Recently West Australia’s new home boost came as an early surprise for Perth’s first homebuyers, taking the already existing cash incentive from $7,000 up to $10,000.
What this now means is that first homebuyers (FHB) can finally sign the contract on their already targeted new homes, or start hunting with arguably a little more buying power. But where should they search, to balance lifestyle and potential long-term investment? Let’s take a look, but first let’s see the conditions in greater detail.
While some think a new home grant means they’re limited to buying out in one of Perth’s sprawling housing estates, think again. The home only has to be new – whether a builder is contracted to construct it or if it’s just been completed and never lived in. This means there are many options. For example, who said one can’t buy a new villa in a trendy middle-ring hub?
The boosted grant is capped at $750,000 for the home and land, or a cool $1 mill if the home is positioned north of the 26th parallel. So cashing in the incentive on a new apartment or townhouse in a trendy Perth suburb will certainly fit the bill.
FHB’s in Western Australia can also receive a transfer duty concession, with zero transfer duty on the purchase of a home of up to $500,000, a saving of up to $17,765. Transfer duty for a FHB rises quickly up to a $600,000 purchase where the duty for any residential buyer including FHB’s is $22,510.
Many FHB’s aim to stay around the $500,000 mark because of the double savings in transfer duty and the $10,000 grant.
For vacant land in Western Australia the transfer duty concession for FHB’s allows them zero duty up to a $300,000 block, increasing to a $400,000 buy where they pay as much as another buyer.
How to find ‘new’ in Perth
Perhaps a good place for FHB’s to start is to narrow down the areas where they’d most like to live. Some considerations could be accessibility to a work hub, handy to a shopping village, and schools.
Avoid inflated prices
You see, builders and developers can take advantage of the incentive – they may factor the first homebuyer grant into the price and even add a further premium due to higher demand created by the incentive.
We have heard of house-and-land package marketeers who inflate the building price by up to $30,000, and that’s $30,000 too much buyers are paying for the package. So just be careful to thoroughly research the market price or work with an experienced professional.
This doesn’t mean you should entirely rule out a Perth house-and-land package, they can be good, but quality and price are so important. Most are put together by developers wanting to make a quick buck, so the house plans are thrown together quickly for a low-cost house, to make the price of the whole package attractive.
Many people think house and land packages are a fast way to profit and that it will be worth much more once it’s built. Theoretically, there should be an increase for your efforts, but we regularly hear about people finding they have negative equity once a house and land package is built i.e. it’s worth less than the sum of what they paid for the house and land, this is usually because they paid too much.
Property Wizards’ new Perth home pick
So, ready to hunt? What we’d suggest Perth first homebuyers look for to achieve the lifestyle and potential long-term capital growth balance, and cash in on the incentive, is a new villa in a small group of 2 to 3 in an easy distance to the Perth CBD.
This way it’s much like having your own house, rather than a unit in a complex. And you have some land – as opposed to an apartment with no grounds – but you’re not paying for a large piece of land, which would push you further out for the same price.
The key is scarcity, so you don’t want to be in a big complex, where you may compete for tenants if you rent it out down the track. Just as important is location, so make sure you are close to shops, transport and other amenities that will attract future tenants and buyers.
House and land packages
Instead of settling for one of the advertised packages, where you may not be getting the right design and the price might be over-inflated, why not find a small block of land, have your own designs prepared and choose your own builder.
It helps tremendously if you have professional help to put this together and that way you have advice that’s in your interest, not from a seller or promoter who is out to make money from the deal and move on.
Maybe new isn’t for you
If you’re finding it difficult to locate or build a new dwelling within budget and relatively close to the Perth CBD then perhaps it’s better to forego the $10,000 cash incentive, settle for the $3,000 established home grant, still pick up the $17,765 transfer duty concession, and buy a traditional house with potential to add value through a makeover or subdivision down the track.
Once you’ve saved some money and grown some equity you can boost your value by renovating or adding another home.
With all of these options, professional and customised help can mean the difference between finding a property with negative equity and a low-quality build, to a Perth property with positive equity, high-quality construction and being easily rentable or subdividable in the future.
If you have an interest in building your wealth through property, then call us on (08) 9381-7450, or request a FREE Starter Pack.