FOMO in Today's Housing Market
It’s 2021 and FOMO is at an all-time high here in Sydney’s property market. If the acronym is unfamiliar to you, you’re in a position of envy.
FOMO – or ‘fear of missing out’ is running rampant in the property sector right now, with bank interest at an all-time low and more buyers actively looking for a home than is readily available in the market.
With banks having loosened their lending criteria, more buyers are able to enter the property market with lower than usual deposits and the ability to borrow a larger amount.
Amazingly, some lenders are even offering home loans at fixed rates of less than 2%, which was unheard of back in the day when interest rates of 18% were the norm for homeowners. How did we ever survive?!
But with that solid serve of good luck comes some bad – the Sydney property market is so competitive right now that potential buyers are entering a state of panic and experiencing FOMO for real.
Rather than technicalities driving the pricing boom at the moment, it’s our own human psychology.
Panic-stricken homebuyers are willing to go ‘all in’ at auctions and with negotiations to ensure they don’t miss the property boat. The feeling is that they’ve been looking for agessssssss and it’s best to jump in now, even if they’re overpaying. Perhaps there’ll never be another house to buy…?
Never fear though homebuyers, as there are precautions you can take to ensure your finances aren’t ill affected. And you don’t need to feel you’ll be without a new home to move into if you were planning on both buying and selling too.
There is light at the end of the property-buying tunnel! Breathe. It will all be OK. Let’s look at how our brains got us into this psychological tailspin….
The pandemic made us trigger happy
According to Trading Economics, unemployment in Australia is at a low 5.6% as of March 2021. More people are now saving money on their daily commute by working from home and monthly hours in all job types having increased upon those worked this time last year. We are now working longer these days as our work-home boundaries have become blurred with the “new normal” daily WFH schedule.
Moreso, with international travel restrictions in place Aussies are finding their savings have increased significantly since the pre-pandemic period. This has led to an increased demand on non-renovated first-rate properties from buyers looking to create their dream home with a little DIY elbow grease – particularly in the Sydney region, and buyers looking to pay with cash.
On the 14th of April, Westpac-Melbourne Institute Index of Consumer Sentiment reported that consumer spending had increased by 6.2% since March 2021 – the highest level of growth since August 2010.
While COVID-19 had a serious impact upon the livelihoods of countless Australians, it seems Aussies – with the help of government initiatives such as the JobKeeper program and economic stimulus handouts – showed resilience in fighting the pandemic at an economic level.
Westpac also reported that labourers, construction and tradies enjoyed big sentiment gains (14.6%, 17.3% and 18.5% respectively), suggesting homebuyers were investing in residential construction activity in a big way – a strategy homebuyers are employing to avoid missed opportunities in the housing market.
And it’s good news for homeowners looking to sell their existing homes, too. With house prices achieving a 5.8% increase nationally since January 2021 and auction clearance rates near 80%, owners are rubbing their hands together in delight and breathing a sigh of relief as they bid farewell to their much loved homes.
This is where it gets tricky…
Australia’s housing market may be strong right now due to lower interest rates and eased lending criteria, but it is also highly competitive to get into.
If you are looking to sell because you’re downsizing or just want a change of scenery, experts advise you buy your new home before saying sayonara to your existing one.
While you may want to rest on your laurels by selling your home first and enjoying a prosperous bank balance, buyers and sellers alike need to beware of the risks in the current competitive market. In buying your new home before you sell the old, you’ll have a roof over your head and time to establish yourself in a new suburb or area while you navigate the ins and outs of selling your existing home.
Finally, it is possible to set-up a longer settlement period in a contract for sale, which gives you more time to find your next humble abode or extravagant dwelling in this competitive housing climate.