating is not the word he is using lately. This is his first home so it should have been more exciting and rewarding than what it has been, but that has not been the case in his situation. It is something that is more common than you would think. You just have to search on www.news.com.au under “Aussie Property Dream Turns to Nightmare” dated March 2016 to only realise – it can happen to anyone.
The sales pitch used from company to company entices you in, but what are you really getting? What have they omitted to tell you and what little things have they snuck n the price without you knowing. You think you are getting a bargain – but are you really?
Sometimes the small print means you have more outlay than you bargained for and lets not forget, you have to finish it, window treatments, flooring (they only tile the wet areas) , sheds, fencing, driveways, patios etc are not all that cheap. That little fine print can sometimes mean you only signed up for a driveway so many metres long, but what about the rest and the crossover, well that is on you my friend. What about landscaping? They may include a portion but chances are, that is the front they include, you still need to finish the back yard—then there is heating and cooling, the list appears endless. …and believe me—it is!
Different builders have different hidden costs, usually display homes have all the extras included (the “upgrades”) and not the base cost given to build the house. The internal doors, handles, taps, fixtures, stove, extra plugs and lights etc may be an extra cost if a bit fancier, they may also have the display home as slightly bigger than the base plan, another extra involved if you find that too small.
Another problem with house and land packages is that it’s often not a fixed price and that prices can actually vary due to the soil in the area and due to the slope of your block.
What happens when building a property is that you generally have a fixed price but if your property is sloping, that can add thousands of dollars to the build and more so again if you don’t have the best soil and you have rocky soil or difficult soil.
If you’re purchasing a house and land package through anyone but the developer or the builder, then there’s going to be extra commissions built into that.
Rather than just purchasing, paying for the land and paying for the build, on top of that, on top of the build generally you’re also going to have commissions paid to the people who are marketing and selling that property to you. You didn’t think they were doing it for free did you?
Now these commissions can often be undisclosed and they can be as little or as much as they want to, it could be as little as a couple thousand dollars, it could be as much as… upwards of $40,000 on different deals (I have even heard of $80,000 commissions upon researching on the internet – crazy thought is it not?).
That’s going to the marketer’s pocket, that’s not going to the value of the property you are building and so therefore, chances are that’s going to inflate prices even more. So when dealing with someone selling you a house and land package I do recommend that you ask what commissions are in built, what they’re getting and if they’re not willing to tell you then I would be very cautious about moving forward. That can add thousands to the build as well. So even though you’re quoted a price or there’s a price on that sign board as you’re driving down the road, that doesn’t necessarily mean that’s how much you’re going to pay.
Another problem with house and land packages is that you almost always get suckered into paying for the upgrades as stated earlier.
And what they do is they give you a package that has a nice house but for just an extra $2,000 you could add this or for an extra $1,000 you can have a granite bench top or wider doors or a better frontage, doors on a theatre room or ensuite etc, all of this different stuff adds up fast so that when you’re going through the process and you’re spending $160,000 or $200,000 or $800,000 an extra $2,000 on top doesn’t seem like a lot. But when you’re doing $2,000 here, $4,000 there and $2,000 over there it adds up pretty quickly.
In a lot of cases, purchasing the land by itself and then getting quotes from local builders and contracting a builder to build it could be a much cheaper option for you.
Buying a pre-established home means you know what you are getting – no hidden costs or agendas – WHAT YOU SEE IS WHAT YOU GET! It also means that blocks are bigger. Did you know that it is the land that appreciates and the home that depreciates, so the bigger the block – the better in the long run when you come to sell and move on.
With homes so competitively priced and interest rates still so very low, to get in to the market is so much more affordable with mortgage payments for a $300,000 home on 4.5% over 35 years being around $350 per week – that is CHEAPER than rent!
Now we are not against house and land packages—not at all, but you certainly should be prepared, well informed and not dazzled by all the pretty lights, offers and features you see in the show home and think very carefully whether taking on extra burden is really what you are bargaining for before you go ahead and put down your deposit should it all go pear shaped and leave you in a poor financial position.
At least buying pre-established means you get in to your home much quicker as well. No paying for a mortgage as well as rent at the same time which can really bite in to your back pocket.
The bottom line is that while building a new property can seem appealing, it often proves unsatisfying over the long term due to weaker capital growth. If you are looking at a long-term investment opportunity, more often than not, your best option will be a second hand property.