Property investors should not rush NSW purchases ‘purely for the incentive’: Aviate
NSW property investors should not rush to exchange off-the-plan properties ahead of the June 30 end to state stamp duty concessions unless they have completed all the necessary research and due diligence, according to research and investment firm the Aviate Group.
From July 1 investors buying off the plan will only get a $5,000 handout from the government instead of saving up to $22,490 under the zero stamp duty option under the soon-to-end NSW home builders' bonus, creating a conundrum about whether to buy now or wait in the expectation of unit property market having staggered growth over the next few years.
They are likely to be encouraged by some developers to complete their purchases over the next two weeks and take the bigger incentive.
Meriton boss Harry Triguboff says he will be going “hell-for-leather” to sell to investors before July 1 “because they’ll still get something”.
Developers have the added impetus of getting as many investors over the line before July 1, as the first-home buyers’ market is also expected to retreat for three months between July 1 and October 1, until the double $15,000 first-home owners’ grant for a new property purchases kicks in.
But Aviate Group managing director Neil Smoli says property investors should never make a rushed decision to purchase an investment property, no matter how tempting the incentive.
An investment property, he says, is a long-term prospect, “and the right property will always deliver long term growth”.
“If an investor has undertaken all the necessary research and due diligence on an investment property that falls within the concession price bracket, they should by all means proceed with a purchase before the end of the financial year and pocket the stamp duty saving,” Smoli says.
“However, it is never a good idea to make an investment decision based purely on an incentive. If a property does not have the potential to deliver reliable returns and capital growth opportunities over the long term, no government incentive at the time of purchase will change this fact.”
According to Smoli, a rushed decision before July 1 may jeopardise an investor’s security down the track.
“The short-term benefit of an incentive will pass relatively quickly, but the shortcomings of an ill-informed investment property purchase may have a lasting negative impact.
“At the end of the day, an investor must analyse their capacity to meet repayments, considering the complete range of factors such as the likely rental, cost of different insurance requirements and strata fees, to name a few. An investment decision influenced solely by a government incentive is perhaps a sign that the investor is not ready to invest.”
“While growth in property prices may be subdued at present, astute investors still recognise that good properties with the right attributes still have the potential to outperform other investment alternatives,” Smoli says.
“It’s important to recognise that price growth statistics, even when confined to individual suburbs, can be misleading. Each development – indeed each apartment within each development – has variables that determine its capacity to perform as a quality investment over the long term. Some developments merely streets apart can have entirely different capital growth outlooks, depending on the investment criteria applied.”
Aviate is also calling for stamp duty to be abolished, calling it “an unnecessary burden for buyers”.
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