Five Reasons I'd Never Buy a House & Land Package for Investment

I keep a running count. Sixty-three. That's how many people have reached out to me — through social media, through our website, through referrals — who bought a house and land package for investment purposes and now wish they hadn't.

The most extreme case? A bloke who bought fifteen. Fifteen house and land packages from the same developer. Same builder. Same floor plan. Same exterior colour scheme. Same estate. He's now listing them at a loss because every comparable sale in his street is identical to his property. There is no differentiation. There is no scarcity. There is nothing a buyer would pay a premium for.

I get why these packages are attractive. The marketing is excellent. Brand new house. Fixed price contract. Government grants for first-time buyers. The display villages look beautiful. Everything feels clean and controlled.

But the economics are terrible for investors. And I can show you exactly why, with data, across five separate dimensions.

Reason 1: The bank values your new house below what you paid

This is the one that catches people off guard. You'd think a brand new property would get a strong bank valuation. The opposite is true.

When a bank values a house and land package under an "as-if-complete" assessment, the resulting figure is almost always lower than the combined land-plus-build cost 1. The success rate for challenging an undervaluation on a new build is under 5%. You read that right. Less than one in twenty appeals succeed.

Why? Several reasons compound.

First, the bank's valuer assesses the finished product against comparable sales of established homes in the same area. A three-bedroom, two-bathroom house on a 400-square-metre block in Tarneit doesn't command a premium just because it's new. There are hundreds of identical properties within a two-kilometre radius that sold at similar prices. The "newness" adds zero in the valuer's model.

Second, if you buy unregistered land in a new estate, the gap between signing the contract and land registration can be twelve to twenty-four months 2. Markets shift in that time. If house prices soften by even 3-4% during the build period, your contract price is now above market. The valuer marks you down.

Third — and this one stings — if your air conditioning isn't installed, your window furnishings aren't in, or your fencing isn't complete at the time of valuation, the valuer marks the property as "incomplete" and applies a further reduction. I've seen shortfalls of $30,000 to $50,000 on properties priced at $700,000 to $800,000 3.

The practical outcome is painful. At 80% LVR, a $40,000 valuation shortfall means you need to find $40,000 in additional cash to settle. You either raid your savings, borrow from family, or accept a higher LVR with lenders mortgage insurance. Before you've collected a single dollar of rent, you're already behind.

Compare that to our approach. We bought a property in Cranbourne for $610,000. Before settlement, the bank valued it at $650,000 4. We bought below market. The bank confirmed it. That's a $40,000 buffer working in our favour from day one. It's the exact opposite dynamic to a house and land package.

Reason 2: The developer's incentives are misaligned with yours

Developers care about one thing: selling land and collecting settlement funds. Your ability to get finance, your rental yield, your capital growth — none of that is the developer's problem.

The settlement clock starts ticking the moment your land is registered. In most new estates, you have 14 to 30 days to settle on the land 5. But your builder needs 8 to 12 weeks minimum to produce the construction documents, engineering plans, and council permits. Often longer for anything remotely custom.

Do the maths. 30 days versus 12 weeks. You settle on the land. You start making mortgage repayments on bare dirt. Meanwhile, the house hasn't started. No tenant. No rental income. Zero.

You're paying a mortgage on land that generates nothing, plus rent on wherever you're currently living. This dual-payment phase typically lasts 8 to 14 months — the combined time for land settlement, build documentation, council approvals, and actual construction 6. On a $500,000 land loan at 3.5%, that's roughly $1,460 per month in interest alone, for months, with no offsetting income.

The developer? They've collected their money. Transaction complete. Your financial stress from this point forward is entirely your own.

Established properties don't have this problem. You settle, the tenant moves in within two to four weeks if the property is rent-ready, and cash flow starts immediately. Our renovation team can turn a newly settled property around in 10 to 14 days — fresh paint, new flooring, minor repairs — and have it listed for rent while the paint is still drying 7.

Reason 3: One street, one thousand identical houses

This is the structural issue that makes house and land packages fundamentally unsuitable for investment. And it's the one the sales consultants at the display village will never bring up.

PropTrack data from 2020 shows that Tarneit recorded 1,547 house sales in a single year. Craigieburn had 990. Truganina, Mickleham, Clyde North — each adding hundreds more 8. These are all new estates dominated by house and land packages.

Let me put this bluntly. If you spend $750,000 on a house and land package in Tarneit, you are buying one of fifteen hundred near-identical products dumped into the same market in the same twelve-month period. Same builders. Same floor plans. Same facade options. The house three doors down from yours is the same house. The one around the corner is the same house.

Capital growth requires scarcity. If a buyer has 1,547 options that look and feel the same, your property has no pricing power. You can't charge a premium because there is no meaningful differentiator. The market treats your house as a commodity, not an asset.

Contrast this with established suburbs where housing stock is heterogeneous. In Hampton Park, no two houses on the same street are identical. A 600-square-metre block with a 1980s brick veneer sits next to a 700-square-metre block with a weatherboard extension. The scarcity is baked in because the land was subdivided decades ago and every property has a different history, a different layout, a different renovation status. When we bought at 15 Wren Street for $590,000, there was literally no identical product within a kilometre 9. The land was unique. The price reflected our negotiation skill, not a developer's cookie-cutter spreadsheet.

"Capital growth comes from scarcity. A house in a new estate has zero scarcity. There are a thousand of them. An established house on a large block in a built-out suburb — that's scarce. That's what appreciates." — Yan Zhu

Reason 4: The land-to-asset ratio is inverted

Our core investment principle at PremiumRea is simple: land appreciates, buildings depreciate. We only buy properties where the land value represents at least 80% of the total purchase price 10.

House and land packages invert this ratio.

In a typical $750,000 house and land package in a growth corridor, the land might cost $350,000 and the build $400,000. That's a 47/53 split — less than half the value is in the land. You've just put the majority of your investment into a depreciating asset.

A brand new four-bedroom house starts losing value the day the builder hands you the keys. The carpet compresses. The paint marks. The appliances age. The fixtures go out of style. In ten years, the house needs a kitchen refit, bathroom update, and exterior repaint. The building component of your $750,000 purchase might be worth $280,000 in depreciated terms, while the land — if the area has grown — might be worth $450,000. Your total value: $730,000. You've gone backwards over a decade, before you factor in rates, insurance, and maintenance.

Now take an established property. We buy in the $590,000 to $700,000 range in Melbourne's southeast, where the land value is typically $500,000 to $600,000 and the building is worth $90,000 to $150,000 11. That's an 80-85% land ratio. The building is already depreciated — it's an older structure that costs nothing in depreciation terms. All future appreciation accrues to the land, which is the appreciating component.

A $590,000 house with $500,000 in land value, in a suburb growing at 5-6% annually, is worth $700,000 to $750,000 in five years — purely from land appreciation. The building hasn't contributed anything, but it hasn't cost anything either. And we've been collecting $850 per week in rent the entire time 9.

The maths isn't complicated. It's just not what the display village wants you to hear.

Reason 5: You can't add value to a new house

This is perhaps the most overlooked problem. A house and land package arrives finished. Brand new. Nothing to improve. And that's exactly the problem.

Our entire value-add model is built on buying properties with improvement potential. Buy an older house at a discount. Renovate. Increase the rent. Increase the valuation. Refinance. Use the equity to buy the next one.

With a new build, there's no renovation upside. The kitchen is already new. The bathroom is already tiled. The floors are already polished. You can't spend $13,000 on a light cosmetic reno and increase the rent by $400 per week — because there's nothing to renovate. The property arrived at its ceiling condition on day one.

One of our strongest performing properties was bought for $585,000 with a tired interior 12. We spent $13,000 — paint, flooring, a partition wall — and the rent jumped from $550 to $950 per week. Six months later, the bank valued it at $710,000. That's $125,000 in equity uplift and $400 per week in additional rent, from a $13,000 outlay.

You simply cannot replicate that return profile with a house and land package. The property arrives maxed out. There's no inefficiency to exploit. No value to create. You're paying full retail for a finished product in an oversupplied market.

"The whole point of property investment is buying below intrinsic value and creating upside through physical improvement. A house and land package has no improvement runway. You're buying at the top of its condition curve and hoping the market lifts you. That's not investing — that's speculating." — Yan Zhu

I also want to address the common counter-argument: depreciation benefits. Yes, new builds offer higher depreciation deductions for tax purposes. But depreciation is a tax shield, not a return. It offsets income tax liability, which is valuable, but it doesn't create equity. A $12,000 per year depreciation deduction on a $750,000 property saves you perhaps $4,500 in tax (at a 37.5% marginal rate). Meanwhile, the building itself has depreciated by $12,000 in actual value. You've saved $4,500 in tax and lost $12,000 in asset value. That's a net negative of $7,500 per year 13. The depreciation story is a sales tool, not an investment thesis.

What to buy instead

If you've read this far and you're wondering what the alternative looks like, here's a direct comparison.

House and land package in Tarneit: $750,000 purchase. $350,000 land / $400,000 build. Bank valuation $710,000 (shortfall $40,000). Rent $450/week after build completion (8-14 months of zero income during construction). Gross yield 3.1%. No renovation upside. One of 1,547 identical properties sold in the same year. Land-to-asset ratio: 47%.

Established house in Hampton Park: $590,000 purchase. $500,000 land / $90,000 building. Bank valuation $670,000 (surplus $80,000). Rent $850/week (tenanted within three weeks of settlement). Gross yield 7.5%. Full renovation upside captured through $60,000 structural reno. Only comparable property within 800 metres. Land-to-asset ratio: 85%.

One of these is an investment. The other is a purchase. The difference is in the land ratio, the cash flow, the scarcity, and the value-add potential.

I'm not saying house and land packages are wrong for everyone. If you're buying a family home to live in for fifteen years, the brand new kitchen and modern floor plan have genuine lifestyle value. Enjoy the house. Don't worry about the economics.

But if you're buying for investment? If you're looking for capital growth, rental yield, and the ability to create equity through renovation? Stay away from the display villages. Drive to the older suburbs instead. Find the 600-square-metre blocks with tired houses that every other buyer walks past. That's where the money is.