Looking for a home or investment property requires a lot of time and energy. You may find you’re being bombarded with advertisements that showcase house and land packages and turnkey new home packages at very affordable prices. These adverts are put out by developers who purchase large areas of land, add all the necessary infrastructure, and then release several lots to the market. They release these individual lots as either vacant land for buyers to build their house upon or they sell a completed house, as a package. Now, this can be tempting. However, it is important to consider if they are the best option when comparing them to custom built homes.
You may be actively checking prices, location, packages on offer and market trends, but still confused about which option to go with. And really, at the end of the day, there is no right or wrong…
There are some legitimate reasons why there is a debate surrounding purchasing house and land packages versus turnkey packages. Of course, there are quite a few benefits and drawbacks as well when we compare them to custom built homes.
This article will help you decide which option is better for you by comparing their advantages and disadvantages to ensure you’re choosing the right one for your own situation.
What makes them different?
Turnkey Packages are exactly what you get. You get to purchase a fully built home with no further work required whatsoever. Everything is set and also included.
Standard House and Land Packages comprise of buying a piece of land where the design and layout are already chosen. However, you may be able to customise certain features.
Custom Built Homes, on the other hand, gives you the freedom to choose exactly what you want. Ultimately, if you have an idea, it can be achieved!
Turnkey Packages
Advantages of Turnkey Packages
- All the hard work is taken care of
When it comes to turnkey packages, once the building is complete, you can turn the key in the front door and start living straight away, with no further work required. The next step would be to start decorating and explore the neighbourhood.
- You can move in straight away, without any additional work required
According to the Australian Housing and Urban Research Institute (AHURI), it takes about 7.5 months on average to build a house from scratch. On the other hand, it takes roughly about 30 days to seal the deal and move into a turnkey home. The delay will cost you money for the land and increasing loan, while you are still renting for example.
- Pricing covers the whole package — there won’t be any additional costs or financial surprises
Budgeting to build a new home can be difficult. Choosing a Turnkey home option takes the stress out of money worries, as there are no hidden costs; what you see is what you get.
- Great investment opportunities as they don’t require any additional work
Disadvantages of Turnkey Packages
- You have limited control over customisation
As mentioned before, you are moving into a home that is already built. Meaning you may end up not loving every aspect of the layout or design. That’s why finding the perfect turnkey package is genuinely challenging. You might not notice design issues or defects of the home right away, and you can’t do much about it when you do. There is also potential risk with not knowing what kind of shortcuts the builder may have taken to finish the project on time.
- It may be more expensive
Depending on where you decide to settle in, the price tag varies. However, according to the National Association of Home Builders, it definitely won’t cost you as much as building a custom designed home.
Standard House and Land Packages
Advantages of House and Land Packages
- You can customise some features
Like the Turnkey packages, the design and layout are taken care of. However, with this option, you are able to customise some features giving you a little bit of freedom to personalise your home.
- More affordable
The costs are usually well below any custom designed option. The house and land package is a middle of the range option when it comes to pricing. The factors that go into the house design and materials are able to be done in bulk, as each design is sold multiple times. This reduces costs for the builder. You are more likely to get cheaper deals of this type on offer on the outskirts of existing cities or suburbs.
Disadvantages of House and Land Packages
- It may take longer than expected
With house and land packages, there may be further delays in starting the build after the package has been purchased.
- You may not get the location of your dreams
The majority of house and land packages are located on the outskirts of the city, in areas often with an abundant supply of land, weaker economic drivers and a lack of infrastructure. Capital growth (meaning an increase in the value of your property) is therefore often harder to come by.
Custom Built Homes
Advantages of Custom Built Homes
- You can build it however you like
These days, most homeowners are settling in for buying land and choosing to build because they couldn’t find anything in the market that suited their style. With a custom built home, you’re able to build the home of your dreams
- Your home value is more likely to increase over time
As time passes, your home value will increase due to the customisation of the home. Having a unique home is usually more of an advantage because buyers like that- unless it is too different or odd. If you build in an area that is not full of other similar house and land style houses, then you can normally get better growth in value. If there are a lot of similar homes, it is slower to get the increased values.
Disadvantages
- It takes time
Not a news flash, but planning and building a home from scratch takes time. Lenders can restrict borrowing by providing a cause that must be achieved, i.e. completing the construction within a limited timeframe of settlement.
- It can be costly, and it’s not fixed.
In most major cities in Australia, purchasing land requires a hefty sum. Additionally, costs can quickly spiral out of control if you aren’t monitoring where the money is being spent and on what. Make sure to go through your builder’s contract to see whether everything has been covered. Sometimes, builders don’t include the usual fees such as light fittings or driveways, which might cost extra.
When deciding on a plan, ask as many questions as possible to the builder about the display home. They might show you a home plan which uses cheaper versions of the tiles and light fitting when you thought they were authentic.
- Progress fees on a construction loan
Some lenders can charge a fee for processing each payment, while others may charge a one-off fee. Additionally, as you build, progressive costs are added to your construction loans, so be careful to check fees, timeframes and requirements for any loan.
There are government grants available as well as savings on stamp duty that can affect the affordability of any of these purchases significantly.
All of the ‘new home’ government grants and concessions are available on each of these options. To find out more about what loans are on offer, click here. The government grants you can get are easier to manage with the turnkey option. When you get the First Home Owners Grant and also the Home Builder Grant is more so ‘along the way’ for the other 2 options. You have to work with your broker to ensure your own funds are paid at the right point in the exercise, for example towards your builders’ deposit.
The impact of lending against the turnkey option is simpler because you do not have to manage progress draws along the timeframe it takes to build your home. You also have a home to move into quickly reducing the rent paid while you build (double whammy costs).
In Conclusion: Which One is Better?
While buying an existing home takes out all the stress of building your own home, a turnkey, house and land package, and custom built home all offer flexibility, freedom and overall satisfaction once completed. The better option really does depend on your location, situation and preferences.
In any case, we recommend discussing your options with a professional and consider all the points above before entering into any contracts. If you’re needing more clarification on the best option for your situation, please don’t hesitate to contact us today!
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