19 Nov The thing about ‘house and land packages’ – Harris and Bateman
Don’t you hate sweeping statements like “houses are better investments than units” or ‘buying off the plan is dangerous’. Property Mentors Matt Bateman and Luke Harris join us to discuss one that annoys them about house and land packages.
Kevin: One thing we see a lot of commentary about property is sweeping statements, generalisations, particularly when it comes to things like units, units over houses because of land value, even whether or not you should be looking at a house land package, whether you should be buying off the plan. Sweeping statements sometimes can lead you in the wrong direction. I’m talking now to The Property Mentors, Matt Bateman and Luke Harris. Gentlemen, thank you very much for your time. I’m hoping you can give us a bit of an insight here as to what advice you give about house land packages specifically. Are they a good idea?
Luke: Thanks for having us, Kevin. Yeah, look, they can be a good idea, and they can be a bad idea, really, as with all things property, as you know. I think, for us, really, it comes down to finding what’s good in a house and land package, and finding out really where the property’s actually located. The quality of the land is more important than the quantity of land, and really, things like good infrastructure is probably the key thing to be looking for. So the actual design of the house and land package itself is overall slightly less relevant than the actual location and the quality of the land. If you’ve got good infrastructure with really good schools nearby, good freeway and public transport infrastructure, good shopping centres, hospitals, things like that, that’s going to improve the value of that land faster than if you had a larger piece of land with no infrastructure nearby.
Kevin: I guess it also depends on the purpose of the investment, doesn’t it, whether it’s a home. If it’s a home, then you’re going to have some specific requirements around what the family needs, but if it’s an investment, you’re going to have some specific requirements around what’s going to make a good investment, in terms of what will attract tenants.
Matt: Yeah, and look, you’re spot on there, and this is what I guess we’re saying, is you’ve got to have a plan and a purpose for every property that you add into your portfolio. Let’s take owner occupiers for example, house and land does appeal to them because they might have a growing family and they want that little bit of a yard to be able to kick a soccer ball in the backyard with the kids, so these are all things that are important to some buyers. For other buyers, what they want to do is they want to be able to have the kids walk to school, or they want to be able to be close to their parents, and therefore, for them, a townhouse or a unit or apartment might be a better option for them as owner occupiers.
Matt: I guess the point there is, are house land packages good, yeah, as Luke said, they can be, but they can also not be, because they may not fulfil the criteria for why you’re putting that property into your portfolio in the first place. Some house and land packages could be in a very large estate with very poor amenity, even if the land blocks are big and the houses are well designed and relatively affordable. But again, one of the reasons that a lot of people are attracted to house and land packages is because of their affordability.
Kevin: Yeah, they are more affordable, and I guess you’ve got to be wary too of the fact that where a lot of these are being built, there isn’t the infrastructure at this point in time, so you’re really buying ahead of that development in the area, aren’t you?
Luke: Absolutely, and that does factor in the lower price and the affordability side of things, but when you’re looking at, let’s say for example, we’re in Melbourne, we’re here on St Kilda Road, right now, right in the middle of Melbourne, and really, if you look at the infrastructure that we’ve got around us, if you look at areas like St Kilda and Prahran and South Yarra that are on our doorstep here, really, you’ve got billions and billions and billions of dollars’ worth of infrastructure in trains and road networks and hospitals and schools, all of the amenity that’s been built up over this, as Melbourne has grown over the last hundred years.
Luke: So really, the size of the land is less relevant because you’ve got the access to infrastructure and, really, when you’re looking at house prices, what underpins it is, the infrastructure around it underpins the land value, and so when you’re looking at the infrastructure around an area like where we are right now and other CDB centres, the quantity of the land is less important than the actual quantity of the land that you will get. Out in the suburbs, you might get a larger piece of land, but it might be in a new estate and you’ve got to drive for 10 minutes just to get to the freeway.
Matt: One more thing on that, Kevin, if I can, and that is that obviously we’re also looking at, is the property … we’re talking about it as an investment … is the property designed to be largely for capital growth or is it largely designed for rental yields? Obviously, in some of these house and land packages, we might get a higher rental yield, but we may suffer a lower capital growth over time.
Kevin: Is it possible to get both?
Matt: Absolutely, it is, and again, that’s the holy grail, I guess, of investing, is finding those areas that have both high levels of capital growth potential, but also have strong yields to help support not only this property purchase but the acquisition of further properties down the track.
Kevin: So what about some of the regional areas? Are they good prospects for this? I mean, you’re going to get the double whammy, I guess. You’ll get good land and you also get great affordability.
Luke: Look, absolutely, and especially in places like Bendigo and Ballarat, here in Victoria, where you’ve got the state government pushing for people to actually move to these regional centres. You’ve got good freeway and transport infrastructure through the train networks, to be able to get to Melbourne. Even Geelong has some opportunities if you’re buying in the right area, but really, that comes down to doing the research on really why you are buying that property in the first place and what the purpose of it is. See, it does come down to affordability. Some people may not even be able to get into a one-bedroom apartment in a CBD location, but they may be able to get into a small house and land package in a regional centre.
Kevin: Matt, Luke, thank you once again so much for your time.
Luke: Thanks, Kevin.