The state budget brought good news for first homebuyers but increased stamp duty for everyone else
The big news coming out of Queensland is that the state budget has thrown some interesting developments into the property market.
The good news is that the Queensland Building Boost will offer $10,000 to buyers who pick up a new property in the six-month period starting at the beginning of August.
“With the new grant, if you buy a dwelling or build a dwelling that’s never been lived in before you can get an extra $10,000 boost,” explains Grow Consulting director Ayda Shabanzadeh. “If you build a house construction must commence within 26 weeks.”
She suggests that it will be first homebuyers, in particular, that will capitalise on the new grant, especially as they’re already able to benefit from the $7,000 First Home Owner Grant as well as well as stamp duty concessions.
“In Queensland, especially Brisbane, there are a lot of available off-the-plan inner-city projects. And there’s definitely stock available in that $500,000 and below category, which is where first homebuyers don’t have to pay stamp duty,” she says. “They get the $7,000 grant, plus they get the $10,000 boost, so that’s going to really stimulate that market.”
With all this expected renewed demand for off-the-plan property, Shabanzadeh expects that competition amongst developers will be fierce, with some even offering to match the $10,000 grant in order to make the sale and beat the competition. “So if first homebuyers are getting $10,000 from the government, $10,000 from the developer and the $7,000 First Home Owner Grant, that’s $27,000. And that’s pretty much the deposit on the property that they require,” she says.
The bad news for non-first homebuyers is that the state government has decided to wind back stamp duty concessions for this sector of the market. This is a move that has drawn near universal criticism from industry insiders.
“We think this is a fundamental error on the government’s behalf,” says Property Pursuit principal Meighan Hetherington. “There was a period of time where we held hope that stamp duty would be treated more sympathetically, and they’ve actually gone the other way in removing the concession.”
This baffling move, says Hetherington, may well see existing homeowners who were planning to upgrade deciding instead to stay put and renovate.
“I think some buyers will exit the market because it’s going to be more economical for them to renovate their own home,” she explains. “And on the other hand, those who really do need to upgrade, change areas, or move to Brisbane, are going to have to alter their budgets accordingly.”
But don’t try to use increased stamp duty as an excuse to leverage some price discounting from vendors, as a more subtle approach will need to be taken, even in Brisbane’s current buyer’s market conditions.
“Work on understanding the vendor’s motivation, and offer a group of conditions to get a better price, rather than strongarming them and saying ‘I can’t afford it because of stamp duty so drop the price’,” says Hetherington.
It’s expected that apartments in particular will see the bulk of building boost buying action, with first homebuyers targeting one-bedroom pads within 5km of the CBD or two-bedroom properties within 10km, and it’s these inner-city zones that investors would also do well to target.
“But look for infrastructure as well,” says Shabanzadeh. “What else is happening in that area besides the fact that it’s a brand new property, and what’s the supply already like?”
“But in the inner-city, it’s incredible what things are renting out for and what people are willing to pay.”
RP Data senior research analyst Cameron Kusher also points to rising rents as one of the factors that’s starting to stimulate the Brisbane market.
“If you have a look at yields, they’re becoming a lot more attractive: you’re getting a yield of 4.5% on a house and 5.1% on a unit,” he says. “Potentially, if that continues to increase, we could see investors more interested in the market.”
And should this trend continue, the rental cycle will eventually reach the point at which renters will decide that it makes financial sense to buy for themselves, bringing some much-needed sales activity into the Brisbane market.
“It starts being more affordable for people to rent the house they want to live in rather than buy, but then you see the rents move up and they think that they may as well buy. So there’s a bit of a trend to watch,” says Shabanzadeh.
She adds, however, that it will take around two years for this process to take place. So, for the time being, rents should continue to rise while the property market regains its momentum.
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