The best things in life are free

The best things in life are free, so they say.

Everyone enjoys receiving freebies from the Government, or at least getting a tax deduction here and there.

For many home buyers, Government grants are very appealing, at least on the surface. That said, we need to cough up quite a bit of our own hard-earned cash to access these, and there is the suspicion that these have inflationary effects on the final prices we pay.  None-the-less, it pays to know what each state offers for budding property investors.

The most well known is the first home buyers grant (FHBG). Initially introduced in 2000 to offset the effect of the GST, the FHBG is set at $7000 across the nation.

However, each state has enacted its own legislation and schemes that provide home buyers specific incentives.  First home buyers in New South Wales, the Northern Territory and Western Australia can receive over $25,000 in subsidised assistance which include stamp duty concessions.  This compares favourably with South Australia and Tasmania, where the maximum benefit is under $16,000, dependent on the price of the property. 

So, if you are looking at buying property as an investment (rather than to live in), it may pay to look at places with more generous incentives than the one you grew up in.  That said, I note that both New South Wales and Western Australia have much higher housing prices than South Australia and Tasmania, somewhat offsetting their incentives.

The other consideration is that legislation and schemes do change – for instance, on 1 September, the ACT replaced the FHBG with a $12,500 grant, but only for new homes – coming into line with the majority of Australian states.  Hence, finalising a deal for an established property in Canberra in August would theoretically have saved first home buyers $7000!

Recently, Western Australia’s state government extended its FHBG of $7000, whilst they finalise the details of a new scheme. The proposed changes would lower the grant for existing homes to $3000, whilst increasing it to $10,000 for new homes. Again, first home buyers looking to purchase an existing home in WA would do well to do so prior to these proposed changes.

In my field of work, we see many potential home buyers capable of funding a mortgage thwarted from entering the market due to poor personal credit ratings.

What many fail to realise is that missing a bill five years ago can still impact your ability to get a loan today. The problem is that by waiting for black marks to drop off your credit report you could miss out on some incentives, should the Government decide to discontinue them.

Being aware on what is on your credit report is even more important now that we are leading up to legislative changes to the Privacy Act that come into effect next year. The Act will change the way banks and mortgage brokers discern whom they lend to, and at what interest rate mortgages are offered. For instance, come March 2014, lenders will know if we pay our bills a few days late… currently only late bills over 2 months appear on your credit report!

My advice is to examine your credit report PRIOR to seeking out real estate investments, so you can deal with any black marks before seeking finance. Should you find a black mark on your credit report, take action today so you don’t “miss the boat” on grants and other incentives.