In addition to the extra cash, Johnson says there’s plenty of room for growth with the new homes built in some of the mid-to outer suburbs.
“People are buying property off the plan, which – from a cyclical point of view – makes sense,” he adds.
Johnson especially advocates buying in Sydney, where housing prices have been flat for a number of years.
He cites the example of a chef from Surry Hills who recently bought a new house in Penrith, west of Sydney, for $292,000. He had $17,000 in cash, and borrowed the rest. Johnson says this buyer doesn’t plan to live in the property permanently – just the time required to qualify.
“In fact, there are good times to buy into a housing market, and also that aren’t so good,”
The property would bring in $320 per week in rent and, while that leaves the buyer owing an additional $72 per week in the first year to hold the property, Johnson says the point of such a rental investment is not for immediate gains.
“You are in it for the capital growth,” he explains.
Making such a purchase is not very difficult, either. Johnson says all anyone needs is just $26,000 in annual income to secure a loan of $290,000.
“That’s how easy it is – it’s extraordinary,” he says, adding that Australian banks have plenty of money to lend at the moment, despite a growing negative perception.
“This is a window of opportunity through which you can jump five years ahead in the housing cycle that previously simply didn’t exist”
“You are in it for the capital growth,” he explains.
“That’s how easy it is – it’s extraordinary,” he says, adding that Australian banks have plenty of money
he says. “But now is a good time in Sydney as prices have remained stagnant for seven years. We’re not saying it’s going to go through the roof, but over the short to medium term ahead, it should be favourable.”
Even when taking the incentives from the grant, these new homebuyers don’t need to live in the property themselves for any more than six months, based on national and local requirements. So those who prefer to live in the city can make the purchase in a suburb further out, then go back to renting in town while they reap the capital gains over time.
“You live in it for 26 weeks of the year, then you can move and rent it out,” says Johnson. “It then becomes an ongoing rental property.”
Rule-breakers don’t prosper
Those who go forward with this and use their purchase as an ongoing rental should be aware of the requirement of living in the property. The new owner, if using the government grants for first homebuyers, must live in it for six months within 12 months of the purchase.
Violate that – or any of the other conditions involved – and you risk some heavy fines that could add up to as much as $80,000. In addition to doubling what you were awarded in the grant and boost, you are subject to a flat fee of $11,000.
Johnson says the government has ways of tracking down violators.
“They have field officers who knock on your neighbours’ doors,” he says. “First Home Owner Grants have been around for [ages]. They’ve had time to figure out how to catch you.”
Penalties also apply for making false or misleading statements.
