Fear’s impact in a property boom
Property prices are climbing strongly - making it party time for owners, investors and sellers - but there's also a fear that needs to be fought.
It's the fear of missing out, or FOMO, and it can cause silly decisions that come back to bite buyers down the track.
A year ago fear was palpable as the pandemic hit hard and caused lockdowns across Australia. Some investors panicked and sold properties at low prices to ensure they didn't lose everything in the great COVID recession.
They must be kicking themselves now, with prices in every capital city now higher than they were a year ago. And savvy buyers who bought property cheaply have enjoyed good gains.
However, buying today is not as opportunistic as it was in April 2020 because house prices are already surging. They grew at their fastest rate in three decades during March.
Buyers are now worried about missing out at today's prices and being unable to afford real estate in the future.
FOMO strikes investors in all types of assets, from shares to cryptocurrencies, and has been the biggest reason for booms and busts over decades.
The best way to deal with this fear is to confront it head-on and treat real estate with a businesslike brain.
Buyers agent Michelle May says FOMO is a homebuyer's biggest enemy and can lead to years of regret.
She is seeing frenzied buying activity and her number one piece of advice is "don't panic". Many people are ignoring their usual self-imposed rules and bidding for real estate they normally would ignore.
"Don't lose sight of what matters to you in a home," May says.
"Make sure you take a breath and see the property at least twice before making a decision. Usually on the second inspection the rose-coloured glasses come off and you can view the property more objectively."
Real estate values move in cycles, and while we're currently in a strong upswing it won't last forever.
When it became clear the pandemic wouldn't produce a property price plunge, Australians began buying. Locked within our own borders and enjoying bank accounts stuffed with stimulus cash, there are fewer spending options so real estate is shining.
The impact of JobKeeper ending this month is yet to be fully felt, so don't be afraid to wait until you have a clearer picture. Patience gives you power.
May says the housing market will go from hot to warm as more people get encouraged by crazy sales results and decide to put their houses on the market. This will lead to more supply, which traditionally puts the brakes on price rises.
"Buy within your means - it's never been more important to get your finances and due diligence ticked off before committing," May says.
Investors are better placed to avoid FOMO because they usually treat property as a business asset rather than a lifestyle decision. Does it stack up financially or are crazy forces pushing prices too high too fast?
If buyers can look at the property market with that businesslike brain, rash decisions are less likely.
Originally published as Fear's impact in a property boom