As the weather is getting colder and we move into a new financial year, the market remains quite robust. Rolling over into July 1, we will see whether it has been the first home buyers about to lose their first home owners grants (FHOG) who have been holding up the market, or, as I believe, we have a firmer, more resilient market that is building each month and will finish with quite a flourish through Spring.
Anyone trying to purchase in the $500 – $750k range has had to contend with first home buyers pushing the prices somewhat over the past 8 weeks. This is because the Victorian State Government has now changed the first home owners grant. It is now only available for those who purchase a new home. Whilst it has been increased to $10,000 (up from $7000), this will be lost when a first home owner pays a premium for a new home. The other change for first home buyers is the 40% saving in stamp duty
Many investors ask me about buying new and saving stamp duty (there is a 40% discount anyway) and now I will be asked about buying new to get the FHOG. When buying new, you are purchasing off a person that has built the property to make money. As opposed to somebody selling their existing home to move onto something else. The builder has to pay for the land, the building cost and then make a profit. The existing seller is usually selling the property for what the land plus improvements are worth.
In other words, you will almost always pay a 20% premium to buy new. There is nothing wrong with this. In fact, if you do not pay a premium, there may be something wrong with the build or builder. If a builder is not making 20% profit then, I hope he does not save money somewhere else! This means when buying new, your potential stamp duty savings and or the FHOG will usually be gobbled up by the builders premium.
As far as the rest of the market goes, we should see a slight slow down over the next 4 – 6 weeks. We have school holidays and some cold weather, not to mention the issues happening in Canberra. Both the share market and property market usually slow down their turnovers during an election campaign.
This means over the next 2 months there are quite often some bargains to be found. That is the tricky part. Whilst there are less properties around to look at and therefore harder to find that perfect property, if you do, there are sometimes less people around to create competition.
I usually find that winter is an excellent time to find an investors bargain. Agents and vendors tend to be more negotiable as they have fewer purchasers around.
If you are considering a property purchase please feel free to give us a call. We offer a no obligation free first meeting. Just remember: if you are purchasing a property from a real estate agent, the other side has hired competent counsel. WHY HAVEN’T YOU?
Ian James
Director
JPP Buyer Advocates
