How FOMO Is Driving The Property Market in Sydney’s East
FOMO is driving big price gains in Sydney’s property market.
We look at what it means for buyers and sellers.
Sydney’s surging property prices are the result of many factors and one of the most important ones is the fear of missing out (FOMO). Here in the Eastern Suburbs, we’re seeing FOMO at play every day among buyers with people prepared to pay above the odds to secure a home before prices rise again.
We look at why FOMO is so strong and what it means for buyers and sellers.
The perfect storm for property prices
Property prices are ultimately always driven by the laws of supply and demand and right now there are strong drivers on both sides of the equation.
On the demand side, buyers have access to record low-interest rates and the banks are often prepared to let them borrow more than they were six months ago. There is growing confidence in Australia’s economic recovery and relief that COVID-19 never took hold here like in many parts of the world.
Added to this, a lot of people are also determined to move after the pandemic clarified long-held dreams or created new ones.
On the supply side of the equation, there simply isn’t enough stock to meet the demand. While there may be more property on the market than there was a year ago (stock levels were at their lowest point ever in May 2020), there still aren’t a lot of listings at the moment compared to normal times.
In fact, the total number of properties available in the Sydney market in February 2021 was 25% lower than in February 2019.
Creating competitive tension
With demand outstripping supply by some measure, there is a sense of competition among buyers that we’ve rarely seen. To say the property market is running hot at the moment would be a wild understatement.
For evidence of this, look no further than the auction clearance rate which is currently hovering around 90% in Sydney’s Eastern Suburbs, according to the Wentworth Courier.
We’re often seeing five-to-10 parties place competitive bids at an auction – even for premium properties, such as 16/16 Notts Avenue, Bondi Beach, which sold under the hammer for a record $20.1 million.
This strong competition means that right now we’re almost always encouraging sellers to let their property go to auction rather than accept a pre-auction offer. It’s not uncommon for properties to achieve 20%-to-30% more on auction day than we’d have expected at the start of a campaign.
Off-market sales still strong
The auction market doesn’t even tell the full story. As many as 50% of our listings off-market so that they never make it into official figures and here, FOMO is just as strong – if not stronger still.
Buyers understand they don’t hold many of the cards right now and they’re often keen to secure a property before others have the opportunity to see it. They don’t want the next person to walk through the door to also fall in love and then offer more.
So we’re often seeing buyers willing to pay the full vendor’s asking price just to take something off the market.
These buyers feel that even if they’re paying above market value, it’s better than waiting 12 months. After all, ANZ Bank recently forecast Sydney property prices would jump 17% this year, while Westpac forecast 20% growth over the next couple. For the buyer, paying a small premium now might save a much larger one down the track. It also means they can sell their own home and won’t have to rent while they continue their property search.
A continuing factor
Unless conditions change drastically, we don’t see FOMO leaving the market anytime soon. That could be a great thing if you’re selling to downsize (because the gap between prices will work to your advantage) or if you’re exiting the Sydney property market. But buyers need a plan.
With the market heading upwards, our advice is to buy first and sell second. If you can negotiate a longer settlement period on the home you’re buying, you may still be able to settle both properties simultaneously.
It also pays to act decisively when you’re buying. In this kind of market, buyers who hold out waiting for the perfect home or who try to negotiate a hard deal just because they’re worried about overpaying end up being the ones who really do miss out.
That’s because, if prices continue to rise, they usually end up having to pay far more.
If you’d like advice on buying or selling in today’s market, get in touch.