Last week the Queensland Government announced a short term $10,000 grant for new homes, available for all buyers, whether they are first home buyers or investors. Not only is this great news for buyers and investors, offering much-needed financial support for a new home or apartment, but it will also boost our housing construction industry.

For the past few years, construction of new dwellings in Queensland has been down due to stricter lending conditions. This has placed enormous pressure on our housing market, given our booming population and a shortage of homes. The State Government has eventually identified this as having serious consequences, and responded by stimulating the housing construction industry with this grant. The $10,000 grant is for a person or corporation buying or building a new home in Queensland for a value less than $600,000the housing construction industry with this grant. The $10,000 grant is only valid for contracts made between 1 August 2011 and 31 January 2012. For a comprehensive home building project, building work must commence within 26 weeks of the date of the contract and be completed within 18 months of the work starting. For homes and apartments bought off the plan, the building work must be completed by 31 July 2013.

The boost is only available for six months, so people hoping to take advantage of it are well advised to act quickly. It is not likely to be extended or repeated. We are confident that a number of companies in the housing construction industry will become active to satisfy demand from buyers looking for a home or investment property under the grant, and we are looking forward to a number of projects entering the market very shortly.

There is more talk in the media about the appropriateness of the Government’s practice of providing tax-effective investment for property investors, with various banking experts concerned that negative gearing is compounding affordability issues and encouraging a “get-rich-quick” view among Brisbane property market investors.

While we are not necessarily opposed to or supportive of negative gearing, we most certainly encourage our property investment clients to take advantage of available tax benefits that are available to them through property investment. From our point of view, tax incentives mean more cash in the investor’s pocket at the end of the day, which we advise they use to make extra payments toward their mortgage to pay it off quicker.

We most certainly do not encourage the practise of investing in property solely for the purpose of claiming tax deductions, nor with the objective of getting rich quick.  Property is a long-term investment that allows the investor to achieve their goals for the future, and certainly not a method that makes money in the short term. Once an investment property is paid off, the investor can then reap passive income through rent, eventually selling the property when the time is right to, ideally, make a profit. We most certainly do not advocate the publicised practise of buying and developing, or buying and renovating, with the aim of making cash overnight.  The fact that a tax deduction is available is simply an added bonus in a long-term strategy for wealth creation.

The most important factor in property investment, we believe, is that our clients can invest in property to achieve their goals for the future, while continuing to live their preferred lifestyle today. And this is where affordability comes into play. We absolutely advise against property investment if significant changes need to be made to an investor’s lifestyle in order to make or hold the investments. Everyone has a different lifestyle  – some people like to travel frequently, others enjoy dining out regularly and still others find it important to afford private school fees for their children. We always encourage property investors to ask themselves whether an investment will mean they need to alter those aspects of their lifestyle that are important to them. If yes, then it’s not the right time to invest.

To summarise, we are all for tax-effective investment for Brisbane property investors, but there needs to be responsibility taken among the investors themselves. They need to understand that investing in the local property market is a long-term strategy to reach their goals, and that they are still able to do so while living well within their means.

Recently, I discussed what a decrease in building approvals means for the future Brisbane property market – namely a shortage of available property and an increase in values in years to come. However, at the moment, reports are showing that the currently flat property market will not actually pick up until spring this year.

We are currently seeing a number of reports emerge that indicate large quantities of properties on the market, and low auction clearance rates. RP Data, for example, has recently reported that there are still substantially more homes on the Brisbane market than this time last year – 27.9 percent more in fact – with many of those suburbs being in Brisbane’s outer suburbs,  including Forest Lake, Caboolture and North Lakes. This in itself is unsurprising as demand will continue to exist, albeit perhaps at a lower level, for property closer to the CBD.

Low buyer demand is not only a trend in the Brisbane property market, with last weekend’s auction clearance rates in Sydney and Melbourne still flat. According to Australian Property Monitors, over the weekend, Melbourne and Sydney clearance rates both dipped into the high 50s and low 60s. The result suggests buyers are still scarce, fearing interest rate rises.

We are hearing more reports of increased vendor discounting too, offering the perfect environment for both buyers and investors right now.  Once the market picks up in Spring, as predicted, there will be less bargains to come across and fewer properties to choose from. I would suggest buyers and investors take advantage of the current situation – fewer buyers, more properties and less competition – to really find a good buy.

The property market seems to exist in a series of cycles.  One cycle that is not commonly identified is that of capital growth verses the cost of rents.

Basically, this is how it works.  Firstly, capital growth on property in any given location increases to a point that it is far more favourable and cost effective to rent, as the weekly cost of a mortgage outstrips that of the average rent on a similar property.

Over the months that follow, landlords increase the cost of rent so that the gap closes. When this happens, and the cost of owning a home is barely much more than renting, first home buyers become active in the market.  Property investors also take advantage of the favourable conditions.

However, the cycle re-asserts itself once more, and capital growth tends to pick up again, widening the gap between the weekly cost of owning a home and renting one. This is when buyers leave the market, and rental vacancy gets tighter, causing a favourable situation for property investors.

The situation right at this moment is one where property investors and first home buyers are set to reap the benefits, with rents increasing to meet the comparative value of owning a home. Right now, first home buyers can spend only slightly more than their weekly rent to own a home. Property investors entering the market will also score on the comparatively higher rents, helping them to pay off their mortgage on the investment faster.

Therefore, anyone thinking of entering the market for either their first home, their first investment, or to build on their existing portfolio, it would be advisable to do so now, before the market lifts again, and the reality of property ownership moves further away again.