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The process of buying land

It’s an understatement to say that buying land is an inexact science. There’s no secret formula that determines exactly what will suit you now, in five years’ time and within a couple of decades. But there are some tried-and-true methods that can steer you towards living happily ever after. It involves doing your homework on everything from budgeting and savings to planning, networking and imagining your dream home on that piece of dirt in front of your eyes.

Do your homework
Location, location, location is the standard phrase used when talking about property. And it relates as much to your block’s position within the estate as to facilities outside the community. Whether you’re happy to put up with extra traffic by buying close to the entrance of an estate is an individual preference that is equally as important as a quicker exit – just as being close to major facilities within an estate is often balanced by a desire to be far from the noise pollution of freeways or train lines. Only you can determine what suits your lifestyle. 

Study any of the glossy brochures at new estates and the primary emphasis will be lifestyle – and picturing yourself enjoying the many attractions that will distinguish this offering from the rest. What is less obvious is whether smaller estates are better than larger estates, but Villawood Properties executive director Rory Costelloe, said it was a matter of quality over quantity. “It all comes down to the value and importance the developers place on delivering a quality product. Larger developments allow better planning and scale, along with more amenity options, while smaller estates are more boutique and quieter, with most features within walking distance. It ultimately comes down to the lifestyle you want to lead and choosing a developer who can deliver this for you,” Costelloe said. 

In most cases, the answer lies in people finding the estate that suits them best for work, rest and play, and then choosing the land within the estate. Besides the proximity of shops, schools, transport, work, health and recreation options such as parks, sporting ovals and resident clubs, your immediate neighbourhood should be a primary consideration. Many new estates create Facebook pages to help establish the sense of community. “Pick a location where you can raise a family and be proud to call it home. You don’t need to move somewhere just because it’s where the cheapest house and land package is offered,” Costelloe said. “Look at the master plan of the developments you’re considering and critically assess if it has been designed in such a way as to foster a sense of inclusion? Well-designed streets and carefully landscaped parks and open spaces create opportunities to meet neighbours and create new friendships are very important as a starting point. Also consider the location of nearby schools, shops, healthcare and childcare are high on the list of priorities for everyday access for families, along with things like higher-level sporting facilities for older kids.”

Arden Homes director Dean Morrison advises that buyers should think about where they live now and what made them settle there. In other words, determine what is most important to you and your family. It’s also worth considering who else is buying in the area. If you have a young family it may not be prudent to buy into an area largely populated by those downsizing. If the land is housed within an existing stage, treat it like an established home. If possible, visit the block at various times of the day to take in everything that’s going on in your new neighbourhood. This will let you know how much noise to expect.

Something for everyone
Blocks of land come in all shapes and sizes. From the standard rectangular block to the irregular-shaped or corner block, they can overlook water, parkland or just neighbouring homes. Some are sloping and others are predominantly flat. Regardless of how wide the lot is or where it’s placed within a residential estate, the only certainty is that the individual characteristics of the land will affect the design of the home. At its simplest, it’s important to select a suitable, flat block of land, and to think long term (solar access, maintenance requirements, connected services and family plans). It’s advice that Urban Development Institute of Australia Victorian chief executive Danni Addison said buyers would be wise to heed. “Each block comes with its own set of advantages and challenges and every purchaser will be looking for different qualities and features. But the closer you can get to a flat, rectangular-shaped block without easements and with full street frontage, the cheaper your build costs are likely to be overall,” Addison said. “When hunting for the ideal block of land, homebuyers need to consider location, size, budget, amenities, and whether the infrastructure is there to serve their lifestyle needs. Before purchasing a block of land, it’s a good idea to step back and really assess your priorities, and consider how those priorities may change in the medium term. It’s also important to be familiar with the rules and regulations governing what you can and can’t build on any particular block. The average homebuyer doesn’t realise that sometimes you cannot fill your entire block of land with your house – there are regulations governing setbacks for example.”

It’s natural that, after visits to display home villages, people can easily picture a preconceived house size in their mind. But the realities of building can kick in. Setbacks, building envelopes and height restrictions can all reduce the amount of land on which you can place your home. In other words, don’t assume that a 14m-wide block can accommodate a 14m-wide house. Corner blocks, for example, are usually larger because their building setbacks are larger. It’s said they can be hard to sell due to security, privacy and traffic concerns, but few consider the upsides – the lack of neighbours on at least one side and the extra natural light – that can considerably enhance their appeal. And don’t forget to factor in where your driveway will be in relation to the home (the crossover is the access point from the street to your block). Again, discuss this with the land sales agent and with any builder you may be considering. 

Another element to consider with land is the average-size block in the estate. Think about how close your neighbours will be, and if this suits your requirements for privacy. Costelloe said the timeframe between land being titled and your home being built was two years but it can vary. “The reason for this is to reduce land speculation and ensure the character of the community – very few people want to live next to an ugly vacant block or a construction site that keeps dragging on,” he said. “At Villawood, we do our very best to tailor to the needs of our residents, who generally are quite motivated to get settled in to their new community.” As a point of reference, a house between 20 and 30 squares will require a 450sq m block. Those between 30 and 40 squares require are best accommodated on a 550sq m lot, and anything larger would need at least 600sq m.

Crunching numbers
Business is booming in land sales, with more than 22,000 blocks sold in the past 12 months. Housing Industry Association statistics show that in September 2016 the median price for a block of land in Melbourne was $240,000, and buyers paid $193,400 for their lot in the Barwon region. Go back a decade earlier to September 2006 and the Melbourne median ($137,000) was only fractionally above the Barwon median of $135,000. And in March 1991, when the official statistics began, Barwon was still more affordable ($39,750) than Melbourne ($46,100). Red23 monitors land sales across Melbourne growth areas and the demand for land in recent months is clear. “With a stable 140 trading projects across metropolitan Melbourne, the median (land) price now sits at $238,900, down 0.4 per cent in December. The median lot size is 420sq m. On a dollar per square metre basis, values have increased from $235sq m to $570sq m over the last 10 years,” Red 23 Research and Business Development general manager Andrew Perkins reported on social media. A month later the company’s growth-area snapshot found Casey, with a median land price of just under $300,000, was Melbourne’s most expensive market. It also revealed that 40 projects had sold out over the past 12 months. A month later Perkins was heralding that Melbourne’s average growth-area land price “looks certain” to push through the $250,000 mark for the first time after moving to $249,600 in February. It equated to an increase of $190 a day.

A helping hand
Thankfully, several recent State Government initiatives mean buying land is becoming more achievable. Firstly, an additional 100,000 lots of rezoned land will be released in Melbourne’s Urban Growth Corridors by December 2018. And secondly, the reform of stamp duty fees will assist first-time buyers. From July 1, stamp duty will be axed for any first-home buyer whose property costs less than $600,000. There are also discounts for properties costing between $600,000 and $750,000. It’s expected that up to 25,000 people will benefit from the changes, with an average saving of about $8000. These concessions have been bolstered by a doubling of the existing $10,000 First Home Owner Grant in regional areas, for new houses costing under $600,000. This will make a tree/sea change to Geelong and regional areas even more attractive.

Rather than wait for July 1, the change has allowed firms to take a proactive stance to claim a share of the anticipated extra business. Less than a fortnight after the announcement, Porter Davis Homes said it would pay the stamp duty on land contracts to the value of $350,000 (including GST) for first-time buyers who build with it. “We want to offer an industry first and pay the stamp duty now, so there’s no need to wait until July 1,” director Paul Wolff said. “And just to be fair, if a customer has already purchased land after October 31, we’ll also refund their stamp duty. “There has never been a better time to be a first-home buyer. Our commitment to pay the stamp duty for house-and-land packages gives customers the chance to buy property in the Melbourne metro areas, surrounding outer suburbs and regional Victoria now, and get into their new home sooner rather than later.”

As far as the new blocks are concerned, residential Precinct Structure Plans will be created in areas such as Quandong, Mt Atkinson, Tarneit Plains, Lindum Vale, Donnybrook and Woodstock, Northern Quarries, Wollert, Minta Farm and Pakenham East. Addison welcomed the “common-sense approach to reforming Victoria’s under-performing planning system”. “There remains a critical issue with the time it takes for industry to bring sites to market after they receive planning approval. There is a serious need for state and local governments to focus on improving this process,” Addison said. It was also announced the Streamlining for Growth program will be extended to four years, with an extra $16.46 million allocated towards reducing red tape. The government’s target is to keep a four-month stock of lots for sale, and fast-track 30 per cent of permits through the extended Vic Smart program with a 10-day turnaround.

Patience is a virtue
The length of time from buying the block of land to starting building will differ with every sale but it can take on average at least 12 months. Part of the reason is the certificate of title, which is necessary before any construction work can begin. “The biggest misconception held by most purchasers is that they can build straight away, once they’ve bought a block of land,” Costelloe said. “The period between land purchase and legally being able to build is called ‘time to title’. Villawood generally seeks to deliver titles under 12 months, but we’ve seen other instances in the industry where people have waited up to 24 months for titles.”

Another is the infrastructure. When it comes to creating infrastructure in new estates, it’s said that development resembles an iceberg. It’s estimated that only one-third of the work is visible above the ground, with the majority of works (electricity cables, sewerage, water and gas pipes and internet) hidden away from view. Thankfully, the services for house blocks in most estates are ready to be connected. But never assume – always ask. Once your block is titled, your builder conducts a soil test and updates any site costs. Approvals, such as building permits and unconditional finance, must be obtained, and settlement on the block finalised before the site is prepared for construction.

Soil tests performed by a qualified engineer will ultimately determine the cost of building your foundation, upon which your dream home will be constructed. It will also show whether there is a need for extra earthworks (adding infill or removing rocks) or retaining walls before building and landscaping begins. The main consideration in soil tests is how reactive soil is — in other words, how much it’s likely to move when the soil’s moisture content increases or decreases. Understandably, the desire for stability means it’s generally more expensive to build on reactive soils. 

The upside of waiting for a block to be titled is greater savings potential. Just so you are prepared financially, Dennis Family Homes advises that construction of your house is broken down into several stages and you will usually be invoiced a percentage of your overall contract value at the completion of each stage: Slab; Frame; Lockup; Fixing and Completion. Needless to stay, the earlier you can start reducing that mortgage, the better it will be for your financial future.

Money, money, money
Money talks when buying land – far beyond paying the industry standard of a 10 per cent deposit. Dennis Family Homes recommends the establishment of a budget as an integral part of its 10-step process to home ownership. In addition to expenditure and savings, the budget should also include conveyancing costs, state taxes, stamp duty and fees. Also, speak to a mortgage broker to determine the best loan for your circumstances and obtain pre-approval. It’s also vital to factor in any rebates or grants you may be entitled to, such as the First Home Owner Grant.

Getting in early is encouraged when new estates are first released. It’s a common practice for the price of land in each stage of an estate to progressively increase as they are released, so get in early when you can. In other words, Stages 1 and 2 are likely to be less expensive than Stage 13, and all are likely to cost less than Stage 30 and so on. Before signing on the dotted line, compare the cost with similar recent land sales in the area to ensure you are not paying too much. 

Words: Ross McGravie

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