Home buyers should be smart about HomeBuilder: Qld broker
Prospective home buyers eager to get into the market to take advantage of generous government incentives, such as the $25,000 HomeBuilder grant, need to be cautious to avoid falling into a poor investment trap, according to CGIO Finance Owner Cara Giovinazzo.
Even though the HomeBuilder grant boosts the construction sector and enables people to achieve their home ownership dream, buyers can risk making hasty and potentially costly decisions because of the attraction of “free money”, Ms Giovinazzo said.
“The appeal of getting the grant might blindly encourage people to make poorly considered investment choices as they are so focussed on getting $25,000 for free,” she said.
“They need to tread carefully so it does not cost them more in the long run.”
The HomeBuilder grant provides eligible owner-occupiers, including first home buyers, a grant of $25,000 to build a new home valued at $750,000 or less or to substantially renovate an existing home for costs of between $150,000 and $750,000. The purchase contract needs to be signed between 4 June 2020, and 31 December 2020, and construction must commence within three months of the contract date.
While HomeBuilder was announced by the federal government on 4 June as part of measures to counter the economic impact of the COVID-19 pandemic, the Queensland government only opened applications in July for work commenced since 4 June, or work waiting to commence.
HomeBuilder funds are not released until the slab stage of a home project, which means most banks will not accept approval for the grant to be used as funds to complete.
“This means buyers in that situation will still need a deposit so they should talk to a mortgage broker regarding options as a few banks will accept it or can work around the delay,” according to Ms Giovinazzo.
“Another issue is some builders and developers are promoting the grant to clients when those buyers may not be eligible, or they know they can’t meet the contract deadlines. For example, if the land is not registering until next year, these clients can’t possibly start construction as you only have three months to clear the site and start construction from signing the contract.
“This can be problematic if you are expecting funds, but your builder has delays. If this happens, you must seek special consideration to still get the grant – and there is no guarantee that it will be approved.”
In addition to HomeBuilder, first home buyers in Queensland can get the $15,000 Queensland First Home Owners’ Grant, while regional Queenslanders can access the state government’s $5,000 Regional Home Building Boost.
Ultimately, first home buyers in regional Queensland can access up to $45,000 in grants to get into the property market.
While a massive incentive, Ms Giovinazzo reminded investors to be smart about making decisions, especially as the world still strives to recover from the negative impacts of the pandemic.
“You need to tread carefully and not get caught out by contract deadlines or making poor purchasing decisions. It is really important to do your research and get advice before making any major decisions,” she concluded.
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