Grant Extended

Last week the Government announced in the May budget an extension of the boost to the first home owner’s grant. Widely expected to end on 30th June, the boost for existing homes will now remain available at its current level of $14,000 until 30th September. The boost will then be halved for a further three months until 31st December, meaning eligible applicants will receive $10,500. At January 1st, the grant will revert back to the original $7000.

The first home owners grant has been an effective stimulus to the lower end of the Australian property market. We are beginning to see a ripple effect into higher price ranges as the vendors of these lower end homes upgrade on their next purchase. Additionally, with low interest rates and good rental yields we are seeing increasing investor activity. Sales volumes are beginning to increase resulting in a better market than we’ve seen over the past year.

However, while the budget announcement is good news for first home buyers, it’s important to remember there are a finite number of eligible buyers who now have more time in which to finalise a sale. This takes some of the prior urgency out of the market place which is not so good for vendors.

Market analyst, Data monitor was quoted in an article in the Australian newspaper last week as reporting that 30% of people who bought homes in the past year are suffering mortgage stress. In the same article HFA Asset Management chief investment, Jonathon Pain, was quoted as forecasting national property prices would slump by up to 20% amid the economic downturn.

Rising unemployment remains a real threat to the Australian economy. The positive indications we are currently seeing should be viewed with caution; it is premature at this point to be predicting any widespread recovery. Any activity around your property needs to be viewed in light of the current environment and as a potential opportunity to capitalise on same.