New incentives for first-home buyers

Falling interest rates, changes to the first-home owner grant in some states, plus builder incentives are making it easier for people who have previously been locked out of the market to get a foothold on the property ladder.

NSW and Queensland governments have increased incentives for first-home buyers of newly built and off-the-plan homes.

In NSW, eligible first-home owners buying new property for less than $650,000 will receive a $15,000 grant. No stamp duty will be payable for homes up to $550,000, saving up to a further $20,240, with concessions up to $650,000. The benefit winds back to $10,000 on January 1, 2014.

In Queensland there is also a first-home construction grant of $15,000 for new homes costing up to $750,000 and stamp duty concessions: no duty up to $500,000, saving $8750; lesser concessions cut out at $550,000.

"From a first-time buyer's perspective this presents a one-time chance to short cut the deposit gap and get into the Sydney market before it moves into the next upturn," says Brett Johnson, of Quartile Property Network.

To illustrate just how affordable it can now be for a first-time buyer with modest savings to become a property investor, Quartile uses a new two-bedroom apartment priced at $298,000 with the purchase price funded by 95% borrowings and the balance from the FHOG and personal savings.

The first hurdle will be the deposit, says Quartile, as you will not receive the grant until settlement.

This could be overcome with a personal loan, a deposit bond or bank guarantee secured by equity in your parents' home (they have to agree). Also most lenders like to see proof of genuine savings, so it's wise to set up a regular savings plan even if it means slashing the budget for a few months.

To score the grant the property must be your principal place of residence for a minimum of 26 weeks within 12 months of settlement, bringing in no rent. Quartile calculates it will cost the owner $420 a week to live in. After that you can lease it out at an estimated annual rental of $18,200, costing you $104 a week before tax.

On an after tax basis it's estimated that this property will cost a person on a marginal tax rate of 19% about $29 a week. For all other tax brackets it will generate a positive cash flow ranging from $20.40 a week (32.5% tax) to $65.80 a week (45%).

In Victoria stamp duty on first homes valued up to $600,000 is also being cut. This started with a 20% cut on July 1, 2011 and three further 10% cuts are due on January 1, 2013 and 2014 and September 1, 2014.

If cash is tight you can apply to the tax office for a withholding tax variation to put the excess cash in your pocket each payday.

You could do even better if you buy from a developer or builder offering incentives, some up to $10,000. Keep in mind the "incentives" may be built into the price.

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