Deciding to enter into the property market is a huge life decision. It is the most expensive thing you’ll ever spend your money on but one of the most important. It’s not like you can just wake up one day and say ‘Hey I’m going to buy a house’. There’s a lot of research, planning, and processes to follow before you can call that little piece of land your own. One of the most important factors to understand is the current landscape of the property market. As property experts, we have assessed the current situation and created the ultimate guide to help you decide when is the right time to buy.
At the moment the media and news outlets have been informing us of the continuing rising property prices in Australia. It seems that it’s not just the big capital cities but also regional towns and other cities such as Brisbane. These shifts in property demand are the consequential result of; the pandemic and the opportunity to work from home. In light of these revelations, the rising property prices have been a huge shock for many observers but when you analyse why demand is rising, it all makes sense.
Let’s divulge a little deeper and understand why everyone is going bananas for real estate.
Record Low Interest Rates
For many people deciding to purchase a property is dependant on the current interest rates. Now that they’re low, this is great news for interested buyers. With the current average mortgage rate as low as 2.94%, it means that the property is more affordable for prospective buyers. It also relieves the burden of high-interest loan repayments. The RBA (Reserve Bank of Australia) determines the interest rate by factoring in employment rates, inflation, property demand and any other important economic factors, their decision to keep interest rates at an all-time record low, has further fuelled property demand. It also makes it easier for purchasers to receive a loan because their interest repayments are significantly lower.
Government Incentives Currently Available
Recently we have seen a number of government incentives made available to prospective buyers. These incentives aim to stimulate the property market and make it easier for people to purchase the property. Knowing what these are and the eligibility criteria can have you saving big $$$ so let’s dissect all of the incentives available at a federal and state level (Vic only).
Principal Place of Residence Duty Concession
Principal Place of Residence duty concession can be used to receive a reduction of duty tax for a property that has been purchased. It is available in Victoria if you have purchased property, both new or established, with the intention to live in it (owner-occupier). There are, of course, eligibility criteria that must be met in order to obtain a concession. The property value must not exceed $550,000. Along with this, you must show intention to move into the home within 12 months of settlement and occupy the property for at least one year as your primary home. However, please note that this concession cannot be obtained if you purchased your property at a significant discount or it was gifted to you. This benefit is more accessible than other grants on offer, as it is eligible to all buyers as long as the criteria is met.
The HomeBuilder Grant was conceptualised during the pandemic, in an effort to keep Australia’s property market afloat. If you’re buying or building a new home (including off-the-plan) valued at $850,000 or less, you can receive a $15,000 grant. This incentive is currently available until March 31st. There are a few eligibility criteria to adhere to such as; you must be an Australian citizen, earn <$125,000 for a single income and < $200,000 for a couple per year, and you must be an owner-occupier.
When deciding to purchase a property, a great way to save money is to purchase off-the-plan. How and why you ask? Well, let us tell you some of the industry secrets.
Off-the-plan purchasing can save you a lot of money, this is because of government incentives that are available exclusively to this type of purchasing, such as the off-the-plan concessions, developer rebates, and a host of other government incentives available. Buying off-the-plan can be risky which is why you should always do your homework and research the developer. Understand their track record including their; completed projects and current projects. If you do purchase off-the-plan ask for regular construction updates, so you can stay informed. We at Cornus, practice transparency keeping our buyers informed of our projects through monthly updates.
This type of concession will allow you to save more than if you were buying an established or completed project. This concession enables purchasers to only pay duty on the amount of construction that has commenced. Please note that the further along a building’s construction is, the more duty you will have to pay. This varies significantly for different types of properties and is dependent on the stage of construction.
Now, we know this can all be a bit confusing, so imagine this:
You find your dream off-the-plan apartment in Melbourne for $700,000. You have signed your contract prior to construction commencing. $450,000 of the contract price is going towards construction. This means that the dutiable value on your apartment is $250,000 ($700,000 – $450,000) once the off-the-plan concession has been applied.
In the example above, if you were a first home buyer, you would also be exempt from paying any stamp duty, as the dutiable value of the property is under $600,000.
For a more accurate and precise idea of what your savings may be, we advise you to speak to your developer or sales team member. Please note that the best way to capitalise on this incentive is to purchase in the early stages of the project.
Incentives For First Home Owners
First Home Owner Grant
The First Home Owner Grant is a $10,000 incentive available to eligible first homeowners. As part of the eligibility criteria, you must ensure that:
- The purchase price for the home does not exceed $750,000
- The home must have never been occupied before
- This must be the property’s first sale
- The property must be purchased with the intent of being your home, therefore it cannot be used as an investment property or a holiday house.
The First Home Buyer Duty Exemption
First home buyers may be eligible for an exemption or concession from duty if they have signed their property contract on or after the 1st of July 2017. To receive this exemption, your first home’s dutiable value must not exceed $600,000. The duty concession, however, will apply for houses with a value between $600,001 and $750,000. These benefits are more accessible than the first home owners grant, as they are available to you whether you are buying a new or existing home.
Stamp Duty Savings
The Victorian Government introduced new stamp duty discounts on properties in an effort to stimulate the property market and rebuild consumer trust. Stamp duty is a tax that is placed on transactions, including properties, charged to the home buyer. One of the stamp duty savings that you can take advantage of is the 50% off stamp duty concession. This is a discount placed on properties that are valued at up to $1 million (provided the contracts are dated on or after the 25th of November 2020 to the 1st of July 2021).
However, there is a catch! Newly built or off-the-plan homes are eligible for the full 50% reduction, whereas established properties will save 25%. With these massive discounts coming to an end in the coming months, now is the time to make use of them before they’re gone.
Melbourne’s Resilient Property Market
Another factor that is contributing to Melbourne’s growing property demand is that despite a pandemic, Melbourne’s property market has shown strong resilience. With many suburbs bouncing back to show record growth, auction clearance rates are at an all-time high of 80%. It seems everyone has decided to purchase a property at the same time! In the midst of what felt like a never-ending lockdown, being stuck at home allowed us to save money and ultimately asked us to reevaluate our living situation. We all grew comfortable with working from home, leading many to consider remote work as their long-term plan. This shift has consequently seen the median metropolitan house price grow by 9.5%, the largest increase in 21 years.
Malvern East has seen the largest property price rise, with a whopping 28.5% increase.
The people have spoken and they want to spend their money on property! Property demand has risen significantly in the past few months, driven by low-interest rates, new grants, and prospective buyers who were locked up during the pandemic. All of these factors have contributed to the rising demand for property.
For first home buyers, this has been the ideal time to take advantage of grants and discounts available to them. Along with this, our very own Marcus Jaffa, a sales consultant from Cornus, explained that owner-occupiers are having a huge impact on demand in the property market, specifically ‘downsizers’.
So what’re you waiting for? There has never been a better time than now to buy a property! Make a smart choice by taking full advantage of all the incentives and low-interest rates currently available.
If you’re interested in an off-the-plan apartment, we have two projects under construction; Cornus Woodlands and Cornus La Frank, and we have also just launched our Cornus Carnegie project. All of our projects are in prime locations which have seen significant growth as of late. so, get in contact with us here at Cornus Developments for boutique property developments.