How will FHOG changes affect property prices in Perth?

jarrad tnWith the changes in the First Home Owner's Grant (FHOG) due to take effect soon, property investment in Perth is about to change with them.

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Blogger: Jarrad Mahon, Investors Edge Real Estate

As soon as the new federal budget ensues, the FHOG for new homes will increase from $7,000 to $10,000, while the FHOG for established homes will fall from $7,000 to $3,000.

Those who are purchasing investment property in Perth obviously aren't first home buyers but they will be affected by the FHOG due to its effect on prices.

Here is how we see it playing out.


Established Properties
We expect a surge on established property, especially in the inner area, until the changes are officially passed. If it passes in October as expected, we expect the surge to come to a standstill as new homes become a better investment for first home buyers.

New Housing Estates
We predict that there will be a rise in outer area new housing estates in the 2 months going into Christmas as first home buyers take advantage of the $10,000 grant. Unfortunately, this should make titled land waiting times increase from 1-2 months to 3-6 months in some of the most popular estates.

Mining Standstill: Construction Industry to the Rescue?
In 2014, as more building approvals are granted, we project that the construction industry will become very busy. If all goes as expected, the construction industry will replace many if not all of of the jobs that are currently being lost as the mining industry reduces labour costs. This is a best-case scenario and we hope to see all tradespeople who are losing jobs in the resource industry find jobs in the construction industry.

How this Could Affect Land Prices
The second quarter of 2014 will be crucial. If it happens as we think it will, there will be a strong increase in demand for land and new home construction. That will, of course, increase land prices and construction costs. Our belief is that buying land in the suburbs the next 2 months will provide some short-term uplift in value.

How will it Affect Investment Property in Perth?
As any of our buyers' agents or property managers will tell you, every property and every investor in the Perth market are different and there is no blanket statement that will be true for 100% of investors. That is why we always recommend that you do your due diligence by keeping informed and contacting experts.

With that caveat in mind, it looks like the rise in property prices will cause the median price for a home to rise in most suburbs. There is a very good chance that established homes will provide greater value as investment properties as land and new home prices in Perth suburbs rise.

However, land and new homes show great potential for short-term growth in the next 2 months. That growth could give your investment portfolio a boost while setting you up for some nice long-term profits.

About Jarrad Mahon

Jarrad is the director of Investors Edge Real Estate.

Jarrad thrives on helping hundreds of investors every year formulate a clear plan to get the best returns from their Perth property. This requires a carefully thought out and innovative approach to understand your situation and help you to make the right move at the right time.

His renowned personalised "Property Success Plan" takes you step by step through how to make thousands of extra dollars and avoid the costly mistakes that Jarrad has learnt the hard way by investing himself all around Australia.

Over the last five years he has used his engineering background to build and refine a unique property management, sales & investing process that is sure to impress while getting you real results.

A sales and marketing expert, Jarrad combines the latest technology and cutting edge sales strategies to sell homes across the whole of Perth metro area.

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