House and land package versus knock down rebuild: How to decide which option is best for you

If you’re planning on building a brand new home, there are two key choices: a house and land package or a knock-down rebuild.

Domain spoke to HIA executive director of building Simon Croft and Carnelian Projects director Kerri-Ann Hooper to explore the pros and cons of each option.

Knock-down rebuild

Croft says knock-down rebuilds have been increasingly popular since the early 2000s following rapid increases to land prices alongside decreasing lot sizes and diminishing land supply in major cities.

“Knock-down rebuild has the benefit of allowing the householder to remain in the same location while enjoying the benefits of a new home,” he says. “Alternatively, buyers may try to pick up an older house where most of the value is in the land, knock it down and build on the block.”

Love where you live

Hooper says the ability to stay put in the suburb you already call home is the biggest single advantage of this type of new build.

“If you’re living in a street you love, with great neighbours and a great neighbourhood, a knock-down rebuild can be the right choice,” she says.

Many homeowners are entrenched in their local schools and community and comfortable and familiar with the local amenities including shops, green spaces and transport. A move out of the area can be disruptive for friendships, work commutes and the lifestyle to which you’ve become accustomed.

Croft says a new home in an established suburb will drive up the overall worth of your property should you later decide to sell or rent.

Hidden costs

Over the past 12 months, Hooper has helped three clients with their knock-down rebuild projects and each project threw up unexpected expenses like an Aboriginal Cultural Heritage Assessment Report, screw piering for a waterfront site, a bushfire report and a replacement sewer.

“There are so many hidden things that can pop up,” she says. “You may need to pay for an extra electricity pole; you could have limited access to the site or need traffic control for deliveries, you may be too close to an easement or need a bushfire report.”

The bottom line, says Hooper, is that property owners opting to knock down and rebuild will need a big contingency fund.

Lengthy approval process

Hooper estimates it will generally take between three and four months to get the necessary approvals for a knock-down rebuild, compared to four to six weeks for a house and land package.

Croft says you’ll also need to take into account design or heritage restrictions.

“For example, a two-storey home can be difficult to get approval for where there are mostly one-storey houses,” he says.

House and land package

House and land packages are typically offered in brand new housing estates on the outskirts of an established city, making them a more affordable alternative to existing property in middle and inner-ring suburbs.

Many are offered with fixed price contracts so you’re aware of all your costs up front and this can be more favourable to lenders.

It can also be relatively simple to get council approval for a house and land package.

“The approval process is done by a private certifier in an estate with no trees, underground electricity, the NBN is already there so the certifier can sign off on it in four to six weeks,” says Hooper.

Incentive to buy

Hooper says there are a lot of land estates offering incentives to entice buyers in what is currently a sluggish market.

“They may offer to pay the stamp duty or double the first-home owners’ grant,” she says.

Domain also found various upgrade offers including one where buyers can pay $10,000 for an upgrade package valued at $70,000, an offer to triple the first-home owners’ grant and an offer to accept a five per cent deposit instead of the usual 10 per cent.

Less stress

Hooper believes signing up for a fixed price house and land package is typically less stressful than a knock-down rebuild, where it can be near impossible to negotiate a fixed price contract due to unknown costs.

“Generally I find builders will not fix the price on a custom-build,” she says. “They just don’t know what surprises they’ll find on an existing block.”

Infrastructure plans

Moving to a brand new housing estate in the early stages can mean living for some time without easy access to infrastructure like schools, shopping centres, public transport and community facilities.

“A lot of house and land packages are in emerging areas that don’t have all the infrastructure and amenities of an established suburb,” says Croft. “Potential buyers should think hard about this when buying their new home, especially if there are children involved.”

Finding a new house and land package with good access to amenities can often make the difference between enjoying your new home and wishing you’d purchased elsewhere, says Croft.

Hooper says most new housing states will have plans for infrastructure, but it may not be built until after residents have moved in.

You’ll also need to take into account your place of work and how easy it will be to get there from your new address; the benefits of a shiny new home can pale in the face of a long or difficult commute.