The Puppy Conundrum
This is Holly.
Holly has featured in such previous posts as the dog which was hoisted over a balcony to be smuggled into a pub.
She’s also one of the Swede’s favourite playmates, is a massive sook and has an obsession with a yellow ball that could stump Cesar Milan. She’s also not our dog. We don’t have a dog. She’s Steph and Chris’s dog. We love her anyway.
Holly is also at the heart of The Puppy Conundrum, which is as follows: When accommodating all the financial and logical advice, and weighing up the options, none take into account the inexplicable human desire to adopt a fur-child.
The Puppy Conundrum goes like this:
Theoretically, there is a squeeze on the WA homebuyers markets at three distinct points by first homebuyers, like us.
Point one is where our favourite State Government-imposed stamp-duty tax cuts in, at the $500,000-mark. Anything under half-a-million, and you’re conceivably saving $17,765 that a non-first-homebuyer would have to pile in a wheelbarrow and take over to the State Treasurer’s house, of which statistically 25 per cent will end up funding the WA public health system. Just sayin’.
Point two is just on the near side of the $600,000 mark. Up until that point, first homebuyers are getting a reduced stamp duty rate, which means the suggested $11,115 + $4.75 per $100 above $360,000 will be… less than it otherwise would be. Apparently*.
And point three – and thanks to Josh-the-savvy-next-door-neighbour for bringing this to my attention – is where the squeeze really starts to kick-in, around the $725,000 mark. This is where first homebuyers are still getting free money from the Government, and a slightly lower stamp duty rate. The First Home Buyers Grant is currently $7000, down from ~$20K in 2010.
According to this uni student, Josh, Scott Pape the Barefoot Investor, and various other experts I can’t be bothered referencing, all these First Home Owners Grant and stamp-duty breaks have done for punters like me is compromise the value for money we would be getting in some of the most affordable and sought-after value brackets, right at the point we would want to buy.
Thanks, Wayne. And Troy. That’s just awesome.
Taking the Purple Circle theory into account, which means I want to live near my mates and within 10km of the WA Rowing Club, if I want to get value for money for the property I want to live in for the next few years, I should probably be willing to take the tax hit and buy something like:
Property 1: Just above $500K, some sort of apartment or townhouse and just cough up the reduced stamp-duty rate.
Property 2: Just above $600K, some sort of townhouse with a courtyard and just cough up more stamp-duty.
Property 3: Pitch for just over $750K for some sort of aging 1920s 3 x 1 with a bit of a yard, thus giving up the first home-owners grant and copping an eyeful of stamp-duty. This would conceivably give us room for a fur-child but reduce the chance of trading-up in the next decade or so, and result in a bigger stretch financially.
My brain, and Josh-the-savvy next-door-neighbour, tells me what I should do in this situation is go for Property 1 or Property 2, get the benefit of the first homebuyers grant and maybe a reduced stamp duty tax, pay off as much of it as possible for a couple of years… and in the event the Swede and I make the lifestyle choices that are flooding my Facebook wall on a daily basis (we’d like to welcome Charlotte, Leo, Archer, Evelyn, Charlie, Jack, Indie and Emmy to the world), we then rent out the property for a nice healthy tax break, and rent a bigger house in a location we want to live in, but can’t necessarily afford right now.
And here’s the rub: Anyone with a fur child of any description knows the likelihood of finding a really good rental is severely curtailed when there is a four-legged woofing, pooping, stinky, hairy, licky creature into the equation.
Even one as cool as Holly.
*For the record: I have read and re-read the finance.wa.gov.au site on the subject of concessional stamp duty in the $500K-$600K bracket for first homeowners, and from what I can work out, the concessional stamp-duty on a property worth $599,999 would save you… $6.
It breaks down like this: The rate of duty is apparently $22.51 per $100 above the $500K cut-off for the first homebuyer. On my $599K property that this still applies to, the stamp duty would be $22,509.
For a non-first-homebuyer buying the same property, the finance.wa.gov.au calculator shows me the stamp duty would be $22,515.
So effectively you’re saving the value of a coffee and maybe a newspaper.
I’m not sure if this is right, so if anyone else has info on it, let me know!
Get the fur-kid first, as then you have the added benefit of having to search for a property that will be suitable for them – i.e. away from main roads…
I am by no means a savvy investor – but wouldn’t option 3 give you the most flexibility? Could still rent it out if you wanted, able to add more value with renovations (if you found the right one) and also, not mattering so much re the damage that certain fur-children and lifestyle choices inflict on abodes in the early years. Also – anything that maximises the chance of fur-children and lifestyle choices is the better option in my entirely unbiased view! They are so lovely!
Not sure if rules have changed since I bought my $1.3M house in 2006, but I still got the $7k first home buyers grant as it was my first home in WA. Felt a little off getting it, but hey I paid nearly $70k in stamp duty, so anything I could get back took a little of the sting out of it.
My only piece of advice on this whole matter…for what its worth….is something my scottish investment savvy parents taught me….Work out all your current outgoings and income are (be honest), then work out what you spend on the little luxuries in life (I said LITTLE PBR, I don’t mean crates of Veuve), then see what you have left to pay on your monthly mortgage repayment. THAT is the size of mortgage you get. No more. No less. In about 12 months it doesn’t feel so tight and you have established a good investment to which (as Elle says) you can add to or change as you see fit. No point renovating a $500k house if you are moving in less than 3 years.
From what I can tell here in Oz adding rooms doesn’t seem to add value unlike the UK. Its all about land value and position. So spend that mortgage on the largest piece of land in the best suburb you cna afford.
thats what I did as a single person and now I have a lovely home that has adapted into the family home I now need. I take the point that I am starting at a slightly higher level (and age) than you PBR, but the principle is the same.
OK…now I have to go and clean orange crayon off the walls of said house….
Stop being so full of bloody common sense as always, Su.
Agree with all, except: A CRATE OF VEUVE IS A TOTALLY LEGITIMATE LIFE COST.
I dislike DIY, extensions, cleaning and fixing anything that requires more effort than WD-40, gaffa tape or araldite. So I’ll not be looking at a house I can add rooms to.
A shed long enough to fit a scull in… now that would be good.
Incidentally yes, rules for FHBG have changed and it’s now got a $750K cut-off, precisely because of the community outrage that people were getting it for multi-million dollar properties. This was particularly an issue when the FHBG was around the $20,000 mark.
The legend goes that parents who wanted to upgrade would buy a $2million property in the name of their child. Child gets FHBG. Parents buy property from child without agents fees etc. Walk away with $20K for free.
Whether that’s true or not, I’m not sure. Nothing in that scenario explains what would happen to stamp duty. But that’s the rumour and the reason the cap is now there.
The cap is different in all States, and if you buy a house in the far north of WA, say Karratha, you still get the FHBG to the $1.5million mark.
Advice given to us when buying first time around was to buy your second house first…. if you get that concept. Buying selling costs so do it the fewest possible times.
Of course I didn’t do that and are now looking for our second house…. but maybe we should try buying our third house?