Listener Questions – Bought off the plan- my situation, rates & the market is worse, I need the FHOG, but moved in with my partner, help! Is it a good time to subdivide? Suburb analysis and more (Ep.174)

Question 1 – My question is, if I’m buying a property on my own but am living with my partner who has bought a property and received the First Home Buyer Assistance Scheme (transfer duty reduction) already, can I also still qualify for a first home owner grant myself?

Further details, if helpful:
* The mortgage will only be under my name and the property will just be mine.  

• I am financially separate from my partner,  
• but we are living together in his 1-bed apartment he bought Oct ’21 with a NSW FHBAS.  
• I have been paying him what is market value ‘board’ each week and half of the electricity and gas bills, but not contributing to water or strata.  
• I have no stake in his apartment, and he won’t have a stake in mine. * 
• However, the VIC FHOG website says people living on a genuine domestic basis don’t qualify if their partner already has received a FHOG grant, even if interstate. I’m not sure if transfer duty partial exemption from FHBAS counts as FHOG, as he did not get any grants.Background information:
  * Off the plan – I discovered the podcast soon after signing an off-the-plan contract, so I know how you feel about them and wouldn’t buy another one, but I’m locked into my decision and focusing on the many strengths of the property.  
• My main concern now is qualifying for the grant so I can afford it. (It is in a good growth area, next to a train and tram, with the highest land-to-asset ratio I could afford, and I’d be happy to live in it myself).
  * It is a 2-bedroom 1-bath 1-car townhouse, and one of 8 on the block. It’s in Inner North Melbourne.  
• I signed the contract for $620,000 during March 2021 when the RBA said rates wouldn’t rise until 2024, and the HomeBuilder grant in Victoria was $15,000.  
• They are expecting the property to settle early 2023.  
• It is my first property and I would be able to live in it for the first 12 months for the government assistance eligibility which is dependent on it being a PPR.  
• I currently live in Sydney but will move interstate for the necessary time to live in it, noting my partner will not be moving in (though he will be visit and stay every now and then). 
• Without the help of the FHOG and accompanying stamp duty reduction, the loan will be about 5x my income.  
• The repayments at even the current fixed 5-year P+I rates would already be 60% of my net income, and I expect they will go up to at least 65% of my net income by the time it settles. This is even after I will have a 30% deposit, after years of diligent saving.  

Qualifying for the FHOG and accompanying stamp duty reduction (as I understand have the same eligibility criteria) would mean a better chance of a bank giving me a mortgage. I calculate it would reduce the loan amount by $28,984 (reduce the stamp duty to $2151, rather than a 50% stamp duty of $16,135, plus the FHOG of $15,000). 

Answer 

Anyone who is named on the property title must be on the application and also your spouse/ partners details, even if they will not be on the property title. 

You are not entitled to the FHOG if you or your spouse/partner have previously: 

• received a First Home Owner Grant in Australia 
• owned a home or other residential property in Australia, either jointly or separately, before 1 July 2000 
• occupied, for a continuous period of at least six months, a home which either of you owned or part-owned on or after 1 July 2000 in Australia. 

Whether your finances are separate or not, it doesn’t matter, it is still a domestic relationship 

The only thing you can do is move out and not be living with your partner. 

If you move out to ensure you qualify, this will change your financial position so what I would recommend is to do the following: 

• Get a very accurate assessment of your borrowing capacity factoring in the likely rent that you will be paying if you move out so that you know what rent you need to pay to be able to get approved. Ask your Strategic Mortgage Broker to provide you with a copy of the serviceability calculator. Potentially the lender you choose will be based on who will lend you the money, rather than who has the best rates etc.  
• You also should factor in rates increasing another 1% and 1.5% I would say between now and the purchase to cover your bases. 
• By the way, if you get a strategic mortgage broker to do all of this for you, I would suggest that you remain loyal as this is a lot of work for someone who is quite a way off settling on the loan, remembering that mortgage brokers only get paid 30-60 days after the loan settles. In other words they get paid, especially with pre-approvals, often around 6-12 months in arrears from beginning the work. 

If my bank can predict I am in a relationship (based on fund transfers, rent to my partner weekly), do they usually or are they obliged to tell the government? 

Yes, they are obliged to disclose to the ATO and other government organisations. 

Anecdotally I have heard they do, and have known people who have had to repay it. 

Call the SRO and explain the situation openly, run a scenario, I’ve moved out so no longer living in a domestic relationship, can you see any barrier to me being eligible for this offering. 

Do the banks or government do any other forms of investigation? Ie social media? My profile picture is just of me, and my accounts are private, but we have photos tagged together. 

It would be an investigation for someone to go down to that path.  

What they can do is data matching, across ATO info and evidence, bank information and address, bills sent to a home address.  

Trying to fool the government carries serious risk, weighing it up, don’t think it’s worth it.  

We know of people who have had the FHOG and taken it back off them some time down the track.  

They audit a certain percentage of files, like any prudent organisation does.  

Legally, once you’ve lived with someone for 6 months, you then potentially become de facto and then you have some eligibility to receive equity in their property should you split up. Comes down to the legal system. 

One of the disadvantages of buying off the plan, in that time frame life happens and things can change. It could be job losses and increasing interest rates. What you signed up for in 2021 could be different to what you’re getting in 2023.  

A lot of people buy them with the expectation that their financial position will be stronger and this is seen as an advantage. But there are unknowns in what may or may not change during that period. Borrowing capacity is a lot weaker, property values may have fallen, valuation could come in less than the purchase price.  

Question 2 – Hi guys, absolutely love your show. We owned a unit in Thornbury and purchased a entry point 3br house in Reservoir during the pandemic for $15k less than it was sold for 3 years previous. The block is 536m2 and we are looking at subdividing the block and building a 3br townhouse at the back to live in as our family home (2 young daughters). I would like to explore whether the next 12 months would be a good time to commence the planning and building process for the back town house or whether the current climate with building materials and inflation mean it’s a bad time to subdivide and build? We have never done any subdivisions or building before but completed a full internal renovation ourselves on our first property. Love you hear your thoughts! 

A town planner or a qualified professional will tell you whether you can do what you want to do. Depends on the encumbrances and easements.  

If this is a home for the long-term, get it right and pay a professional for the right designs and right feedback.  

Right now is not a great time to get a builder, but that will change.  

This is a great time to get your planning and building approval and land division approval. They last for varying times – 1 to 3 years.  

When the construction industry settles down and supply chain more dependable. But we would not be building right now, but getting ducks in a row and getting the planning in place.  

If your plan is to retain the house and rent it out or sell it, it will need to be prettied up at some stage. If you can coordinate a renovation that the family can comfortably live through, that will play a role when you’re getting a bank valuer out there.  

Thinking about the longer-term.  

1. Are you sure you will be happy living in the back property for 5 to 10 years if that is required from a financial standpoint? How long do you plan to live here and what are your lifestyle goals? 
2. Is there a market for the front property for tenants or if you are selling and have you closely tracked comparable sales and market rents? 
3. How would you enjoy living next to your tenants, especially if you don’t get on with them?  
4. How could tenants be impacted by having their landlords behind them? Might that make it less likely to have long-term tenants.  
5. How much equity and surplus cash flow do you have today, and can you manage things if cost blow out by 10 or 20%, and rates rise another 2%, will you be able to manage? 
6. If you had to or decided to sell one or both properties and needed to move the family sooner than planned, what would you buy next and move into that would align with your family lifestyle? 

Question 3 – I’m curious about the neighbourhood Point Cook in Melbourne. It seems to have plenty of amenity and has been suggested as a future 2nd CBD hub for Melbourne in some articles I came across. I also think it’s great that it’s one of the most multicultural neighbourhoods in Australia. What are your thoughts on it as a neighbourhood to live in. Are there any areas you find better than others? 

If someone loves Point Cook as a home/community, then that’s enough reason to buy a home there.  

But as an investment, it doesn’t have the critical drivers for me to personally recommend it to clients. I have never bought an investment for a client there. Sanctuary Lakes is an exception, but it’s expensive. 

The key issues at present for Point Cook are: 

• Limited PT connections (it’s a stressed line and parking at Williams Landing is super limited, and requires driving to get there). 
• Stressed train line, it’s very busy 
• Relatively poor value when compared to some areas closer to CBD and/or Werribee – eg: Altona Meadows 

• Limited mix of styles of housing – cookie cutter, similar era, lack of scarcity is worrying. 
• Generally smaller block sizes (which is not what cashed up people generally want) 
• Nearness to green fields – lack of scarcity of land in the area 
• Also lack of easy access to amenities and infrastructure from many locations  

If you love it and it’s a home, then do it. If you want to live there, but you haven’t, then we would strongly suggest renting there first to see if you like it.  

The thing that I would say for anyone thinking about Point Cook as an investment is investigating the vacancy rates and the competing stock on the market. You can be in a price war with other landlords trying to find a tenant.