Who doesn’t like a good deal? It’s a universal desire to get a little something extra, and Australians have always shown an appetite for bargain-hunting, not least of all when they look for homes.
The advantages enjoyed by home and land buyers are too numerous to count. Suffice it to say that by getting a mortgage for the land and the building of a home all in one, you can save plenty of money in the long run. But how does this bargain stack up against some of the greatest deals in history?
The purchase of Phar Lap
Australia’s most legendary racing horse was also one of its most legendary bargains. Phar Lap was reluctantly bought by trainer Harry Telford for a mere £160, who was initially disappointed by the purchase. By the time the horse had died, however, he had won nearly every major Australian race, amassing a prize money haul of £66,738 – around £4 million in today’s money, or approximately AU$8 million.
There’s no guarantee you’ll get a return as exceptional as that on a vacant land mortgage. However, if you choose your location well, your home can end up being worth substantially more than when you first bought it. For instance, according to SQM Research, the average asking price for a three-bedroom house in the Sydney suburb of Kellyville rocketed from just under $500,000 in 2009 to nearly $900,000 in June 2015.
This is because the supply of land is finite. As it becomes scarcer and scarcer, buyers will be willing to pay more money to achieve the dream of the quarter-acre block.
While you’re not likely to find a hidden store of gold beneath your land, a newly built home does have some significant value potentially built into it.
This may not be an Australian example, but it nonetheless shows how far a little bit of foresight can go. The state of Alaska, one-fifth of the landmass of the US, was originally purchased from Russia by the American government for $7.2 million, a rate of two cents an acre and a princely sum at the time. The purchase was quickly ridiculed, and nicknamed a “polar bear garden” and “Seward’s folly”, after the Secretary of State who took up the offer.
Thirty years later, however, many Americans were singing the praises of the decision when gold was discovered in 1896. Since then, the state has paid for itself many times over, and also become the location of some of the country’s most beautiful natural scenery.
While you’re not likely to find a hidden store of gold beneath your land, a newly built home does have some significant value potentially built into it. If you’ve built it for investment purposes, new homes have a higher rate of depreciation, which can net you some significant tax savings. There’s also the fact that, being newly constructed, your home won’t need significant repairs for some time, being free of the wear and tear of a previously occupied property.