A great Article from the Money Magazine

If you have been holding off buying your first home because you expected prices to fall further in this time of economic uncertainty, the federal government has given you a huge incentive to get into the market before June 30 next year. As part of its $10.4 billion package to stimulate the economy, the government will double the first home owner grant (FHOG) to $14,000 for existing homes, and treble it to $21,000 for new homes.

Eligible buyers will have to enter into a contract before June 30, 2009 to receive the increased payments. In the case of new property, as long as there is a valid contract to purchase, the home will not have to be completed by that date.

“All new residential dwellings, including units, as long as they have never been lived in, will attract the $21,000 grant,” says Wilhelm Harnisch, CEO of Master Builders Australia. Those who take advantage of the increased grants will have to establish the property as their principal place of residence, probably for at least six months, but can then turn it into an investment.

Some commentators say this move will drive up prices, but others disagree because of current uncertain economic conditions.

In reality, desperate first-home buyers who have found saving a deposit very hard, especially with rising rents and a higher cost of living, basically want their own affordable roof over their heads.

“You can still build equity with affordable property,” says Cameron Kusher, RP Data research analyst. “Your first home does not need to be the one you live in for the next 20 years. Older units and houses with renovation potential are a good way to boost value and build equity.” (See our cover story, page 44.) One thing most analysts agree on is that this increase in grants, combined with falling interest rates, will put a floor under prices, especially in the lower price range.

For more details on the FHOG see www.firsthome.gov.au.

For more on property, see this month’s Money.

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