Buying an empty block of land was probably not the first idea that came to your mind when you decided you wanted a property investment. For many Australians, property investments usually involve a house with tenants or a shiny apartment in the city. But there’s another side of the properties investment that you should think about: land.
If you’ve ever looked at a patch of earth and imagined what could be built there, you already understand the appeal of property as investment in its rawest form. Obviously, it’s basically just dirt right now – no house, no rent coming in – but that’s exactly what makes it a blank canvas.
With a bit of patience and vision, purchasing new land can be a fantastic investment. You’re looking at a piece that is essentially a property to invest on your own terms down the track.
Learn more about how you can go about doing this in this article.
Why Invest in Land?
Let’s take a look at some of the major benefits and a few of the drawbacks:
Pros
Low Maintenance
One big plus with land is how low-maintenance it is. With no building on it, there aren’t going to be any leaky taps or repair bills – you pretty much just let it sit and (hopefully) appreciate over time.
Low Holding Costs
The holding costs are low too: you’re not paying much in property taxes or insurance on an empty lot. And because vacant land usually costs less than a house, it gives a much lower entry point if you’re on a tight budget.
Many people buy a block now and build later so they aren’t getting priced out of the property market when prices end up rising.
In fact, well-located land is a finite resource – as areas develop, an empty plot tends to become more desirable (they’re not making any more of it, as the saying goes). Unlike a house that gets old and needs repairs, the land itself won’t deteriorate – if anything, its value usually grows as the surrounding community expands.
And if you decide to build in the future, you have the freedom to design exactly what you want on your land rather than being stuck with someone else’s layout. We’ve seen how limited supply can drive up land prices in some regions; for example, in Victoria a slow release of new lots over recent years has pushed prices higher due to pent-up demand.
Cons
Now for the slightly less exciting side of buying land:
Not Always Predictable
It shouldn’t exactly be a surprise to learn that land investment usually requires a bit of patience. Values often inch up slowly year by year. But sometimes all it takes is one change – say a rezoning or new highway – for a quiet paddock to jump in value.
Some investors deliberately buy on the fringes (a strategy known as land banking) hoping for that kind of development boom down the line.
The downside is that an empty block won’t pay you any rent in the meantime. You still have to cover expenses like council rates, maybe land tax, and loan interest out of your own pocket.
That can add up, so make sure you can afford to hold the property long-term (smart investors even use negative gearing tax benefits to offset these costs). On the plus side, you might find creative ways to get a bit of cash flow from the land while you wait – for instance, leasing it out for parking or farming can help offset some costs.
Banks also tend to be stricter with loans for vacant land – they consider it a speculative purchase and might require a larger deposit or stronger finances before approving a loan.
What to Consider Before You Buy
Doing your homework on the land is crucial. Location still matters a lot. A block way out in the sticks might be cheap and tempting at first glance, but land closer to towns or growing suburbs is more likely to gain value and is easier to sell or finance later – common sense.
If you’re planning to build a home or start a business on it eventually, make sure the area suits that – for example, a family home will benefit from schools and shops nearby.
Local Regulations
Always check the zoning and local regulations next. Verify that you’re allowed to build what you intend on the property. Some land is zoned only for farming or commercial use and not for residences, and some neighbourhoods allow only single-family houses (no apartment blocks). You don’t want to buy land thinking you can put, say, a workshop or a second house on it, only to find the council rules won’t allow it.
Future Prospects in the Neighbourhood
Also look into any future plans for the area. Is a major road extension or new subdivision planned that could affect your block? Those kinds of projects can either boost land value or give you massive headaches, depending on what they are.
Local councils can tell you if any new highways or shopping centres are slated nearby, so you know what’s coming down the track.
Accessibility
Banks and buyers also care about access and services. Make sure the land has a proper road entrance – otherwise you might need to negotiate access via a neighbour’s property. Ideally it should have basic utilities available or at least nearby.
If the block is off-grid with no power or town water, find out what it takes to get those set up. You might have to pay for electricity poles or install a septic system for sewage – costs that can add up quickly. Not always what you’ve got in mind when you’re thinking “I might get into property investment”. This is a big commitment you’ve got to be ready for.
The Land Itself
Consider the land’s terrain and condition too. A steep or oddly shaped lot might be hard to build on or subdivide later. And if a property’s price seems too good to be true, there could be a reason.
For instance, it might have been an old landfill or industrial site, which could mean contamination issues. Be sure to read any covenants or other restrictions on the title as well, since they could limit your plans (for example, some estates require you to build within a certain time or to a particular design standard).
Do your due diligence – talk to the council, maybe get a soil test – so you’re not caught off guard by any surprises.
Final Thoughts
In the end, buying undeveloped land in Australia is about seeing potential where others might not. Again, it’s more of a long-term play rather than a quick flip, but it can be really rewarding to watch your patch of earth increase steadily in value as the years go by.
How Upscore Can Help
When you’re ready to make your move, having your finances lined up can make all the difference. Upscore’s Finance Passport helps you organise your finances for lenders, so you can get the best loan options without needless delay. Our service is free to use, and it’s designed to make borrowing overseas (or across state lines) feel as smooth as local finance.
