House and land packages have a mixed reputation in Australian property investment circles. The criticism is often fair — too many investors have been sold a new build in an oversupplied estate that underperformed for a decade. But the criticism is also often overgeneralised. The problem with those outcomes was almost never that the property was new. It was that the location was wrong.
When selected in the right growth corridor, with the right land component, by a builder with a solid track record, house and land packages offer a compelling combination of tax benefits, tenant appeal, low maintenance, and genuine capital growth potential. This guide explains how to think about them correctly.
What is a house and land package?
A house and land package combines the purchase of a vacant land lot with a building contract for a new dwelling to be constructed on that land. The two components are typically sold together by a land developer and a builder — though the contracts are usually separate, which has important implications for stamp duty and finance.
In most states, stamp duty on a house and land package is calculated only on the land component (not the total package value), because the house doesn't exist at the time of contract. This can result in meaningful stamp duty savings compared to purchasing an equivalent established property.
The pros and cons: an honest assessment
The depreciation advantage — explained properly
This is the single most misunderstood benefit of new construction. Depreciation allows property investors to claim a tax deduction for the decline in value of the building and its fixtures — even though no actual cash changes hands. It's a non-cash deduction that reduces your taxable income.
Division 43 — Building Allowance
The ATO allows you to claim 2.5% of the original construction cost per year for 40 years. On a $400,000 build, that's $10,000 per year in deductions — regardless of what the property is worth or what you paid for it. This continues for the life of the building, subject to the ownership tenure rules.
Division 40 — Plant and Equipment
Fixtures and fittings — appliances, carpet, blinds, hot water systems, air conditioning — depreciate at accelerated rates, often in the first 5–10 years. On a modern new build, the combined Division 40 deductions in year one can easily reach $6,000–$12,000.
Together, these two schedules can generate $15,000–$25,000 in depreciation deductions annually in the early years — deductions that don't apply to established properties bought after May 2017 (for Division 40). This is a meaningful and genuine financial advantage of new construction.
How to evaluate a house and land package
Land first, always
The house depreciates. The land appreciates. The primary investment decision is the land — its location, its size, its zoning, and its position within the estate. A larger land component in a stronger location will always outperform a smaller land component with a fancier house. Don't let the display village distract you from the fundamentals of the land you're buying.
Estate quality and developer track record
Not all estates are equal. The quality of infrastructure, planning, and staging affects the rate at which a new estate matures and generates capital growth. Developers with long track records and completed projects can point to actual performance data. Newer developers may have attractive packages but less certainty around delivery and long-term estate quality.
Builder assessment
Builder insolvencies have unfortunately been a feature of the Australian construction landscape over the past 3–4 years. Before signing a building contract, assess the builder's financial health, review their current project pipeline, check for complaints with the relevant state building authority, and understand what happens to your deposit if they fail to complete.
Progress payment structure
Building contracts involve progress payments triggered by construction milestones: slab, frame, lock-up, fixing, and completion. You need sufficient cash flow or access to a construction loan facility to fund each stage. A construction loan typically draws down progressively against each payment, with interest charged only on the drawn amount — which can make the cash flow position manageable during construction.
What makes a house and land package work for investment?
The answer is almost entirely about location. A house and land package in a corridor with strong fundamentals — population growth, infrastructure, supply constraints, employment diversity — will perform well over a 7–10 year hold. The same package in a low-demand corridor with an oversupplied pipeline will underperform, regardless of how good the depreciation schedule looks.
The second factor is price integrity. Many builder-developer packages include margin stacked into the build price — sometimes significantly above what the market would otherwise value the completed property at. An independent valuation before contract and a comparison of comparable sales in the area will identify whether the package is priced fairly or inflated.
How SPP approaches house and land: We don't take referral fees from builders or developers. When we include a house and land opportunity in a client's shortlist, it's because the land fundamentals are sound and the pricing is fair — not because we're being compensated to put it in front of you. That independence is what makes the research useful.
Common mistakes investors make with new builds
- Buying from a display village without independent research. Display villages are sales environments, not research environments. The builder's sales agent is incentivised to close a sale, not to advise on investment fundamentals.
- Choosing the facade over the land component. A beautifully rendered facade on a 300sqm land lot in an oversupplied suburb will underperform an average-looking house on a 450sqm lot in a supply-constrained corridor every time.
- Underestimating the construction timeline. Plan for delays. 6–14 months is common; longer is not unusual in the current environment. Your holding costs (rates, land tax, possibly interest on a partially drawn loan) continue during construction.
- Not securing pre-approval before signing land contracts. Finance conditions change during construction. A pre-approval secured at contract may not reflect the lending environment at completion — particularly if rates have moved.