When you decide to purchase a house and land package, you’re going to hear lots of different viewpoints on when to buy. These packages bring together the purchase of land with the purchase of a new home build, combining them into one package. Typically, the package involves dealing with two separate entities – one handling the land and one handling the construction. For many people, this is a once in a lifetime purchase. It involves a significant amount of capital, and therefore careful consideration is crucial before committing.
Most purchasers want to maximise their returns and optimise their purchasing power. Unfortunately, everyone has an opinion on how to do this. Some people may tell you to wait a while, informing you that home and land package prices are just too high at the minute and you should hang back until the market cools or reaches a trough. Essentially, they are asking you to time the market – holding off on your purchase until you can get the lowest possible price.
Is this a good idea? In most cases, probably not. Timing the market is a risky strategy, and most experts advise against it. Let’s take a look at why this is.
Market dips are relative
It makes sense in a way – you spy a plot of land that would be perfect for your home and land package building project, whether in Austral, or another area of Sydney, but you think the price is too high at the moment. So you sit back and wait for the next dip in land prices. Then you’ll make your move when the price has dropped and the way is clear for swift value growth.
Only, this doesn’t work in practice. If it did, dips and rises would be as regular as buses, and we wouldn’t have any market uncertainty at all. In practice, no one knows how far a price is going to rise before it falls, or how far it’s going to fall before it rises again.
Let’s say you found a plot of land for $600,000. Yes, this price might drop in the future, but it may rise before it drops – what if it rises to $650,000, then dips to $625,000? Yes, the price has fallen relative to the high point, but you’re still $25,000 worse off.
A delayed purchase is a delayed project
If you are purchasing a home and land package in Sydney, or the surrounding suburbs, you have a plan in mind. You want to secure your block of land, finalise your home design and get your home into construction as quickly as possible. However, even after construction is complete, there’s more to do. You want to turn your new house into a home, or you want to prepare your property for the rental market or for another commercial purpose. Basically, you have lots of work to do and you’re keen to get moving.
Of course, you shouldn’t get carried away here. Emotional or rushed investments can be seriously risky – we’ll look at this in more detail below – and you shouldn’t enter the market too urgently or without proper consideration. However, it may not be a good idea to delay too long either. If you are using your investment for commercial purposes, you are missing out on time in the market – i.e., the time it takes for your property to become established and build its profile.
There are also other factors to bear in mind. The underlying shortage of housing stock at the moment is driving rental yields. To take advantage of this, investors need to act relatively quickly when they purchase home and land packages, constructing properties that are going to generate considerable rental income. Delaying the project means potentially missing out on this. Yes, you could get a lower price by deferring your purchase, but you’d need to make sure that this lower price was worth the lost income – and there’s no way to make sure of this.
Even if you plan to live in the property yourself, you’re still losing out by delaying the purchase. Waiting for a market slump means you won’t be able to start enjoying your new home, and that slump you’ve been dreaming of may never arrive.
Emotions begin to run high
The longer you wait, the more your emotions will begin to cloud your judgement. Is the market due to fall in value soon? Will it fall far enough? How much of a saving do you hope to make? How much of a saving do you expect to make? What’s your strategy – do you wait for the sign of a bounce and make your move? But what if the bounce is just a blip, and the market continues falling? Perhaps you should make your move now? Maybe you should wait longer?
The problem is, none of these questions have definitive answers. Because you don’t know which way the market is going to go, you can’t possibly confirm that you have reached the right time to make the purchase. The market could fall further tomorrow, which would mean you have still lost out on a potential saving. When you delay, delay, and delay again, your approach to the situation becomes ever more emotional and dependent on instinct. In turn, it becomes more likely that you will make a rash decision.
If your current situation is not quite right and you would like to defer your purchase, this is fine. You shouldn’t feel pressured into completing the transaction if you’re not ready. However, deferring your purchase in an attempt to time the market simply isn’t going to work. It’s best to leave this risk technique where it belongs – nowhere near your home and land package strategy.
Find the house and land packages you need in Sydney, NSW
When it comes to house & land packages, Champion Homes is a great choice. Our Freedom House and Land packages deliver you more home for less work, providing you with a range of high-quality design choices for single storey, double storey, corner lot and narrow lot options, all of which come packed with more inclusions for fantastic value.
And with our extensive experience in building house & land packages throughout Sydney, you can rest easy knowing that we’ll deliver you designs & quality you can trust.
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