Why First Home Owners Grant should not be a driving factor in investment decisions
First-time property investors often consider a lot of things before making their first purchase—from their personal and financial goals to the possibility of renovation—but according to propertybuyer's Rich Harvey, First Home Owners Grant need not be one of them.
Property investor Colin Finch got the $10,000 First Home Owners Grant for his first property—a two-bedroom, two-bathroom, two-level townhouse off-the-plan in Maidstone, Victoria—in July 2015 and was wondering if it was a wrong first purchase.
"It's great to get that, but $10,000? Look, in the scheme of a property investment... [First Home Buyers Grant] shouldn't be driving factor for them making a decision on a property investment. Certainly, it's the icing on the cake, but consider the fundamentals of the property and the area that he's buying in first," Rich said.
"I mean, look what happened in Sydney. I can't remember the year that it was introduced, [maybe] 2011 or 2012—there was, what I call, huge pull-forward demand in that low end of the market. It just ignited that bottom end of the market, [and] properties between $400,000 to $600,000 just went crazy. It was just a bunfight to get properties in that bracket.
Smart Property Investment's Vivienne Kelly also made a point about how the access to the grant can affect the market and property investors in general.
"There's been a lot of evidence with First Home Owners Grants... that if everyone has access to that money, it just ends up pushing up the prices, because if every first time buyer has an extra $10,000, then everyone can afford an extra $10,000 and it's not always the sort of carrot that people think it is," Vivienne said.
Property investors should instead focus on the fundamental drivers of growth in a certain area when deciding to purchase a property.
"What [happens in] the next 10 years for that area? Has it had its growth and is going to flat line for a while? Or are there enough fundamental drivers in terms of population, investment and infrastructure that's really going to drive the growth forward in that area? That's really key... to know," Rich said.
According to Phil Tarrant, editor of Smart Property Investment, knowing when an investor makes a wrong turn in his journey is as simple as looking back to his own goals. After all, there is no one sure way to success in property investment.
As always, good education and mentorship go a long way in ensuring that one is always on the right path towards achieving his short- and long-term goals.
Tune in to The Smart Property Investment Show's special Q&A episode to know the answers to some of the most frequently asked questions about property investment, including off-the-plan risks, creating equity, the financial backing you need to get started. and identifying the best real estate agents to sell a property.
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