The downsides of house and land packages

ME’s head of home loans has warned property buyers of the risks associated with house and land packages.

Patrick Nolan said that while house and land packages are often pitched at first home buyers with prices that offer value and affordability, slower capital growth is not uncommon with these types of deals.

“Home values in outer suburban areas can rise at a slower pace than for established locations closer to city centres,” he said.

“It’s an issue that can particularly apply in larger developments with a significant number of new homes, and slower capital growth could impact your ability to climb the property ladder further down the track.”

Mr Nolan said a house and land deal may appear to offer good value, but many new estates feature small lot sizes.

“This is a way of keeping prices down, but be sure a small land area will still meet your needs in years to come if, for instance, you start a family,” he said.

“Consider the location too. New estates are often constructed in outer ring suburbs where employment opportunities and public transport may be thin on the ground. This can mean a long and potentially expensive commute to work each day – money that could go towards paying off a home in a more established area.”

[Related: 'Mum and Dad home buyers face settlement risk]

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