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Research before buying property

Buying property can be a way to increasing wealth, but how do you know when it’s the right time to buy?

Whether you’re looking for an investment property or a home to live in, keeping up to date with what the experts are saying may give you an edge. regular John McGrath, CEO of McGrath Real Estate Agents stresses that it’s “essential” before buying property to carefully do your homework.

“Take a businesslike approach and invest the money required for legal advice on the contract, a pest and building inspection and, if you’re buying an apartment, a strata report,” he advises. “It’s better to spend a few hundred now than find 10 million termites later. It’s called due diligence and to me it’s a no-brainer.”

He claims that less than 20 per cent of buyers get an expert’s option before buying property.

Watch the news

A date all people looking to buy property, or who own property, should keep in their diaries is the first Tuesday of every month. Barring January, these are the days the Reserve Bank of Australia (RBA) board meets to discuss whether it will raise, lower and stay its hand on the cash rate of interest, that is, monetary policy. They analyse the state of the Australian and global economies, and look at all the data that has been released over the previous month in order to make their decision on rates.

Just before the Global Financial Crisis hit in the second half of 2008, the cash rate of interest was as high as 7.25 per cent. From September 2008 through to April 2009, the RBA dropped the cash rate of interest by 4.25 per cent to three per cent, the lowest it had been in almost half a century. Then in October 2009, Australia became the first developed economy to raise the cash rate of interest. Following the July meeting, the cash rate had been on hold since May at 4.5 per cent.

Of course, predicting cash rate movements is impossible, but keep up with what’s happening in economic news to give you an idea of where the RBA may take interest rates each month. 

Market cycles

McGrath explains that property investors should be aware of market cycles and that they should also track them.

“While there are definitely cycles in the property market, well-located and in-demand property rarely declines in value,” he says.

McGrath advises that buying property is a major transaction, even if it’s in the most affordable market in Australia, so it’s important to “carefully assess your position”.

“Get together with your financial adviser or mentor and work out how much you can afford to spend. Don’t overstretch yourself, but be prepared to break through the fear barrier and take action when an opportunity arises.”

McGrath says that buying a property should be a medium to long-term investment.

“Unless you’re buying it for a five year plus term, I suggest you don’t even buy it,” he says.

Doing the research is crucial when it comes to buying property.

For advice you can trust book a complimentary first appointment with Switzer Financial Services today.

Important information: This content has been prepared without taking account of the objectives, financial situation or needs of any particular individual. It does not constitute formal advice. For this reason, any individual should, before acting, consider the appropriateness of the information, having regard to the individual’s objectives, financial situation and needs and, if necessary, seek appropriate professional advice.

Published on: Monday, August 23, 2010

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