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With recent changes to the First Home Buyers Grant in both QLD and NSW, investors looking to build should be wary about the potential for inflated land and building contract prices.

The Queensland First Home Owners Grant has increased from $7,000 to $15,000 but only applies to first home buyers purchasing a newly constructed or off-the-plan property (valued up to $750,000) with contracts signed after September 12, 2012. Similarly the NSW Government's First Home Owner Grant (New Homes) Scheme offers first home buyers purchasing or building a brand new home from October 1, 2012 a $15,000 grant (capped at $650,000).

The real winner in all of this is the building and construction industry and a small sub-set of first home buyers. If you are an investor looking to build an investment property then be sure you do your due diligence.  With unsuspecting first home buyers looking to sign up contracts to build, the real value of the $15,000 grant may get absorbed by construction companies artificially inflating contract prices. For investors it could mean that existing homes begin to represent better value compared to the cost of building.