Latest Government Stimulus Creating Short Window of Opportunity For First Home Buyers
The Federal Government’s $25,000 cash grant is one of several Government grants and concessions for homeowners looking to build a new home or renovate an existing property. We caught up with Andrew Dear, Founder of Inside Money to find out the details of the grant and the implications it will have on the market and potential buyers.
The recently announced Federal Government strategy to give Home Builder grants of $25,000 to construct new homes or renovate existing houses is expected to provide the property and construction industry with a much-needed boost. Industry experts are saying that the move isn’t broad enough to drive up house prices as a result of more carefully thought out conditions compared to previous grants, but should still achieve its primary goal of boosting activity in the construction industry.
The $688 million HomeBuilder program was revealed as part of steps to improve the stagnant construction industry and will apply to contracts initiated between June 4 and December 31. The grant is intended to support 140,000 new jobs and another one million associated roles in the domestic construction sector.
The announcements have created a wave of interest from potential homeowners looking to take advantage of unprecedented Government support during the fourth stage of COVID stimulus action. The grant is, however, forcing quick action due to a limited window in which potential buyers can take full advantage. The grant creates a rare opportunity for first-time buyers looking to build a new home in combination with existing grants.
What’s Out There Right Now?
In combination with the homebuilder grant, a number of National and State specific grants are available to eligible buyers and can be used together, although prospective buyers will need to act quickly.
First Home Loan Deposit Scheme
From July 1, 2020 the Government will release another 10,000 scheme places which allow successful applicants to obtain a home loan with as little as 5 per cent deposit compared to the usual 20 per cent minimum to avoid paying lenders mortgage insurance.
Individual State Government First Home Buyers Grants and Stamp Duty Concessions
In combination with the Homebuilder Grant, each State is still offering first home buyer grants and First Home Buyer stamp duty concessions.
NSW – $10,000 for the purchase of construction of new homes up to $650,000 in value and concessions for homes valued between $650,000 and $800,000.
VIC – $10,000 for metro and $20,000 for regional properties up to $750,000 in value. First home buyers of properties under $600,000 are exempt from stamp duty with a sliding scale of concessions in place up to $750,000.
QLD – $15,000 for properties up $750,000. No Stamp Duty up to $500,000 with a sliding scale thereafter and for vacant land up to $240,000.
A full rundown of grants and concessions for each State can be found here.
What Are the Experts Saying?
Andrew Dear who is the founder of Inside Money and is currently assisting clients to get the most out of the grant, said that the grant will be offered to existing homeowners and first-time home buyers looking to build a new property and is one of a number of stimulus packages that can be used in conjunction with one another as a tool for buyers, especially first-time home buyers, to get ahead and enter the market.
“There are some basic parameters potential buyers need to be aware of, to qualify you will need to earn less than $125,000 a year or less than $200,000 for couples” said Mr Dear.
“The value of the residential property needs to be less than $750,000 for brand-new builds, while renovators will need to invest more than $150,000 to qualify. The pre-renovation value of their house can not go beyond $1.5 million.” Mr Dear who specialises in helping his clients achieve their financial objectives through mortgage debt reduction, budget management and strategic financial strategy, said that in almost 30 years of working with clients in Financial services he had never seen so much support from the Government.
“What we are seeing is a completely unprecedented opportunity, particularly for first home buyers who can integrate the Homebuilder Grant with the various State First Homeowner grants , the First Home loan Deposit Scheme and Stamp Duty concessions. Collectively First Home buyers are looking at up to $50,000 of assistance; the kicker is that to really take advantage, buyers need to be quick.”
For example, a potential first home buyer in QLD purchasing a property at around $480,000 is eligible for the $15,000 State grant, the $25,000 Home Builder grant, $0 on stamp duty saving around $4,000 and savings on mortgage insurance of up to $15,000 through the first home deposit scheme.
Prime Minister Scott Morrison mentioned Thursday that the scheme was aimed at saving jobs in the building and construction industry. “This investment isn’t just about helping Australians bring their dream home to life, it’s about creating jobs and helping support the more than one million workers in the sector,” Mr Morrison said.
Mr Dear stated that although the primary purpose of the grants was to stimulate construction and jobs, they certainly provided a valuable opportunity for first-time home buyers, although buyers have to act fast to get inside the 3-month window to begin construction after signing a contract.
“There are certainly multiple factors buyers need to be aware of. Buyers in Sydney and Melbourne are going to be excluded by the $750,000 value cap and many others around the country will find themselves excluded based on the income caps. We are hearing of loan approvals taking up to 5-months with some lenders and approvals of brand new builds potentially longer. Given that building has to commence three months from contract date, this will exclude some people indirectly as well. I’m spending a lot of my time educating prospective buyers right now to be aware of these barriers and how to avoid disappointment. The opportunities are there, but it needs to be the right build, and your finance process needs to be streamlined. This isn’t an opportunity to take your time finding and planning the perfect house. This is an opportunity to enter the property market with unprecedented Government support.”
Mr Dear was confident that first home buyers who are in a position to buy and are ready to act quickly have plenty to gain, however, he stressed the importance of following a structured process based on professional advice to avoid missing out on the grants.
“At Inside Money, our entire mission is to provide strategic financial assistance, debt reduction, budgeting and mortgage reduction. What we are seeing right now is a very real opportunity for first home buyers to take a big jump in the right direction, but it has to be done the right way and it has to be done quickly.”