1 in 2 new investors jump into market ‘without a road map’, report says
A new research showed that it is becoming increasingly common for beginner investors to dive into the market “withou...
Move over, fear of missing out (FOMO); there’s a new acronym in town.
The FOMO sentiment – which partly fueled the frenzied property price increases in the last two years – has been replaced by a far more measured approach to the market called fear of overpaying or FOOP, according to the principal of Michelle May Buyers Agents, Michelle May.
“Now that we are now well into a market that has softened with regular clearance rates in the low 50 per cent, the fear of overpaying is back with a vengeance,” Ms May stated.
The FOOP sentiment, which has been reportedly observed by Sydney agents and auctioneers on the ground as early as May this year, had made buyers become more discerning and less willing to pay exuberant prices for properties as market conditions continually cooled as the year progressed.
Ms May pointed out that the tables have turned in recent months due to several factors.
“An election, world affairs, the opening of borders, and of course the much discussed continued increase in interest rates have changed the landscape of property buying in a very short period of time,” she stated.
Ms May added that the uncertainty of what lies ahead with interest rates is a major factor in the shift of sentiment.
With the Reserve Bank signalling that it plans to dole out several rate hikes in the coming months, she explained that buyers are now taking more time to ensure that they can service their mortgages.
For Ms May, the trend of buyers becoming more careful with their purchasing decision is a welcome change in pace.
“After the heady years we have had behind us, I think it is a good thing that buyers are using their heads rather than their hearts to make property decisions,” Ms May said.
She shared her personal experience as a buyer’s agent when the FOMO sentiment was prevailing.
“I have had to push back on many clients wanting to throw way too much money at properties that were simply not worth it,” she professed.
As a result of FOOP, the local expert reported that agents are getting quite a few inquiries from potential buyers who have found their perfect property but are rendered incapable of moving forward and purchasing the property as they have a real fear of overpaying.
Ms May also highlighted that a lack of recent sales transactions has added insecurity to buyers with regards to value and prices as there are no recent sales to compare the property to, leaving the average buyer with no inkling how much property is really worth and how much they should pay.
“In my opinion, gone are the days of throwing too much money at sometimes questionable properties and with agents upping and lowering price guides left right and centre, it is no wonder buyers are left scratching their heads as to where to find true value when it comes to buying,” she said.
Ms May stated that the “final nail in the coffin” for buyer confidence was the lack of other buyer approval, with whom prospective buyers can affirm they are making the correct move.
“Picture this: you are interested in buying a property, and where last year there would be 20 people registering at auctions, now you may only be competing with one other buyer, if there is even anyone else there at all. The lack of social proof scares some buyers off and leaves them not purchasing at all,” she explained.
Given all the factors above, the local market insider offered some advice to buyers on the hunt for a property in the current market.
“[If] you are in the market to buy now, make sure that your FOOP isn’t causing you to miss out on a great property because of the above factors. I do believe that the current market is definitely working in buyers’ favour, so don’t get too scared off and get to work,” Ms May said.
To ensure the purchase of a sound property, Ms May gave tips on where buyers can start with their due diligence.
“Make sure you know all there is to know about the property, such as the true condition of the building (by commissioning a B&P or Strata report), what is going on in the surrounding area (DA checks are a good place to start), but also what the terms and conditions are in the contract – a great conveyancer can help with this,” she said.
Additionally, she recommended checking recent sales to have a clear understanding of a particular property market buyers are eyeing and to consult with real estate professionals when checking a particular set of data.
Ms May also offered some advice to property owners currently looking to exit the market.
“It is not easy to get out of a property in a hurry and there are considerable costs involved in doing so, so it is always wise to proceed with caution,” she concluded.