The Australian Government has decided to double the first home buyers grant to $14,000 for those who buy an established home and to triple it to $21,000 for those who buy a newly built home.
This is fabulous news if you are an Australian property investor. If first home buyers start buying then the demand that they create will start a wave of property price increases.
According to domain.com.au: “When the $7K first home owner’s grant (FHOG) was introduced on July 1, 2000, median prices for houses in Australian capital cities rose by an extraordinary $32,000, on average in the following 12 months.” They put those words in bold (and used “extraordinary”). And, I think they did that for a VERY good reason. Because, if my research is right, median house prices then were between $100,000 (Adelaide) and $275,000 (Sydney). So, that’s roughly a 17% increase in value!
If that were to happen this time and if you had bought a property with only 20% of your own money (and 80% home loan), then your cash investment will have grown by a whopping 85%!
Liz reminded me that 2000 was also roughly when the sub-prime lenders were starting. And that they made home loans more accessible and their actions probably also contributed to the house price increases. So, maybe 85% is more than we can expect this time around. But what if it was only half of 85%? How would a 40%+ return on cash invested sound to you?
Of course, it may not happen. BUT, if it does happen, then the people that make most money will be the ones that are ready to pounce onto great bargains. They will have their finances organised and home loans pre-approved, they will know where they will invest and they will know exactly what strategy they will use to get the maximum out of their new investment property.
So, what do you need to do to get ready? Because, whatever it is, you might want to start getting ready now …
Ian
Tags: FHOG · First home owners grant · price increase · Property investing · property investment · return on investment1 Comment
1 response so far ↓
Hi,
I got a question by email about this and thought that the question was so good that i would share it here. The question was:
“Do you really think it can go up in a poor economy like this?, good news Ian, almost got enough for my second house and ALMOST have enough to do the course on top of it as well.”
Here is my answer:
“Good question!! I honestly don’t know. I know that the economy will eventually turn around. What I don’t know is whether this will be enough of a trigger to start the process. The Government obviously believes it will do it (or at least are saying that they believe it will do it!). My belief is that the media actually controls the answer and it will depend on whether the media decides that this is something they will get behind and whether they will “talk up” the economy and whether they will do this now … or later. I DO believe that now is the time to get ready for it because it is going to happen and, when it turns around, there will be some great opportunities and the people that are ready will make the most money!
That’s great news that things are going really well for you. Congratulations! If you are not already doing it, then start doing the property research and get yourself in a position so that you can spot the market starting to move as soon as it happens. Traditionally, the first moves have been in the city suburbs that are just a few kilometres from the city centre and then the wave has spread out from there. At times, different cities have led the wave. I have heard arguments for and against different cities this time around too. So it will be important to watch what is happening across the Country.
Good luck with it! I hope you get the timing right!
Ian”