October Newsletter 2009
Thursday, October 01, 2009
RATES TRUMP GRANTS, SO GET INTO GEAR & BUY NOW!
It's been a useful bonus for first home buyers, but the Federal Government's first home owner top-up will soon be phased out.
The boost, which supplements the first home owner grant of $7000, provides an extra $7000 for purchasing an established property and $14,000 for buying a new property.
From October 1, the boost will be halved to $3500 for established properties and $7000 for new properties.
From January 1, 2010, the top-up will be cut out.
There's a public perception that the boost has increased demand and fuelled price growth right across the market.
People are reasoning that once the boost expires, first home buyers will retreat, the heat will come out of the market and properties will become more affordable.
Investors and returning home buyers are asking whether they should wait to purchase until the boost expires.
The answer is a simple no. It's true that price growth and market activity in newer suburbs and estates may be affected when the boost expires.
New suburbs have a high proportion of first home buyers, mainly because these locations are more affordable than established suburbs.
Cashflow is generally tight for most first home buyers, so any cut in government grants is likely to reduce purchaser demand and activity in new suburbs, with a flow-on effect to property prices.
In established areas such as the inner and middle suburbs, however, it's a completely different story.
Established suburbs make up the lion's share of property transactions in Sydney & Melbourne, and first home buyers are in the minority.
They only account for around 10 per cent of purchasers in established suburbs. Investors and returning home buyers dominate the scene.
Property in these locations is more expensive than in new suburbs because the scarcity of land and an excess of demand relative to supply combine to push up prices.
This keeps many first home buyers out of the market. Of the first-timers brave enough to dip their toe in these waters, many don't last for long.
Investors have more purchasing power than first home buyers because of their rental income and negative gearing tax breaks, while returning home buyers can put the proceeds of selling their current home towards purchasing a new one.
These factors mean that the loss of the first home owner boost will have virtually no dampening effect on the established market, and therefore on the majority of property prices.
Government grants come and go, but there's another factor with a much greater effect on property prices — interest rate movements.
Interest rate changes will always have a strong influence on the market because they affect everyone, not just first home buyers.
If you're an investor or returning home buyer, delaying your purchase until after the boost expires is more than false economy. It could set you back significantly. The recent spate of interest rate cuts means that the interest payments on a median priced property worth $450,000 are around $18,000 less than they were a year ago.
This provides a huge boost to the cashflow of investors and returning home buyers. The more cashflow they have, the more competitive they will be in the market, and the higher prices will rise.
The longer you delay purchasing, the more you'll have to pay when you do eventually buy, and the bigger your mortgage and interest bill will be.
In these circumstances, a wait and see approach doesn't seem like a smart choice.
In summary
■Cutting the first home owner grant will only affect price growth in new suburbs.
■Most property transactions occur in established suburbs.
■Investors and returning home buyers have more buying power.
■Interest rate cuts will continue to fuel demand and price growth.
Author—Mark Armstrong is a director of Property Planning Australia, propertyplanning.com.au, and The Property School, theproperty school.com.au
Energy Efficient Homes Package
The Australian Government's Energy Efficient Homes Package will install ceiling insulation in many Australian homes and help up to 420,000 households install a solar hot water system.
These practical steps will create jobs, help millions of households reduce their energy use, cut their power bills by up to $700 a year, and increase the comfort and value of their homes.
The non-means tested package includes:
- ceiling insulation worth up to $1,600 for Australian Householders, including Owner-Occupiers, Landlords and Tenants of currently uninsulated homes or homes with very little ceiling insulation; OR
- a $1,600 rebate for installing a solar hot water system or a $1,000 rebate for installing a heat pump hot water system, to replace an electric storage hot water system.
You can only claim one rebate per address
Guidelines for the two elements of the package are available by calling the Energy Efficient Homes Package call centre on free call 1800 808 571.
First home buyer grants – boost extended
The boost to the First Home Owners Grant has been extended until December 31, 2009 as part of the Federal Budget. From June 30 until September 30, the boost will continue at the full $14,000 for the purchase of existing properties and $21,000 for the purchase of newly constructed properties. Between October 1 and December 31, the boost will be halved to $10,500 for existing properties and $14,000 for newly constructed properties.
50% OFF STAMP DUTY ON ALL NEWLY BUILT HOMES UP TO $600,000
Now first home owners aren't the only ones who get help buying a new home.
As part of its economic stimulus plan, the New South Wales Government is helping all eligible buyers of newly built homes up to $600,000, cutting stamp duty by 50%.
Save up to $11,245.
ONLY UNTIL THE 31ST DECEMBER 2009
PINK RIBBON DAY
One in every nine Australian women will be diagnosed with breast cancer by the age of 85. It could be a mother, sister, aunt, cousin, niece or friend. Whoever they are, one thing they have in common is that they will all need our help and support.
This year, Cancer Council's Pink Ribbon day is on Monday, October 26th. Pink Ribbon Day is your chance to help raise money and awareness for all Australian women affected by breast cancer.
For as much as we do to help improve survival rates and treatments, the fact is there is still so much more to be done.
Show your support for breast cancer by ordering pink products to sell, volunteering your time to help, buying pink, holding a pink fundraiser, or making a donation.