What assistance is there for first home buyers?
There is a lot of assistance available to first home buyers from Governments. It is worth spending some time to carefully investigate the rebates and assistance available to you.
First Home Owner Grant
The WA Government’s First Home Owner Grant currently offers $3,000 to first home owners for established homes. The grant is not a loan, and it doesn’t need to be repaid. Home buyers can use their grant to cover the deposit and loan fees in WA, provided they meet the criteria.
Home Buyers Assistance Account
This account provides a grant of up to $2,000 for the incidental expenses of first home buyers when they purchase an established or partially built home through a licensed real estate agent for the purchase price of $400,000 or less. The grant can be used for mortgage registration fees, solicitor and/or conveyancing fees, valuation fees, inspection fees, establishment fees, mortgage insurance premiums and lending institution fees associated with lodging the application.
Stamp duty reductions or exemptions
When a home buyer is eligible for the First Home Owner Grant, a concessional rate of transfer duty may apply. Properties under $430,000 are completely exempt, and a reduced rate applies for properties of up to $530,000 for house and land. If land only is bought, first home owners are totally exempt for land purchased up to $300,000, and a reduced rate applies for land purchased for between $300,000 and $400,000.
KeyStart Home Loan
The KeyStart Home Loan is a low deposit loan for homes under $480,000. Home buyers may be eligible if they have an income under $95,000 a year, or if they are a couple with a combined income under $115,000.
SharedStart Home Loan
With a fixed SharedStart loan, you receive finance from Keystart to purchase a percentage of the property from the Department of Housing. The Department will retain its share, up to 30%, in the property permanently and you can at any time sell your share of the property back to the Department.
This loan is available for current Department of Housing tenants, which is another shared ownership arrangement.
Even if you can access any of these government savings and grants, you must still carefully budget to see if you can afford your new home on your income, while allowing for unexpected expenses.
First home buyers should take advantage of all the opportunities out there to get assistance to buy or build their new homes, and take care to read the fine print to budget carefully for the largest single investment generally made in a lifetime.
What is practical completion?
Practical completion is a term that is misunderstood by many home buyers. Generally it means the point where all building work is complete or all but completed, in accordance with the contract, and the house is reasonably fit for occupation.
A building contract usually defines practical completion being when all works are completed, except for any defects or omissions which do not prevent the home from being used for its intended purpose. In other words, if the unfinished items prevent the home from being “lived in” then practical completion could be deemed not to have occurred.
Usually there will be a practical completion inspection and the building supervisor and client will agree on a list of items that need to be attended to.
There is usually a short gap in time to the handover, commonly 10-14 working days, although two weeks is the standard timeframe to key handover. This may be extended if there are a lot of practical completion items still to be addressed.
The builder has a contractual obligation to repair minor defects, but this may not necessarily happen before handover, although most builders would attempt to do so. Many items are attended to in, or at the end of, the defects liability period (usually a period of four to six months after practical completion for many residential contracts, and sometimes called the maintenance period).
Practical completion is an important stage of the building process but buyers must understand that not every last detail will necessarily be completed at that time. In short, at practical completion, the builder is paid in full, there is a short gap of time, and the owner takes occupancy – then the defects liability period starts. The Building Commission or the courts will act if the builder does not meet the defects liability obligations.
What is home indemnity insurance?
Home indemnity insurance protects you against financial loss for faulty, unsatisfactory or incomplete building work and loss of deposit should the builder die, disappears or becomes insolvent. The insurance policy must cover the residential building work during the construction period and for six years from the date of practical completion.
Currently all residential building work valued over $20,000 must be covered by a policy of home indemnity insurance except when carrying out ‘associated work’ only ie. installing a swimming pool, kitchen cabinetry or landscaping.
It is compulsory for builders to take out a home indemnity insurance policy before accepting any payment or obtaining a building licence from the local government. The home owner must also be given a copy of the insurance certificate.
It is the builders’ responsibility to take out home indemnity insurance; however the insurance cost will be paid for by you, so ensure it is in the contract before signing. Home indemnity insurance needs to be purchased before commencing any re residential building work, asking you to pay a deposit or asking you to pay any other money under a residential building contract.
The builder is also required to give you a copy of the certificate of insurance which summarises the main requirements.
The policy will be in your (owner) name, so should you sell the property within the six year insurance period, the benefit of the policy will pass to the subsequent owner.
If home indemnity insurance cannot be obtained, it is recommended that you find another builder who can to ensure you are covered.
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Should I have a building inspection before buying?
Under the Builders Registration Act, a builder is legally responsible for all faulty and defective work for a period of six years after practical completion. Whether or not you engage a private building inspector will not affect the builder’s obligation for the integrity of your home.
However, many owners do seek assistance from a private consultant if they do not feel qualified or confident in their ability to deal with the builder or his construction supervisor at handover.
If you decide to engage a private inspector, as a matter of courtesy you should advise the builder of your intentions. It is important also that you instruct the inspector appropriately. What you do not require is a list of minor defects e.g. chipped paint, cracked tiles etc which are perfectly obvious for all to see. Builders and clients are often annoyed by voluminous inspection reports which identify imperfections like these which would be rectified in the normal course of events anyway.
Your instructions to an inspector should be to verify the integrity of major building elements. For example, the inspector should climb into the roof space to see if the roof structure is correctly installed. Checking that windows are correctly fitted and sealed is another important item.
Sometimes it is the things that are unseen that are most important. An experienced building inspector can usually assess integrity of the footings and slab by visual examination.
Before engaging a building consultant you should ask for a sample copy of a previous building report. Are the defects described specifically? Comments such as “non-compliant with building code” are vague and unsatisfactory as they give the builder no clue as to what specific section of the code has not been met and what needs to be remedied.
Private inspectors do not require registration in Western Australia, so it is important to check their experience and credentials before engaging them. The quality of some building consultants has been heavily criticised by the Building Disputes Tribunal so it is important to choose wisely. There are a number of precautionary steps that you can take to ensure that you are getting value for money.
- Check with the Builders’ Registration Board to confirm their registration number;
- Contact the Master Builders Association for members who are building inspectors. You can use Master Builders’ free Find a Member service to find an inspector;
- Obtain a list of previous clients and obtain their feedback; and
- Confirm an agreed price before agreeing to an inspection.
What are the benefits of apartment living?
Apartment living is becoming a more popular choice for Western Australians, and what will suit one individual may not suit another. There is a greater variety of product coming onto the market – it is exciting that WA residents now have much more choice than in the past.
As house prices continue to rise, for many first home buyers the dream of buying a four by two house with land is not a realistic option. Apartments tend to be more affordable, and with smaller floor plans can save on cleaning time and gas and electric bills. As many apartments being built in transport oriented developments, you can also cut down on car use
With many located in Perth’s inner suburbs there is great access to shopping, restaurants, entertainment and cultural facilities, and can be found near public transport which can save you costs too.
Due to the location of many inner city apartments, everything from shops, cafes, theatres and parks is usually right on your doorstep.
Apartments tend to have a smaller floor plan then homes, meaning the cleaning and general upkeep are less. All apartments come with a corporate body or strata company to handle the bigger issues and maintenance of the complex such as painting, window and gutter cleaning or gardening which means lower repairs and maintenance bills for you.
A lot of bigger apartment developments can have great additional amenities such as swimming pools, gyms, communal gardens or entertainment rooms. This can be a great way to meet and make friends with the other people living in your complex.
A lot of the newer apartment complexes are quite hard to access, with a security door or tow to get through before you enter the actual building. You are also in close proximity to other residents which offers greater security and comfort of, as well as secured off street car parking.
Do to apartments being smaller, many people own less possessions which means less waste going to landfill. These days, many modern apartments are being built with smart wiring and sustainability in mind.
Are apartments a good investment option?
Apartments are a great investment option if you can afford to. They are typically in high density areas with amenities close by, and are a great option if you want to lock and leave as they are very safe.
It’s important to research the area you want to buy in, and the supply and demand in the area as this will determine the financial success of your investment. There is currently a strong demand for apartment living in inner city Perth, meaning there is a large supply of apartments which you can typically purchase at a good price. However, when there is an oversupply and a lot of apartments available for sale at the one time, it’s easy to flood the market and cause prices to drop.
Land to asset ratio – on average, land value appreciated 10% per annum, while buildings depreciate at 1.5% per annum.
A lot of people believe that buying a house on a large piece of land will increase your value, as it is the land value that appreciates. However, purchasing an apartment in a premium location where the land beneath it is worth a lot, even if the apartment itself is on the smaller size, your land-to-asset ratio is a lot higher as the land you are sitting on will continue to increase in value, driving up your apartment price.
For this reason, it’s wise to look for apartments in a premium location, or one that is in a growing and emerging suburb, and a complex that has fewer buildings.
One of the biggest lures of an investment property is tax depreciation. This is where an investor can write depreciation (the lowering value of the property) off as a tax-deductible expense and end of increasing their cash flow. Depreciation rates depend on a property’s age, with apartments less than 10 year –old having the greatest benefits.
What are the risks with buying off the plan?
Buyers of new apartments have a choice of buying “off the plan” (before construction commences). An off the plan property transaction involves signing a contract with a developer to buy either vacant land, or land to be developed with a building on it, before construction has started. Usually an initial deposit is paid at the time of contract signing, with the balance payable at settlement.
Buying off the plan can provide the opportunity to purchase a property at today’s prices without having to pay the full amount for some time. It is not uncommon for apartments to be re-sold at a lower price than they were originally bought for. One reason for this is the amount of apartments for sale at the one time (supply). The other reason is the land to asset ratio which is explained below.
However there are risks associated with these types of transactions. One of these is the risk that the development may not proceed due to failure by the developer to obtain sub-division approval or construction finance. In addition, most contracts have a cancellation or withdrawal clause for the developer if construction costs rise so high as to make the project unprofitable, or if a certain number of apartments are not pre-sold.
Off the plan contracts need to be read very carefully. There may be clauses which allow for higher building or engineering costs to be passed on to you. Careful attention should be paid to the quality of construction documentation relating to elements such as landscaping, fixtures and fittings, car parking (spaces per unit), room dimensions and materials used. Any provision which allows the developer to unilaterally change these specifications should be carefully considered before contract signing.
Seeing a floor plan is quite different to actually standing in the space and again different once it is full of furniture. Most builders do not allow site access to owners throughout the build, only at the time of handover. Once you have moved in, you may realise the space is not as functional as you first thought, or the rooms are smaller than you realised. You also are not able to take any measurements of your apartment beforehand, meaning items such as curtains, tables, beds or couches cannot be purchased until you have moved in.
However, buying off the plan can present the opportunity for substantial capital gain during construction even before you move in, if markets are moving up.
It can be a great way to get into the property market with little outlay, as buyers can use deposit bonds and bank guarantees to stake their claim. However, should you fail to settle, you stand to lose a fortune. “If the market moves against you, you could be putting down a 20% deposit on the current cost, plus the amount the unit has dropped,” explains Gray.
He suggests engaging the services of an independent valuer to gain a valid, impartial assessment of the property’s current value, as well as sourcing reputable research to predict which way the market will go. You should ensure you have sufficient equity and a plan in case the market blows the wrong way.
Off the plan purchases have been very popular in recent times. Rising property prices have presented buyers with an opportunity for capital gains during the construction of off the plan property investment. The process is not without risks which need to be considered before entering into a contract agreement.