Vacant land

What are the types of vacant land?

Vacant land can be broken down into four major categories:

1. Standard land blocks suitable for a normal house in a major city, regional centre or regional town.
2. Standard land blocks suitable for a normal house in smaller towns of less than 10,000 people.
3. Large lifestyle / hobby farm blocks up to 50 hectares (123.5 acres).
4. Commercial farms (not acceptable for home loans)

When applying for a home loan to buy a block of vacant land you need to consider how the bank will view your land and which lending guidelines they will assess your loan. As a general rule standard house blocks are considered to be around 400 to 800 m2 in capital cities and can be up to 2 hectares in rural areas.

How much can you borrow?

First home buyer: 95% of the property value (restrictions apply).

Investor: 95% of the property value.

Low doc: 80% of the property value.

Discounts: Competitive professional package and basic loan discounts are available.

Note: These are the maximum Loan to Value Ratios (LVRs) offered by our entire panel of lenders. Most lenders restrict vacant land loans to 80% of the property value or even 60% in the case of rural land.

What will the bank assess?

Vacant land is treated in different ways by our bank depending on the location and the size of the property.

Land size: Banks can accept land that is up to a maximum of 50 hectares. Note that most lenders cannot approve loans for land that is larger than 10 hectares. For your reference there are roughly 2.47 acres to the hectare.

Location: Land inside major cities and regional centres are financed quite easily. Rural vacant land in lifestyle locations, hobby farming regions or small towns is not accepted by most lenders, but can be financed if you are with the right bank. At least one of our lenders has no location restrictions Australia wide. Other lenders use a postcode system to determine if the land can be used to secure a mortgage.

Access: The land must have easy access using an all weather road. Dirt roads are ok as long as they are well maintained.

Services: The land must be within range to be connected to the electricity grid without excessive costs. Town water and sewerage services are not required as many Australian properties have tank water or septic tanks instead. Fully serviced and partially serviced blocks are both acceptable.

Zoning: Land can be zoned rural, rural residential or the equivalent for your state. Be careful with land that is zoned industrial, commercial or for farm use as they are generally not accepted. A good rule of thumb is that if the land you are buying is subject to GST, then it would be considered as a commercial property by the banks.

Land use: The land should be used for personal or investment purposes, not as a farm. Hobby farms with minor farm improvements and no income from farm production are usually accepted.

Intention to build: Many lenders consider someone who is building on the land right away or within a year to be a lower risk than someone who has no intention to build. If you are not interested in construction then the bank may consider you to be a speculative investor and depending on their policy, they may decline your loan.

Why are the banks so conservative?

When the economy is weak, vacant land tends to fall in value and takes longer to sell. This is particularly true in country areas and remote locations where land prices fluctuate more often. Normal houses on the other hand have more potential buyers and so tend to sell much faster.

Because of this higher volatility banks tend to be more conservative when approving a home loan for vacant land.

Apply for a home loan

Please enquire online for more information about how we can help you.