Buy or wait? Conditions are ripening to buy your first house
First home buyers have some great options available right now, but also some tough choices to make. Buy before June 30 to get the extra first home buyer grant boost, or maybe wait for property prices to fall further, and perhaps interest rates too, but get a lower grant? Choose between a larger cash hand-out now, or greater choice and a smaller mortgage later?
First Home Saver accounts appear to have been overlooked in all this, but in some respects may be an even better option to consider. Both partners are eligible, and some of the rules are less strict. Either partner can have previously owned an investment property, and with the tax benefits on offer, the more you earn the bigger the benefit, since the interest is taxed at only 15 per cent irrespective of how much you earn. The only downside is you have to save!
The Government pays 17 per cent of what you save into your account gratis and tax free, up to $850 each year - though you need to save $5000 to get the full amount.
And while many have commented on the fact that you can't touch the money for four years, it's not that long, as it turns out. It’s possible to work things so that you can get it down to just three years by shuffling around the June 30 and July 1 payments in the third year, so that two days buys you a whole financial year.
By depositing $1000 before June 30 you're covered for this financial year, then again on June 30 next year to cover 2009-10, June 30 the following year gives you 2010-11 and then just one day later covers 2011-12. So half way through 2011 you'd be able to buy. With the typical three-month settlement you could even buy a home in April 2011 and start looking at the end of next year.
While the extra $7000-$14,000 boost is likely to have disappeared by then, the standard first home owner’s grant of $7000 would still be available. And the beauty of the first home saver scheme is that a couple gets two goes. So if each partner saves $5000 a year they'd have $46,800 plus interest taxed at only 15 per cent. Property prices would have to rise significantly for you to be worse off by waiting three years, and most economists expect property prices to fall this year.
Properties under $350,000 are currently going gangbusters due to bigger grants and falling interest rates, but this is likely to change as the year drags and unemployment rises, so you don't want to be a first home panic buyer right now. If anything, by waiting longer - so long as you’re saving - the stronger your position will be.
