Blog Buying inner city vs acreage - a comparison

Buying inner city vs acreage - a comparison

02 December 2020
Buying inner city vs acreage - a comparison

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If COVID-19 has you thinking about making a tree change, here’s what you need to know about buying an acreage.

With the ability to work from home now an option for many Australians, many people might be opting to buy bigger and move a bit further away from the city.

The COVID-19 pandemic has made many Australians think about swapping the inner city for regional areas. According to a report by ME Bank, 60% of young first home buyers and 45% of Australians overall are considering buying in regional parts of Australia because of the pandemic to save money and change their lifestyle.

So if you’re thinking about buying an acreage, what are some things you need to consider?

Land size

If you’ve only ever lived in the inner city or suburbia, it can be hard to wrap your head around how big an acreage actually is. So to put things into perspective, one acre is equivalent to 4,047 square metres. When you compare that to the average block size in Australia which is 200-350 square metres, you can begin to appreciate how big acreage property actually is.

That amount of space comes with a lot of maintenance and upkeep which you should strongly consider before making a decision.

You should also consider the aspect of the land (this will impact the position and the energy efficiency of your home), the soil composition, utility access, underground water, and tree placement on the block as removing them can be costly if they’re too close to where you want to build.

Residential vs commercial definitions

Acreage property will generally be considered ‘residential’ if you’re not intending on using the land to or livestock to generate a sole source of income. In some cases you can generate a bit of return through small scale farming, so long as it isn’t sufficient income to sustain the farm and meet operating expenses. As soon as that happens, it’s generally considered to be a commercial acreage.

Definition of a residential acreage

Residential acreage Commercial acreage
 Standard house, (liveable) shed, or vacant land  Large crop plantations
 Small orchard (not income producing)  Dairy farms
 A few head of cattle or horses  Several head of cattle
 Small workshop  May or may not have a house
 Dam  Cabins or tourism-style accommodation
 Some bushland and several paddocks  Commercial orchards
 Large crop plantations
 Signs of other agricultural activities

Getting a loan for an acreage

Lenders have some restrictions when it comes to residential loans for an acreage. For example, many lenders will only accept land that meets a certain number of hectares. At loans.com.au we have a maximum area of 10 hectares (24 acres).

Some lenders will also take a more conservative approach to approving finance for an acreage if it’s in a particularly remote location (limited market appeal). This is why it’s a good idea to chat with your lender to check if there are any lending restrictions in the area you want to purchase in.

Rural property zoning can also be a factor that lenders take into consideration - some lenders will take this into account and others won’t. Other factors lenders will take into consideration is how easy access to the property is and what services (water, sewerage, electricity) are connected.

The reason many lenders are so conservative when it comes to residential loans for acreage properties is because they can fall in value and take longer to sell in times of drought or economic downturn.

But don’t let this put you off your dreams of owning acreage property, talk to a loans.com.au lending specialist today to find out if you qualify for a home loan with us.

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