More mistakes to come...

It looks like the NSW state government is set to repeat the mistakes of the federal government with additional incentives for newly constructed property. We’ve already seen what the federal government’s enhanced first home buyers grant has done to the lower end of the market which has essentially increased the asking and eventual sale prices of properties. In Sydney, I have seen first home buyers paying $20,000, $30,000 and even $40,000 more than they would be if the grants weren't on offer.

Now we have the NSW government extending its $3,000 first home buyer supplement until at least mid 2010 and adding a 50% stamp duty cut up to $600,000 for people who buy newly constructed properties which is sure to further inflate this end of the market and fill developers’ pockets. Don’t get me wrong – I’m all for a reduction in stamp duty but I believe that it should be applied across the board to all property transactions which would prevent one area of the market being artificially inflated and at the same time put NSW ahead of other states by making it attractive to investors across Australia.

If you’re looking to purchase property at the lower end of the market in the coming months then tread cautiously and have at least a 20% deposit, especially if it’s a new property, as you could well end up in negative equity if you don't.