DESPITE MIXED MESSAGES ABOUT THE PROPERTY MARKET AND HIGH INTEREST RATES, FINANCE EXPERT JO CARROLL SAYS IT'S ACTUALLY A REALLY GOOD TIME TO INVEST.

Last month petrol was heading towards $150 per barrel, interest rates were increasing, and news from the US and some of our local banks was that the worst may yet to be felt in the financial markets.

This month, however, petrol is under $120 per barrel, and the media and economists are predicting the Reserve Bank's next move will be to decrease interest rates as early as next month or, almost certainly, by November.

Now is a good time to be getting into the property market. Current comment from market researchers suggests the interest rate cycle is peaking and those who can afford a home should be investing. Demand for accommodation is strong and, although interest rates are high, the property market looks to be moving up again.

The residential vacancy rate in Sydney, for example, is now one percent, and there is a shortage of homes to meet the number of new residents coming in to the Sydney market. The average home price is now $560,000 and the average apartment price is $400,000.

Expect strong growth in inner-city properties as interest rates decline and the demand for accommodation increases. In areas close to CBDs, the property market will increase significantly as few new dwellings have been constructed in these areas over the past few years with developers being affected by high interest rates as well.

One of my clients, Patricia, is a good example of how to take advantage of the property market right now. She is a single professional woman who used her savings and the First Home Owner's Grant to purchase an apartment two years ago for $360,000. The property has increased in value to $440,000, which she has recently rented while she enjoys an extended working holiday overseas.

The apartment enjoys close proximity to transport and shops and Patricia has been able to rent the property for $600 per week, which equates to a yield (the rental income divided by the cost of the property) of seven percent. She can rent the property for up to six years without losing her ‘principal place of residence' status, which will protect further capital gains on the property. It is important to remember, however, that yield alone is not a full measure of a property's performance. Factors such as risk and capital gains should also be considered. For example, an inner-city apartment might have a low yield (due to the high purchase price) but demonstrate strong capital growth.

Property Checklist
For those looking to get into the property market, the following checklist will be a good starting point:

* Consult an experienced home loan professional to ascertain how much you can comfortably borrow, and obtain an approval for loan finance subject to satisfactory valuation.
* Discuss any prospective properties with your finance professional to ensure they meet the lender's guidelines.
* Choose a solicitor to act for you with buying a property. They will need to review the purchase contract before you sign and will carry out any required property searches.
* Now, the property hunt - be prepared to look at a number of areas and properties before buying.
* Go to auctions and look and listen to what is happening.
* Talk to agents and get them to contact you if a suitable property is coming on to the market.
* Be patient but be prepared to move quickly if you see a property you like.
* Do get a building inspection done and if the property is strata titled, check the strata management records for any disputes, ongoing property issues and to ensure there are adequate sinking fund contributions.
* Put the bubbles on ice!

Source: Jo Carroll is a director of Mortgage Direct, a boutique financial services and mortgage management company. For more information visit www.mortgagedirect.com.au

Disclaimer
The information provided here is general in nature. It should not be relied on as the basis for any decision to take action or not take action. Readers should obtain professional advice where appropriate before making any such decision.