New building stimulus measures introduced by the federal and Western Australian state government are driving a significant rise in first home buyer enquiry, according to Perth-based property investment consultancy Momentum Wealth.
Combined with the existing First Home Owner Grant and duty concessions, the federal HomeBuilder Scheme and state Building Bonus package could see eligible first home buyers in Western Australia receive between $44,000 and almost $70,000 in stimulus if they sign a contract to build or purchase a new property under construction before 31 December 2020.
Chair of Momentum Wealth’s residential investment committee Emma Everett said that, while this presents a great opportunity for first home buyers to enter the market, buyers should be careful not to overlook the risks and cost of building or buying in the wrong area.
The stimulus could provide a great opportunity for buyers to get into their first home sooner than planned, but these new building grants are also somewhat geared towards house and land packages in outer suburban housing estates, many of which are already facing oversupply, according to her.
“One of the key risks for buyers who purchase in these outer areas is that they will not just be competing with the existing supply already on market, but also new stock that comes on stream from future developments,” Ms Everett highlighted.
“This could not only hold back their property’s long-term capital growth potential, but also accelerate price declines in a future downturn.”
Ultimately, buyers looking to leverage the stimulus measures should consider the different options available.
Ms Everett said that while property investment is encouraged, as always, buyers should be careful about where they do it, keeping in mind the implications on their property’s future value as well as their own lifestyle requirements.
“Rather than buying in outer areas with lots of oncoming supply, buyers could look at purchasing an infill lot in an established suburb closer to the city, or a townhouse or villa under construction in a more tightly held area where there’s less competing stock, better amenity and a higher land value advantage to drive the property’s growth over time,” she said.
Further, with some builders understandably increasing their prices to compensate for the influx in buyer demand, Ms Everett also reminded buyers to ensure they aren’t overpaying.
“At the end of the day, if you’re paying $20,000 too much to purchase a lot or house and land package that won’t pay you back in its end value, that’s going to defeat the object of qualifying for the grant in the first place,” she said
“Equally, you don’t want to be purchasing a [poorly located] block of land just to receive the full $70,000 in grants if that property is going to decline in value and reduce your long-term returns, where purchasing a villa or townhouse would benefit you more in the longer-term due to stronger capital growth.”