Many real estate experts are cautioning Australians that are eager to take advantage of the First Home Owner Grant offered by the Federal Government to proceed with caution due to falling prices in most areas of Australia. The median house prices throughout most of Australia has been dropping at a steady rate since 2004 and show no signs of beginning to climb back up again.
Finding the Balance
Some experts have stated that even though the Government is offering generous handouts to first time home buyers it can be a risky move to purchase a home at this time. Obviously the First Time Home Owner Grant is intended to boost the economy and help new home buyers get into a home. The concern is that new home buyers will bite off more than they can chew by borrowing hundreds of thousands of dollars in an economy that is not doing so great due to unemployment rates and declining house prices. Over the last five years the average house price has dropped 1.8% and the median price for a home has fallen to $270,000. In some areas such as Campbelltown and Leumeah prices have dropped as much as 2.4% this year alone.
Benefits Of Down Markets
While some may argue that the best time to buy is when the market is down due to the lower prices of homes, many experts are concerned that home buyers may find themselves with a negative equity if the prices continue to drop after they have purchased their home (which is why the low-risk of property options is favorable consideration). That would mean that Australians would end up owing more money for their home than what it is worth. On the flip side, if a person is looking at buying a home as a long term investment and plans on staying put for a good many years then investing in property now and getting in while the prices are lower may be a good idea, especially with the additional funds being offered with the First Home Owner Grant.
Sean Rasmussen
Property Options Australia
Property Options Blog © 2006 – 2008
Hi Sean,
I think if you used the First Homeowner Grant in addition to any downpayment you already had; you’re already onto a winner. Then if you bought while the prices were down with the intention of keeping the property for a long time; you’re also onto a winner.
Because over time, the prices of property will go up. You just have to hold onto the home until the market comes back up.