Top Tips for First Home Buyers

To assist First Home Buyers get a step up on the property ladder, there are a few incentives you need to be aware of. To help assist, SA Listings has compiled this go to “Top Tips” for first home buyers looking to purchase in SA.

Top Tips Towards Home Ownership

First Home Super Saver Scheme: You can make contributions to your super account from your before tax pay to save for a house deposit. You are limited to $30,000 per person and capped at $15,000 per year. If you are self employed or your employer does not allow you to do salary sacrifice, you can claim a tax deduction on the after-tax contributions. To find out more, contact your Superannuation Fund direct.

Stamp Duty Savings: There are a couple of ways you can save on shelling out too much stamp duty! The SA Government allows for a stamp duty concession if you purchase an apartment off the plan anywhere in SA. What does “off the plan” mean? This means it is a new building that is yet to be constructed or it is a new building for which construction has commenced and the Commissioner is satisfied the work has not been substantially completed or it is an existing building where the Commissioner is satisfied that the building is to be substantially refurbished and the work has not yet commenced or has not been substantially completed.

The amount of stamp duty concession that applies depends on two things:

  1. What stage the construction is at from the date you enter the contract and 
  2. What the market value of the apartment is that you purchase.

To calculate how much stamp duty you need to pay for an “off-the-plan” apartment, there is a great calculator available on the Revenue SA websiteStamp Duty Calculator

Another way to save on stamp duty is to build. By purchasing a block of land and then building, you only pay stamp duty on the land, saving you considerable money. This additional money can be put towards the build rather than to State Government coffers. For example, if you buy a block of land for $150,000 and build a home for $200,000, you will only pay stamp duty on the land only. At current rates the stamp duty on $150,000 would be $4,830. If you had purchased an established home at $350,000 the stamp duty would be $13,830. This is a saving of $9,000! As a first home buyer this is a considerable amount of savings.

First Home Owners Grant (FHOG): The FHOG is a once of grant paid to eligible first home buyers on the purchase of a new build or construction of a new home. To be eligible for the grant the market value of the property purchased must be $575,000 or less. The amount of the FHOG is $15,000. If you purchase a newly built home, the grant is paid on settlement, if you construct a new build the grant is paid on date of first progress payment.

Pre-construction Grant for “Off-The-Plan” Apartment Purchases: For contracts of “off-the-plan” apartments entered into between 20 June 2017 and 30 September 2017 the State Government is currently offering a $10,000 pre-construction grant.

Savings: Don’t forget good old fashion savings. By saving a few dollars everyday, this can go a long way towards your first home deposit!

At SA Listings we know it is tough for first home buyers to dip their toe onto the property ladder but with sound knowledge and a good understanding of managing your money, the dream can be a reality! We hope this blog assists all those aspiring first home owners and should you have any questions, please send us an email or message us on facebook and we would be happy to help.

Justine Thomson

Please note: Information provided in this blog is current as at date of going to print 

SA Homes Top Ten Wish List

I thought with 2016 recently ending and the New Year ringing in, it is an apt time to review the most common search words buyers use when seeking a property in SA, to assist any would be seller in 2017.

Many will be surprised pool is the number one search word when seeking properties in SA. For all those lucky enough to have a pool, the cost to run, maintenance and amount of times utilised often outweigh the benefits a pool can bring but at sale time this can be a bonus. A pool can be an attractive garden feature and for families a must have in our dry, hot summers. If your kids have flown the coop and you are thinking of ditching the pool, think twice, especially if you have plans to one day sell your home and downsize.

The old fashion granny flat is back in vogue! Statistics prove our kids are staying at home much longer these days and often do not consider leaving the family abode until in their late twenties or early thirties, sigh…. Grandparents are also becoming a part of the extended family, assuming a carers role for children when both parents work. To give extended adult families breathing space it is little wonder the granny flat is a highly sought after commodity. If you are fortunate enough to have a granny flat and are considering taking your home to market, it would be worth spending some coin on reinvigorating life into this space. If used as storage, clear out the boxes, de-clutter and style as you would a second home.

The corner block has always been a sought after find in SA but even more so since the State Government zoning changes. If you fall into the new zoning categories for higher density living, the corner block can be correlated to the golden goose who lays the golden eggs. Make sure you check with your council for current zoning requirements before putting your home on the market. The right zoning can add tens of thousands to your sale price. A good agent should be aware of the possibilities in your area when it comes to potential development or subdivision and should factor this into the market price.

Top Ten Property Search Words in SA

  1. Pool
  2. Granny Flat
  3. Corner
  4. Views
  5. Beach
  6. Shed
  7. Esplanade
  8. Cottage
  9. Character
  10. Investment

To maximise the return on your property consider the top ten search words and ensure your Agent takes full advantage of known characteristics your home has in meeting buyer needs.

If considering selling your home in 2017, we would love to hear from you and assist you in making the most of your properties attributes: salistings.com.au

Justine Thomson

Build or Buy Established?

A common question often considered by first home buyers, families and people down sizing is whether to build a home or buy an established property. Being a Real Estate Agent I have been asked this question many times. In fact, our Plasterer Nev, who is working on our current renovation asked me this question only the other day. The answer to this question is not like a maths question, there is no right or wrong, it all comes down to your individual circumstances. To assist here are some important tips to know.

Stamp Duty

This is a State Government tax paid on the purchase price of a property. The Government call this a duty but it really is another tax! It is a progressive tax. What this means, is the higher the purchase price the higher the stamp duty. If you were to purchase a residential home for $350,000 the stamp duty would be $13,830, this is 3.95% of the purchase price and if the residential home is purchased at $600,000 stamp duty would be $26,830, this is 4.47% of the purchase price. The higher the purchase price the higher the stamp duty. Now here is the trick, if you buy land only and then build, you only pay stamp duty on the land price. This can save you considerable duty and the additional funds saved can add value to the build! For example, if you are a first home buyer and you decide to build and let’s say the land is priced at $150,000 and the build at $200,000, you only pay duty on the land, totalling $4,830. This is a huge saving of $9,000 from purchasing an established residential home at $350,000.

At present, stamp duty exemptions for apartments purchased off plan are also available. You can find out more about these exemptions by referring to the Revenue SA website.

To calculate stamp duty payable on a property, there is a Stamp Duty Calculator available on the SA Listings website, refer http://www.salistings.com.au/stamp-duty-calculator

Let’s hope one day, the State Government will reconsider the imposition of stamp duty for all home buyers and implement a fairer system for all. Some would call me an optimist!

Government Grants in SA

There really is little on offer by the Government in regard to grant money to assist with purchasing a home unless you are a first home buyer.

First Home Buyers Grant: If you are an eligible first home buyer in SA and purchase a new home, a new home is defined as a home that has not been occupied or sold as a place of residence and the market value of the property is $575,000 or less, you may be eligible for the $15,000 First Home Buyers Grant. If you combine the First Home Buyers Grant with the potential stamp duty saving on a new build, this can be a considerable amount of money saved.

To find out more about available grant money and eligibility requirements, refer to the Revenue SA website.

Your Needs & Budget

An important consideration when purchasing any property is your budget. If you are considering building, ensure you have a fixed price contract, often builders will include provisional amounts for unknowns such as footings. Ensure you factor into your build budget a contingency amount for these provisional sum items and for any changes you may make along the way. Don’t forget additional items outside the build contract such as soft furnishings and landscaping.

When you buy an established property you know the purchase price and it is easier to manage the budget, however, maintenance and renovation items should be factored in.

When you build, you can choose exactly what meets your needs. Size of rooms, design of the home, type of build materials and overall style. When you purchase an established home, you often have to sacrifice some of your needs as it can be difficult to find a home that exactly meets your style, taste and size requirements. A rule of thumb is, if you have been searching for your dream home for longer than 12 months then it probably doesn’t exist on planet earth and you will need to create and build it.

Alternatively, you could buy an established home that doesn’t exactly meet your needs but with some renovation will. Buyer beware though, renovations can be painful to live through and can also blow the budget! We have been renovating a heritage villa for four years now and the budget versus actuals correlates with the changes to Elvis’s appearance over the years – from healthy and fit to sad and big.

The Unknown

When you build, there can often be fear of the unknown. How you imagined the home to be is not the reality of the build. To overcome this, it is important you have a great rapport with your builder who can visualise the working drawings.

Buying an established property, you know exactly what you are getting, especially if you splash the cash for a thorough build inspection. I highly recommend Chris Short in Adelaide for anyone requiring a build inspection.

Build or Buy?

If you consider each item in this article it should assist in answering the question for you. Having lived through three builds and three renovations, hands down for me, the build was much easier and more cost effective for us. On the flip side, the satisfaction achieved from renovating in conjunction with the ability to purchase a home with history cannot be underestimated.

Justine Thomson

 

 

 

Mum and Dad Home Loans

Christmas is fast approaching and we all appreciate the little gifts we receive from loved ones but is helping your adult child buy their first home a help or a hindrance?

It is not difficult to understand why adult children are turning to their parents for a step up on the property ladder. In a Parliamentary report titled, “Out of reach? The Australian housing affordability challenge” (8th May 2015), there are some shocking statistics. Up until 2001 annual income grew in line with housing prices, since 2001 the growth in property values has dramatically outstripped growth in household incomes. NATSEM [National Centre for Social and Economic Modelling] data shows that house prices increased by 147 per cent compared to income growth of just 57 per cent between 2001 and 2011. In dollar terms, the median price of a house more than doubled from $169,000 to $417,500 while after tax income increased from just $36,000 to $57,000. Whereas in 2001 an average home price in Australia was 4.7 times the average income, by 2011 this had increased to 7.3 times.

This graph below (source: Master Builders Association), highlights the housing affordability issue in Australia.

picture1-copy

The Housing Affordability Ratio is measured by dividing the median house price by the median income of the house purchaser. A ratio of 5 or less, below the green line, is considered affordable, a ratio of 7 or more, above the purple line is severely unaffordable. This horrific statistic can provide some insight as to why parents are assisting adult children fund their first home. Question is, should we be?

This can be a very difficult question to answer. Prior to gifting money to your adult child, funding their deposit or going guarantor on a loan, make sure you consider the following:

  • Will you have enough money to fund your own retirement if you assist your children?
  • If you go guarantor on the loan and your adult child’s circumstances change and they can no longer fund the mortgage repayments. Will you be able to meet these repayments? If not, there could be serious consequences for your own financial stability.
  • Should your adult child be in a relationship and live with their partner and things turn sour resulting in a relationship break up, watch the can of worms open up! If you paid the deposit or funded the home, the law may see it as a gift and the ex-partner walks away with half or more! Alternatively, if you are guarantor on the loan: What are the financial implications with the split?
  • Have you taught your adult child how to manage their finances on their own? If you are generous and assist them with their first home purchase they may not appreciate the value of a dollar. The best lesson in life when it comes to financial savings is delayed gratification. What you need to give up now to get something in the future can be a great value to instil in your child. If it is out of reach, then maybe it should never have been!
  • If the bank will not loan the funds to your adult child, the risk must be high. If you guarantor the loan you take on this risk.
  • Is your adult child willing to make sacrifices to invest in property? When I talk of sacrifices, I refer to their willingness to purchase in an affordable area that may be many kilometres from the city and to also manage their spending carefully.

This is not an exhaustive list but it does provide food for thought. If you do decide to assist your adult child it would be a good idea to ensure agreements are in writing and clearly understood. Life can often change course when we least expect it.

I have an adult child, still studying at University and living at home and understand the difficulty in wanting to provide for their financial future. Maybe times are changing and the reality of home ownership in Australia is now only a dream. Long term leases could pave the way for our kids into the future, so maybe you should be the one investing in another property!

Justine Thomson

 

The Great SA Property Rip Off

The headline may have caught your attention but this will catch your attention even more. I have calculated stamp duty payable across all states based on the July 2016 Adelaide median residential house price of $445,000.00 and the results will surprise:

QLD:     $0

WA:      $2,878

VIC:      $9,335shutterstock_84524770

ACT:     $11,260

NSW:   $15,515

TAS:     $15,910

SA:       $18,580

NT:       $19,688

The calculations assume the property is an established residential Torrens Title home purchased to live in.

Effectively, South Aussies are paying 4.18% in additional tax on a $445,000 residential home to live in, compared to their QLD counterparts who pay zip, zilch, nothing! And we pity our poor NT cousins who are ahead of us at 4.42%. I call it a tax because it is. The State Government aptly see it as our “fellow duty” to help out the State Administration to fund the coffers. The differential of the transfer fee between SA and the States is also worth noting but I don’t want to depress you even further.

Stamp duty in SA is a barrier for first home buyers trying to claw the end of their fingernail on the property ladder. Some available options for residential stamp duty relief is to purchase an off the plan apartment or buy land and build.

Over recent years we have had some reforms in residential stamp duty relief with off the plan apartments but is this the right way to go? A policy providing stamp duty relief for off the plan apartments will inevitably increase the supply of apartments under construction but will there be enough demand from South Aussies to live in apartments? We still have a good supply of land available North, South and in the Adelaide hills to support our current population growth. We are not yet Hong Kong with limited land supply and large capital values. The concern with current policy is apartment supply will outstrip demand and basic economics suggests this will have a negative impact on apartment prices.

It would only seem fair to spread the love of stamp duty relief across all types of residential purchases. Alternatively, we can all move to QLD!

Justine Thomson