Traditionally, the holy grail of property investing has always been land.
Today, because of the pandemic, the lure of owning your own piece of dirt has never been stronger – or the returns higher, compared with townhouses and apartments.
“Tastes shifted over the past few years into investing in apartments, but with higher vacancy rates and oversupply in some areas, the focus is now much more back on houses in suburban areas,” says John Sheehan, general manager of MetInvest and Invest by Metricon.
“I’ve bought a number of them and rent them out myself and you do get a good return. There are tax advantages, you get higher depreciation on a new build and our product comes with a full lifetime structural warranty.”
“For resale, they can also command a higher price than older houses in the suburbs.”
This month, the developer has released special “rent-ready”, full-turnkey new home-and-land packages for investors in Victoria and Queensland, with NSW to follow later this year.
It follows a surge in the numbers of investors looking at house-and-land packages throughout Australia for both yield and capital growth. Shortages of available land sites and long delays in the rezoning process, coupled with high demand, have led to predictions of continued strong prices.
The Monarch Investments Group of Companies chief executive, Peter Icklow, says the company only has 50 house-and-land packages left for sale at Bardia in Sydney’s south-west.
“Land that was $200,000 five years ago is $450,000 today,” he says.
“We sold the first house at Bardia seven years ago at $325,000 and one just sold last week for $800,000.
“Real estate is a long-term, five-to-seven-year investment and we’re now getting a lot of investors, particularly those using their super.”
While house-and-land packages in new communities have, in the past, been the main province of entry-level, owner-occupier buyers, turnkey ready-to-go products are increasingly appealing to investors.
At Allam Property Group, sales manager Adam Wellington says tenants love renting new houses, particularly those on smaller lots that don’t require much maintenance.
“We’re finding investors often now buying in the first stage of a four-year project, when prices are at their lowest as there’s no real infrastructure at that stage but we want to get runs on the board,” he says.
“By the time we finish, the price of their home has gone up substantially, sometimes by well over $200,000.”
At the company’s Killarney, Box Hill development in Sydney’s north-west, for instance, one of their most expensive sites, a 300-square-metre block with a four-bedroom house, started out at $800,000 three years ago.
Today, it’s selling for $1.05 million to $1.1 million.
“Another thing that’s popular with investors is buying display homes on our sites,” says Wellington.
“We sell them to investors and then lease back for the period of the estate, maybe five years, with about a 6 per cent rental return. And, at the end, they get a brand new house which has gone up in price.”