Property News – NSW State Budget 2012
The NSW State Budget for 2012 has been announced. Here are the most important changes concerning home buyers and property investors, together with my thoughts. The news is, as always, not all good…
New Home Grant Scheme:
From 1 July 2012, a new $5000 grant will be provided to buyers of new homes, whether off the plan or newly built, with a value up to $650,000 and to buyers of vacant land that is intended to be the site of a new home valued up to $450,000
For a vacant land purchase, you must commence building the home – i.e., the laying of the foundations for the home must commence within 26 weeks of completion (settlement) of the purchase, or within any longer period allowed by the Chief Commissioner – There is no time limit on how long it takes to complete building the home.
The grant is targeted at all non-first home buyers and is available to investors as well as owner occupiers. The grant will be administered through the transfer duty payment process.
First Home Owner Grant (New Home) Scheme:
From 1 October 2012, the First Home Owner Grant Scheme will be replaced by the First Home Owner Grant (New Home) Scheme. The new scheme will only apply to first home owners who purchase or build a new home valued at up to $650,000
The grant will increase from $7000 to $15,000 from 1 October 2012 to 31 December 2013 and to $10,000 from 1 January 2014.
Q: From October 2012 do I get a grant if I buy an existing home?
No, from 1 October 2012, the First Home Owner Grant will only be payable on the purchase of new homes. The $7000 First Home owner Grant is still available for purchases of existing homes entered into before 1 October 2012.
Q: Can I get the First Home Owner Grant and the $5000 New Home Grant?
If you receive the First Home Owner Grant, you cannot receive the $5000 New Home Grant for the same property.
The following types of agreement or transfer are eligible for the grant:
- A new home purchase. That is an agreement or transfer for the purchase of land that is the site of a new home that is complete and ready for occupation.
- An off the plan purchase. That is an agreement or transfer for the purchase of land intended to be used as the site of a new home, which is to be built before completion of the agreement.
- A vacant land purchase. That is an agreement or transfer for the purchase of vacant land that is intended to be used as the site of a new home and which is not an off the plan purchase.
- From 1 July 2012:
the transfer duty exemption cap on new homes increases to $550,000 with duty concessions for new homes valued between $550,000 and $650,000
- the transfer duty exemption cap on vacant land increases to $350,000 with duty concessions for vacant land valued between $350,000 and $450,000
Deferred abolition of duties:
The abolition of marketable securities duty on unquoted marketable securities has been deferred until 1 July 2013.
The abolition of duty on mortgages has been deferred until 1 July 2013.
The abolition of transfer duty on non-land business assets has been deferred until 1 July 2013.
What is land tax?
Land tax is a tax levied on the owners of land in NSW as at midnight on 31 December of each year. In general, your principal place of residence (your home) or land used for primary production (a farm) is exempt from land tax. You may be liable for land tax if you own or part-own:
- vacant land, including vacant rural land
- land where a house, residential unit or flat has been built
- a holiday home
- investment properties
- company title units
- residential, commercial or industrial units, including car spaces
- commercial properties, including factories, shops and warehouses
- land leased from state or local government.
Rates and thresholds:
2012: The Valuer General has determined that the land tax threshold for the 2012 land tax year is $396,000. The premium land tax threshold for the 2012 land tax year is $2,421,000.
2011: The Valuer General has determined that the land tax threshold for the 2011 land tax year is $387,000. The premium land tax threshold for the 2011 land tax year is $2,366,000.
Off-the-plan first home buyers find it very hard to get loans, Agents selling apartments off the plan have labelled the new budget changes an ”absolute failure”
Most first home buyers hoping to take advantage of the $15,000 grant and stamp duty incentives will not qualify for bank loans for an off-the-plan apartment and this has been confirmed by mortgage brokers.
These buyers now have only until June 30 to save more than $22,000 on a $600,000 apartment.
The other weakness was that the $15,000 First Home Owner Grant for new property, which starts on October 1, should start on July 1, otherwise the market will stop from July to October.
There are very few first home buyers purchasing off the plan – Banks just cannot give an unconditional approval for an off plan purchase unless a valuation has been complete. Valuations generally can be performed approximately a month before settlement or when the property is complete, banks are happy to do them, but often valuations can come in short if it’s an untested market or the property is unique for the area.
Valuers may not have decent comparable sales to justify the purchase price and that’s where buyers can encounter issues. This is a huge risk for the purchaser, if they cannot complete the purchase, the developer keeps the 10 per cent deposit and he gets to keep that property.
There is a lack of encouragement for investors. They have to be content with a $5000 grant from July 1, after previously being exempt from stamp duty.
If you’re paying $600,000 and more than $20,000 in stamp duty and you get a $5000 rebate, it’s ridiculous. Where’s the incentive in that?
Also rushing to get the deal done before this deadline could result in corners being cut in due diligence, people also forget they are paying a premium development price to buy brand new, I am personally not a fan of brand new or off the plan properties, they are too overpriced, generally cheaply built, high strata’s, they all complete for rent at the same time upon completion.
I have seen way too many clients that have bought brand new properties off the plan years ago and have regretted it, they could have done so much better had they have bought existing properties at the time, It’s a bit like driving a brand new car out of the showroom, how much money will you lose the second you hit the main road.
The only people usually benefit from these properties are generally the builder and the selling agent/property marketing companies with their commission.
Investment Properties…. What Type of Property?
If you are looking to buy an investment property and do not know what suburb to purchase it in, what hot pocket within that suburb, what type of property to buy.. studio? apartment? house? what price to pay, how to achieve the maximum rent, (I have saved my clients a fortune by just negotiating the terms on the contract with the Property Manager alone, Property Managers ALWAYS push their luck, it’s their business, not to mention what I have saved my client in negotiations on the sale price).
Do you know how many bedrooms should a rental apartment have? – i.e., a 3 bed is much harder to rent out than a 1 or 2 bed, certain areas a 1 bed is better and in other areas a 2 bed is better, the 3 bed also has much higher holding costs, with the higher cost of the 3 bed, that can be the difference of buying 2 properties with that spare deposit – i.e., a 1 or 2 bed and an amazing yielding Inner City studio within 2k’s of the City and yes there is capital growth in studios, it has to have a bit of a twist, being in a great spot, view, balcony etc., but you have know what you are doing with purchasing any property, it can make or break you.
Get In Touch
I am not only a Buyer’s Agent, but have the added bonus of being an experienced active property investor for nearly 3 decades with a multimillion dollar property portfolio around Australia, at the end of the day, you need to deal with a like minded person, who treats your money and purchase like their own.
If you are not interested in an investment property and are wanting a new perfect family home and are time poor, tired of looking through unsuitable houses, not sure what price to pay, want to be introduced to off the market properties – then call me on 0416 100 839 or get in touch via my contact page for a chat or free consultation meeting.