Changes to the First Homeowners Grant (FHOG)
A subtle and unpublicised change to the first homeowners grants (FHOG) is set to have an impact on the demand for newly built homes. I would encourage all first homeowners to visit the website of Victoria’s State Revenue Office to gain clarification on what homes are eligible for the FHOG. The major change is in relation to what constitutes a new home. The State Revenue Office defines a new home as; a newly built home; an existing property being sold for the first time as a residence or, a land and building package, or a home that is substantially renovated, or a home built to replace demolished premises.
The SRO states that the property must not have been previously sold as a place of residence, occupied as a home, or used for the provision of short-term accommodation, such as Airbnb. This means the first sale of a property will ‘not’ be a new home if the person who built it lived in it, or leased it out, or used it for short term accommodation. The major change is that previously a home up to 5 years old could be classed as ‘new’ if it was being sold for the first time, even if it was occupied or leased. This is a major change and I encourage all first home buyers to seek clarification from a legal representative before purchasing.
The promise of a strong start to 2021 off the back of a solid end to 2020 has lived up to expectation. The sight of seeing snaking lines at open homes out the front gate and down the street are becoming a regular site on weekends. The continuing popularity of regional markets has seen this become one of the strongest performing sectors with a rise in values of 6.9%. This is a capital gain 3 times higher than that of the capital cities. According to corelogic the rebound in housing market activity and dwelling values is unsurprising given the rapid & substantial monetary and fiscal response from the Government and policy makers. “Record low interest rates played a key role in supporting housing market activity, along with a spectacular rise in consumer confidence as Covid related restrictions were lifted”. There is no secret that as remote working opportunities became more prevalent and demand for lifestyle properties and lower density housing options became more popular, regional areas of Australia saw housing market conditions surge.
The one part of the market that has underperformed is the higher density housing. This is not due to a lack of supply, it has more to do with the stronger growth conditions for houses over units. The transition and demand for growth for the lower density housing options has driven the growth in values. The unit and apartment market has historically been driven by investors; last year the short-term rental market including Airbnb took a bit hit, and the decrease in demand for international student accommodation, significantly impacted on the demand for units and apartments.
2021 will see investors coming back into the market. Yields have increased, demand has risen and the I feel we will start to see some investors divest, reduce risk, and simplify their financial situation.
The biggest driving factors have been defined perfectly by corelogic, they highlight that housing values have been supported by as strong mix of regulatory, monetary, and fiscal measures, which have induced record-low mortgage rates, the deferment of mortgage repayments for households impacted by covid-19, support for low-income households, as well as grants and concessions for owner occupier purchases. Demand for lifestyle areas is also a trend that may have exacerbated but was not necessarily triggered by Covid-19.
The record low interest will be the tailwind for values this year, and will likely increase demand in the market, therefore driving prices upwards. The first major concern that we had for 2021 was centred around what would happen at the end of mortgage referrals. The economic recovery has been more impactful than predicted, unemployment has been lower than expected; these factors alone have softened the blow. Property investment activity will increase across markets such as Geelong due to the increasing yields, high Government employment and continuing infrastructure development.