Is buying land a good investment? | Exford Waters | Melton Real Estate


Is buying land a good investment?

Buying real estate has always been a popular choice for many investors. But there are more options than simply investing in established bricks and mortar. While many investors look towards established homes as rental properties, purchasing land for sale can also present a financially beneficial windfall.

In this blog, we look at some of the reasons why buying land is a good investment and what you need to consider.

Build equity faster

Buying land and building a new home can be much more cost-effective than buying an existing house. Not only will you save on stamp duty (stamp duty is only applicable on the land with a new build) potentially saving you thousands, but you also don’t have to shell out for unexpected repairs or renovations that often come with purchasing an existing home. With a new build, you can choose and design your home to suit your style and budget, plus all your appliances and fittings are guaranteed to be new and in good working condition. 

If purchasing land as an investor, you can also take greater advantage of tax benefits such as depreciation on capital works. For buildings built after 1987, capital works are deducted at 2.5% per year for up to 40 years after construction. With a new build, you can claim capital works for the entire 40 years. Building a new home also means you can claim depreciation on fitting and appliances, such as carpet, appliances and window fittings – a tax advantage not available for existing homes. 

Plus, by the time you complete your build, you will likely have already built up significant equity to draw upon due to appreciation on the land. This will give you the flexibility to further invest, or use as collateral for new purchases in the future.

If you’re looking at buying a block of land and building later, make sure you speak to your sales agent, as some developments have a timeframe for how long after purchase you need to build. At Exford Waters this time frame to start building on your purchased land is 18 months.

Location, location, location

Land is a limited resource and depending on its location can appreciate greatly over time. As population numbers grow across Melbourne and urban sprawl continues to expand outward from the city centre, rural and semi-rural areas are becoming increasingly popular with investors.

Buying land for sale located near established and future amenities such as schools, public transportation, shopping centres and parks can help increase the property’s value over time as these features become more attractive to potential buyers or tenants down the line. Additionally, investing in areas with strong economic growth or job opportunities can also help increase return on investment over time as well as provide more stability for investments moving forward into the future. 

Located just 49 minutes from the Melbourne CBD via the M8, Exford Waters is perfectly positioned to take advantage of this growth, with the City of Melton one of the fastest growing areas in Australia.

Buys time to keep saving for your dream home

Buying land first and then opting to build after your land titles allows you to take advantage of today’s prices while continuing to save for your dream build. It can also allow you to be more flexible with your finance options.

There are two options when financing for land – the first is a land-only loan, and the second a land and construction loan. Land-only loans generally do not require you to build within a certain timeframe, unlike construction loans which usually stipulate that your home must be completed within a certain period. 

If you choose to finance with a construction loan, you will only start paying the full amount of your mortgage repayments when the construction of your home is completed. In the meantime, you pay only the interest component on your land investment and draw down on the loan in stages or instalments. This means your repayments will be less during the construction process – particularly if you are purchasing untitled land – potentially allowing you to continue saving for your new home. 

Your financial advisor will be the best person to help you decide which loan is best suited to your finances and situation.

Buying land has many advantages over purchasing an established home, and can be a smart investment if you’re looking to get into the property market – either as a first-time homeowner or investor. Exford Waters has premium land for sale in our established community, close to amenities and within an easy commute to the CBD. Contact our sales team to learn more.

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