Imminent end of $7,000 FHB grant in the ACT shifting buyer behaviour: LJ Hooker

The announcement that the $7,000 first-home owner grant in the ACT will end on August 31 – replaced by a bigger $12,500 grant for new home homes only from September 1 – appears to be already changing buyer behaviour among first-home buyers (FHBs).

It comes as just across the border, the NSW government extended the lifetime of its $15,000 handout for new homes only until 2016, having originally planned to reduce it to $10,000 from January 1.

There has been a “flurry” of FHB home loan applications, mostly for existing homes closer to the city since the changes were announced in early June, according to Paul O’Regan, head of home loans at LJ Hooker.

He estimates that around 35% of home loan applications are now from FHBs, “significantly more so than previous quarters”.

“First-home buyers traditional make up less than a quarter of the market,” O’Regan tells Property Observer.

Some though are choosing to buy new homes – even though they will receive $5,500 extra from the territory government from September 1.

The concern, says O’Regan is that developers may push up prices when there is a bigger handout on offer – something which happened when the first-home owner grant (FHOG) was doubled (and tripled for new homes) in 2008/2009 to assist the housing market during the GFC.

Most though are buying existing home in the $380,000 to $400,000 price bracket with popular suburbs being Macgregor to the west of the city and Tuggeranong to the South.

O’Regan believes the bigger $12,500 grant for new homes will benefit housing construction and employment, but is less certain of its benefits for first-home buyers, given their preference for established homes.

He believes the property investment market in the ACT will increase, with investors picking up the entry level established homes, for which FHBs will no longer receive a government handout from September 1.

He also expects that some first-home buyers will stay at home longer, delaying their purchases as they save up a bigger deposit or seek assistance from their parents.

And he expects the trend of FHBs becoming ‘renter-investors’ – whereby you continue to rent but forgo the FHB grants by buying an investment property – to rise

“For FHBs that buy an investment property, they get the rental income plus their own wages,” he says.

Not to forget that they can also reduce their tax bills by using negative gearing provisions.

Frank Pompeani, principal at LJ Hooker Tuggeranong has noticed a “slight upwards trend” in first-home buyers.

“FHBs have recognised there is good value to be found in the established market," he says.

He says somewhere like southern Tuggeranong offers good value with three bedroom houses under $400,000 on a small block.

“It’s as good value as in the last four to five years,” he says.

At the same time demand for new homes has tapered a little as some FHBs wait for the new grant to kick to get the extra savings.

But reckons there is still better value to be had buying an established home compared with a new home.

Overall, he says the announcement of the changes to the grant have been a “good stabiliser for the market prior to the election”.

“It’s a nice injection prior to the election, but neither FHBs nor sellers should panic, the value will be there."

His advice: research the market, due your diligence, ask an expert and don’t jump into the first home you see.

“If you’re buying an established home, look at 10 to 15 properties and if you’re buying a new home compare different developments in different suburbs,” he says.

Larry Schlesinger

Larry Schlesinger

Larry Schlesinger was a property writer at Property Observer

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