Removal of FHSA scheme presents opportunities for investors
There are plenty of reasons why investing in property is a natural decision for many Australians. For one thing, it's tangible - you can see it and touch it.
There are plenty of reasons why investing in property is a natural decision for many Australians. For one thing, it's tangible - you can see it and touch it. For a number of individuals, it's the physical aspect of houses that makes makes property investment the preferred way to grow their wealth.
For other investors, building a solid property portfolio is all about responding to the market. By consistently having an eye out for potentially rewarding opportunities that accord with specific property goals, many individuals are able to keep a step ahead of the crowd and invest in property that's right for them.
One recent development that's worth paying attention to is the federal government's recent decision to abolish the First Home Saver Accounts (FHSA) scheme.
What are the changes?
As part of the 2014-15 budget, the federal government has axed the FHSA scheme, which was an incentive offered to those saving for their first home.
According to an official budget paper, the abolition of the scheme will save $134.3 million over a half-decade period. Given that the uptake of the scheme was lower than anticipated, coupled with potential savings, the decision was an apparently straightforward one.
Government co-contributions ceased from the beginning of July this year, with the income and asset test exemption and tax exemption to cease from July 1 2015. Existing accounts under the scheme will become regular accounts from July 1 2015, when the phasing-out process is completed and the scheme is officially abolished.
What does this have to do with property investment?
Those tossing up their property investment options might be wondering how this move affects them.
After all, the abolition of the scheme is going to be felt by would-be first time buyers, right? Technically, that's true. FHSAs weren't brought into being to assist investors in their savings wealth creation goals.
Given that the removal of the incentive may place extra financial pressure on first time buyers, investors may find their opportunities ripe for the picking as more individuals look to rent rather than buy. For those with a comprehensive investment strategy and sufficient financial leverage, investing may become an even more attractive option.
Real Estate Institute of Australia President Peter Bushby commented on the shake up, noting that it will adversely affect those looking to secure their first property.
"With home ownership in Australia declining and first home buyers finding it increasing difficult to enter the housing market, this will not help the situation," Mr Bushby noted in a May statement.
Even so, it appears that Australian investors may be able to make this recent change work in their favour.