What is the new home buyers grant, And how can it help you ?
I will explain it here for those who are unsure.
Treasurer Josh Frydenberg is yet to release details, so far, we know that new home construction and major renovation projects are both being considered for new cash grants, while the construction sector could also be in line for separate stimulus measures.
The Property Council of Australia has proposed a $50 000 new boost to purchasers of newly-built homes across the country.
Under the proposed scheme, the $50,000 grant would be limited to the first 50,000 purchasers of newly constructed homes. The grant would not have a property price cap and would be available to all types of buyers, not just first home buyers.
Now to the next question.
Do I think this is a good stimulus for you to use ?
The answer really depends on each personal situation. If your looking for a owner occupied home and its the only way to get your foot in the door, Then yes, Use any help you can get so you can get your foot on the property ladder. If you are an Investors and this grant is applicable to investors I would take caution when using this stimulus package. There are a few reasons for this.
Generally speaking, A newly built home is in the green-hills areas, these are areas where there is a large supply of land, further out from the CBD. For this reason alone you will not see the same price growth that you would closer into the city in the short to medium term. So for a $50 000 grant you are potentially loosing hundreds of thousands of dollars in capital growth over the life of the mortgage.
If you end up buying a newly built apartment with the grant, Be very mindful, Don't buy in a area with loose zoning laws in a high rise apartment. This is again, due to the oversupply, you will not see strong capital growth and your tenants will have the choice of hundreds of identical apartments to move into. This will put downward pressure on rent and house prices in the short term until that oversupply drys up which can take years.
So called experts will try to recommend newly built houses and apartments and say you can save thousands of dollars on depreciation, which is true. However what they don't mention is how little you will gain in capital growth in the first 5 years.
100% of the time, the so called experts recommending these new and off the plan apartments are receiving commissions from the builders and developers to sell their product, so they don't actually have the buyers best interest at heart.
I think depreciation can be positive bi-product of investing in a area with low supply with all the fundamentals. However be very mindful, if someone is recommending a new or off the plan, and their major selling point is depreciation.
Another thing to be mindful of with this grant is. You can be sure that almost immediately when the grant is announced, new house and apartment prices will be $50 000 more expensive. This is due to the markups the builders and developers will put on and simple supply and demand. Buyers will be competing with thousands of other buyers for the same stock.