INTEREST RATE HIKE MEANS GOING FOR GROWTH
3 March 2005

The recent interest rate hike and predictions of more to come should act as a trigger to property investors to re-assess their buying strategies, according to Perth buyers' agent Property Wizards.

Managing Director Liz Sterzel said the quarter-of-a-per cent rise in official interest rates to 5.5%, to be passed on by banks, could spell trouble for investors who've been looking for cash flow instead of growth.

"Even a small jump in mortgage repayments of $10 or $20 can mean a property that was putting cash in your pocket each week is now draining money out of it," said Ms Sterzel.

"With analysts saying another rate rise is likely in the near future buying for long term growth is now a much better option than buying for cash flow."

Ms Sterzel said many properties purchased for cash flow had little or no prospects for capital growth in the long term - leaving investors in an unenviable situation.

"It's easy to see that interest rate rises make cash flow properties more risky," she said.

"So, even though buying for growth may require a holding cost, if you can afford it, it really is the way to go.

"While it may cause some pain in the short term, in the long term investors will reap larger benefits."

Ms Sterzel said in this sort of climate it was a smart strategy for investors to look at properties likely to achieve above-average growth.

"The dollar benefit of buying above-average can be enormous. The difference in a median priced property that over a 20-year period performs two percentage points above rather than below the average growth works out to be more than a million dollars," she said.

For more information, please contact
Mr Trevor Dunkley
Director
Property Wizards
trevor@propertywizards.com.au
Tel: (08) 9381 7450