There is no denying. Let’s look at the facts and figures and depend more on our head than heart when looking at the state of properties in Australia. The reality is that the landscape of properties have changed dramatically over the last few months around Australia with a slow down in combined overall rise of home value index. This comes as new data from Core Logic release for the June report, showing home value index is showing property prices in Australia’s capital cities with a combined overall rise of 0.8 per cent in last month.
In the last quarter, we have seen the three major cities, Sydney increase by 0.8 per cent per cent, Melbourne by 1.7 per cent and Brisbane by 0.5 per cent with Perth an increase by 0.1 per cent. We have also seen a decline in other cities with Adelaide by 0.2 per cent, Hobart by 1.3 per cent, Darwin by 5.2 per cent Canberra by 0.4 per cent.
The report also states that, “While the pace of capital gains is slowing, rental growth has been rising, albeit from a low base. Capital city rents pushed 2 per cent higher over the past twelve months, a stark turnaround from the end of 2016 when rental growth was flat.”
Having said all that, there is always opportunities in any market and it’s up to us to seize where the opportunity lies.
With the significant increase on fees and taxes on foreign property investors and the sustained difficulties in getting loans through with lower loan to value ratios, and the stringent clamp down on money outflow from China and other foreign countries, this has opened the window for permanent residents, citizens and particularly first home buyers to get into the market with slightly more affordable properties.
Changes in NSW
From the 1st July 2017 in NSW alone, the foreign investor surcharge duty will be doubled from 4 per cent to 8 per cent, while the annual land tax surcharge on foreign buyers will rise from 0.75 per cent to two per cent a year.
At the same time, a stamp duty exemption on new and existing homes is valued at up to $650,000 and vacant land valued up to $350,000 for first home buyers. A stamp duty concession is available for new and existing homes valued between $650,000 and $800,000, and vacant land between $350,000 and $450,000. So for a property bought for $650,000, a first home owner will get $24,740 in exempted stamp duty fees.
The First Home Owner Grant Cap for new home purchases is $600,000; for a property where you enter into a contract to build, or are an owner builder up to the value of $750,000, where the grant amount is $10,000. The stamp duty charged on lenders’ mortgage insurance is also scrapped, which is often required by banks to lend to first homebuyers with limited deposits. The change will save around $2,900 on an $800,000 property. The NSW government says first home buyers will save up to $34,360 under its package.
‘This has opened the window for permanent residents, citizens and particularly first home buyers to get into the market with slightly more affordable properties’
Changes in VIC
From the 1st July 2016 in VIC, the foreign investor stamp duty surcharge went from 3 per cent to 7 per cent causing a significant drop in foreign investors to Melbourne. This has helped first home buyers to start to get into the market and the demand is not as high before, helping ease the prices for properties in Victoria.
From the 1st July 2017, stamp duty for first home buyers purchasing a property not more than $600,000 do not have to pay any duties. First-home buyers buying a home with a dutiable value between $600,001 and $750,000 will be entitled to a concessional rate of duty, calculated on a sliding scale. So for a property bought for $600,000, a first home owner will get just over $30,000 in exempted stamp duty fees.
From the 1st July 2017, the First Home Owner Grant (FHOG) has increased from $10,000 to $20,000 for new homes bought or built in regional Victoria (48 Councils) and valued up to $750,000. Eligible first-home buyers of new homes in metropolitan Melbourne will continue to receive the $10,000 FHOG.
Changes in QLD
Recently, the Queensland government announced the First Home Owner Grant will remain at $20,000 until 31 December 2017. Previously the FHOG was due to decrease from $20,000 to $15,000 on the 1st July 2017. To receive the $20,000 QLD FHOG you must be an eligible first home buyer and enter a contract to purchase or build a brand new property under $750,000 before 31 December 2017.
So with all these changes which favours first home buyers, permanent residents and Australian citizens whilst disfavouring foreign investors, this is one of the best times to seize the slight plateau in property prices and therefore be able to negotiate more with developers who are also concerned with having a significant proportion of their properties sold to qualify for lending. Having said that it is also important to buy properties that are not too far away from market value, so you can be positive on the way in.