The Real Cost of House & Land Packages (What No One Tells You)

Mar 30
6 min read

Buying land and building your first home is one of the most common strategies first home buyers are told to consider.

It’s often positioned as a more affordable way to get into the property market. A brand new home, government incentives, the ability to personalise everything… it pretty appealing.

Something that you want to be mindful of with this pathway though, is that it can either work beautifully, or become incredibly stressful as you progress; when additional costs start adding up (not just the tangible costs, but the intangible ones too). What determines a positive or not-so-positive building experience often comes down whether or not you've been detailed the whole process (warts and all) before getting started... so you can best prepare mentally and financially.

Because one things for sure, buying land and building is a whole other kettle of fish compared to buying an established property. So to empower you to have the best possible experience building your first home, let’s walk through it in a way that makes sense and gives you a heads up.

What buying land and building really looks like

When people talk about house and land packages, what they’re really referring to is a two-part process.

First, you purchase a block of land on one contract. Then, you enter into a separate contract with a builder to construct the home. It’s not one transaction, it’s staged. So straight up this means there are multiple moving parts, more people involved, and more decisions for you to make along the way.

When it comes to people involved, you’ll typically be working with:

a mortgage broker or bank lending specialist
a land sales agent or developer rep
the building company and their team - the sales rep, site foreman etc.

And from a finance perspective, it’s structured differently to an existing property purchase too.

Instead of one loan being fully funded at settlement, subject to your contracts and timeframes, you'll likely have two loans that will settle at differnet times. The land purchase loan settles first, then your construction loan will settle later and be released in stages - known as progress payments - as each stage of construction is completed.

Why so many first home buyers consider this pathway

There’s a reason this strategy is talked about so often. For the right person, it can be a really great option.

You’re building a brand new home, which usually means lower maintenance in the early years. You may be eligible for first home buyer grants or incentives. You get the opportunity to personalise your place - think colours, floorplans, finishes - all of it. And in some cases, depending on market conditions, people can even find their property has increased in value by the time construction is complete. So there are genuine upsides!

But like any strategy, there are also trade-offs. And this is the part that doesn’t always get talked about enough.

The trade-offs you need to consider

The first is time. Building a home is not quick. While buying an established property might take a couple of months, building can take 12 months...18 months... sometimes more. Does that work for you?
The second is location. Many new estates are further out from city centres, which can impact commute times and lifestyle. Are you okay with that?
And the third is complexity. With buying land and building, there are more moving parts. More decisions to make, more coordination and organistation required, and exposure to other variables and unknowns. For some people, that’s exciting and no probs. For others, it can feel like a lot. Is that something you can manage for an extended period of time?

Certainly not rocket science, but points you want to weigh up before signing on any dotted lines. With that said, let's dive into the other realities you need to be aware of upfront.

The 7 realities first home buyers need to know

This is the part I really want you to take in. Because these are the things most people only realise once they’re already in the process. And by then, it can be a trickier to adjust.

Timelines can blow out There can be delays between land settlement and construction starting. And also delays due to weather, trades availability, supply chain lags, and approvals... they can all impact timing. So patience is your friend in this game, as is allowing for timeframe blowouts. To asist with this, I recommend including a time buffer in your schedule (i.e. adding more time onto your preferred timeline). This is a hoping for the best but expecting the worst kind of scenario - planning ahead for it so you're not completly thrown if your timelines extend.
Holding costs need to be factored in While your property is being built, you still need somewhere to live. Which means you may be paying rent or board while also covering costs related to your land and construction loans. That overlap can add pressure if you haven’t planned for it. So it's important to factor this in, forecast your funds and be aware of what money needs to move and when.
Completion costs add up A lot of people focus on the land price and build contract amounts, but it's important to not forget about everything else that's needed to actually finish the home. Think driveway, fencing, landscaping, window coverings... These costs all add up and often aren't included in your build contract. So to avoid being that house on the street that looks unfinished (and so you're not moving in to a place with a list of outstanding things to do), make sure you get additional quotes for these extras and include them in your overall costing early. If you want these costs covered by your loan funds, you'll need to provide the quotes to your mortgage broker with the build contract so they can be included in the valuation.
The mental load is very real Building involves more decisions, more paperwork, and more moving parts than buying established. Some people thrive in that, while others can find it draining over time. So it’s important to be honest with yourself about what you can realistically manage and mentally prepare yourself. Other things that can help here include mindfulness practices (to support your wellbeing throughout construction), regular exerises, and surrounding yourself with a support crew - your cheerleaders and sounding boards who you can talk to during the build - whether that's to vent or celebrate milestones... all these things can help you manage the mental load during your build project.
Finance is a staged process to stay on top of Because your loan is structured in stages, your financial situation needs to remain stable throughout the process. Changes to your income, job, expenses or debts can impact your ability to move from pre-approval to full approval for your construction loan. And that’s something people can miss. So, to avoid buying a block of land and being unable to build on it because finance falls through, don't make any changes to your financial situation.
Valuations can create funding shortfalls Sometimes valuations come in lower than expected, which can create a shortfall with your funding. Then other times, the opposite happens and you can gain equity. The thing about valuations is they are subjective and if a valuation comes in short, it can throw a spanner in the works of your build project. It’s something to be aware of, and that's why having buffer funds sitting in your account is paramount - just in case.
Be mindful of provisional sums You want clarity and certainty around pricing, so a fixed price contract is what you want for building your property. Even with these types of contracts though, sometimes the builder is unable to cement costs, so allowances or provisional sums may be included. That doesn’t mean something is wrong - but it does mean you need to understand exactly what you’re signing. So ask all the questions and make sure you put measures in place to afford any budget blowouts.

So… is this the right strategy for you?

Buying land and building can be an incredible pathway... For the right person.

It tends to suit someone who is comfortable with a longer timeline, likes the idea of a brand new home, has some financial buffer available, and someone who feels okay managing a more involved process.

And it may not suit someone who needs to move quickly, feels easily overwhelmed by complexity, or doesn’t have much room financially for unexpected costs.

And that’s the key takeaway.

This isn’t about whether the strategy is “good” or “bad.” It’s about figuring out whether it’s right for you, and if it is, going in eyes wide open so you can have an wonderful experience building your first place.

If you want help figuring that out...

This is exactly what I help you do inside my program, The First Home Finance Formula.

We don’t just look at one strategy, we look at multiple pathways to get into the property market - and more importantly, we figure out which one works for you. Taking into consideration your numbers, your lifestyle, your goals - so you can move forward feeling clear, confident, and in control, instead of overwhelmed or guessing.

If you’re ready for that kind of clarity, you can find out more about my online education program here.

You can also listen to the full podcast episode about house and land packages over on my podcast, The First Home Playbook on Apple Podcasts or Spotify. Until next time,