Buying your first home can be very exciting, but the whole experience can be extremely daunting. From finding the right location to suit your needs to deciding whether to build or buy an established property, there are many important decisions to be made.
The government has handed out more incentives for homebuyers in recent months than ever before, which, coupled with record-low interest rates, has caused the demand for residential properties to swell.
- Engaging a building inspector early can help you avoid costly repairs later.
- Look into planned developments in the area to know what the location might look like in the future.
- If buying an off-the-plan property, the sunset clause allows some deviation from what's given in the plan.
The federal government’s homebuilder grants scheme is believed to be a big contributor to the renewed interest in the housing market after an initial drop in property prices during the COVID-19 pandemic.
The government has invested in the construction industry to help recover from the economic fall of last year.
Emeritus professor of finance at the University of Melbourne, Kevin Davis, says the fear of missing out among buyers drives up house prices.
“Once house prices go up, people think they’ve got to get in right away. And we see some part of that happening now because once people get that kick-off, they want to make use of the available supply and not miss out,” he says.
In a frenzied housing market, it’s easy to overlook some key red flags in a rush to secure a property.
Buyers may not immediately notice issues with a house, such as structural damage, rusted fittings, bad insulation and even asbestos in some construction. Engaging a skilled building inspector right in the beginning can help you avoid such issues.
“Usually areas of key concern are the wet areas such as the bathrooms and laundry. If these spots have even the smallest defects, they can lead to further ongoing issues because water is probably the number one key contributor to most damages,“ says registered building inspector Myles Clark.
He says it’s only a small investment that can help you sidestep potentially expensive repairs in the future.
What you are paying is only a fraction of the cost before you potentially buy a half-million dollar home.
There are things outside of the property that may be equally important to look out for, such as any planned developments in the area, whether the property is in a high-risk bushfire or flood zone, connectivity with major roads, freeways and railway lines, etc.
However, the most crucial details of your new purchase are set out in the contract. If you need help with understanding the contract, it may be a good idea to engage a conveyancer to advise you.
Jorden Lam, founder of Wealthsource Conveyancing, says though there’s no legal requirement to hire a conveyancer, engaging one early can ensure you get what you signed up for.
She says sometimes clients have already signed a contract of purchase and accepted the property in the shape it is in before engaging services.
“A lot of buyers make a mistake in that, they do all that, and then they start combing through the property. But actually, from a legal perspective, as a seller, you’re only obliged to deliver the property in the condition it was in on the day of the sale.”
First home or investment property
With high property prices, some buyers go for an investment property while saving their dream home. Melbourne University Professor Kevin Davis says while both of these options have their own set of tax benefits, buying a home to live in is the most tax-effective option as there’s no capital gains tax applied at the time of the sale.
On the other hand, he says rental properties may not attract as good a price.
“The most common thing we find about rental properties is that they don’t generally get looked after well enough when compared to a home with the owners living in it.”
Existing home or build a new one
While it’s a decision that depends on a buyer’s circumstances, but building a new home or buying one that’s brand new may make you eligible for the First Home Owner Grant. However, Ms Lam says those going for off the plan properties must take a good look at their contracts, especially the sunset clause that may allow the builder significantly more time to deliver the project and make changes in the construction.
“Because you haven't seen the built property, come completion time you see it, and it's actually not quite what you thought it would be,” she says.
“What the off-the-plan contract often allows for is a level of actual deviation from what you might see in the display home or what they originally tell you in the details of the contract.”
The First Home Owner Grant
The amount one may receive under the one-off First Home Owner Grant varies depending on which state or territory the property is in.
In New South Wales, $10,000 in the FHOG can be claimed for new homes worth up to $750,000. First home buyers can also claim $10,000 in the First Home Owners Grant for new residential properties with $750,000, but if the property is in regional Victoria, first homeowners may be eligible for $20,000 for contracts signed between 1 July 2017 and 30 June 2021.
Find out more about the First Home Owner Grant here.