What is a ‘House & Land package’?

 

There are generally two types of House & Land Packages – Section & Build or Turn Key. Both are essentially the same in nature, in that the sale is for a section and house together as a packaged offering. The builder owns the section and typically has a design created specifically for the section, then offers this as a package for sale to the public.

Section & Build

BUYER funds the section and build

 

A Section & Build package is where you the buyer, purchase the section from the builder and then pay the builder progress payments under the terms of the build contract, as the house is being built. If you are borrowing the money to do this from a bank, you will require a construction loan. Your bank will wish to see a Sale and Purchase agreement for the section, and a Build Contract. Your bank will settle (pay in full, minus your deposit) the section price upon the land title being issued. Then the construction of your new home will begin. The bank will then pay the builder staged progress payments. At the completion of the house build (once the Code of Compliance is issued) your bank will convert the construction loan into a principal & interest mortgage, and choose a fixed term.

See detailed Section & Build process

Pros:

  • From the moment you settle on the Section, your finance is locked in by the bank. If the construction takes longer than a year, your finance won’t expire.
  • It is a cheaper contract than a Turn-Key as the holding costs are not included. However, you’ll be paying interest on the moneys drawn down for the section and as each progress payment for the build is drawn down.
  • Banks typically prefer these over the Turn Key Contracts as they have a security early on in the contract.

Cons:

  • Slightly more work with the bank. It’s not a set-and-forget contract like Turn Key.
  • It is harder on cashflow if your income is a little lower. If the builder goes bust make sure you have a 10 year build Guarantee to protect you. You can mitigate cost overruns or price increases by insisting on a fixed price build contract.

Turn Key

BUILDER funds the section and build

 

Turn Key Construction is where the builder settles the section and funds the house to be built, and you the buyer pay on completion.

As with the section and build process, you pay an initial deposit, usually around 10% of the total price. You pay the remaining balance once the house has received it’s Code of Compliance Certificate (CCC).

In both cases the money for your deposit is held in the Vendors Solicitors Trust account. If the builder goes bust during the build, your deposit will be protected.

See detailed Turn Key process

Pros:

  • Very simple and does not require any cash (apart from your deposit) until the house is completely ready to go
  • You know exactly what the cost of the build will be. You don’t need to pay interest costs during the course of the build.

Cons:

  • Likely to be a more expensive contract than Progress Payment. The Vendor must finance the cost of the section plus all labour and materials during the build which they need to recoup.
  • Your Offer of Finance typically lasts a maximum of 1 year. You may need to reapply and run the risk that you cannot meet the finance criteria. In this case you would need to try to exit the contract (get your deposit back) or sell it on before it is ready.
  • A Turn Key contract that is due to settle in under a year holds less risk and if you have good income and good deposit, this should be a fairly low risk for you.

ADVANTAGES OF BUILDING NEW:

  • Latest technology, materials and insulation (reduction in power consumption)
  • Custom designed to meet your needs
  • Virtually no maintenance for the first 10 years
  • Builders warranty and third party 10 year warranty is offered by reputable builders
  • Typically you can experience an immediate equity gain upon completion of a new dwelling