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Opinion

This is why FOMO is driving up property prices

Property Prices

Our property markets have been surging this year with double-digit growth in sight for all our capital cities.

And now that more Australians feel secure about our economy in general, and their jobs in particular, this will only place more impetus under our markets.

I recently heard someone suggest our housing markets are on a Mexican wave.

You know, like what happens at the cricket or football when they used to allow people to go to the MCG.

One person starts and another joins until the whole crowd has their hands in the air and the circular intensity builds and builds.

And this is showing itself as FOMO (fear of missing out) – when homebuyers and investors are scared the market is running away from them.

They feel they must get into the market and this is showing with even secondary properties selling well above their vendor’s expectations.

Normally at the beginning of the property cycle, there is a flight to quality – people remember the type of properties that held their values well during the downturn and avoid secondary properties.

But currently, I’m seeing some home buyers so worried the market is going to pass them by that they are compromising their selection criteria just to get into this market.

Unfortunately, we’ve seen how do you send up when the market eventually slows down, and it’s not always a pretty sight.

This chart explains why there is so much FOMO in the market

property prices

The strength in our housing markets is underpinned by a disconnect between supply and demand. Just look at the charts above.

Corelogic reports national total listings – the stock of properties for sale on the market – over the four weeks to the end of March was 25.5 per cent below the five-year average.

This is because buyer demand is so intense that it is outstripping the ability of sellers to put their properties on the market.

The ratio of sales to new listings is tracking at around 1.1, implying for every new listing added to the market, 1.1 homes are sold.

This in turn keeps the overall inventory levels low, fuelling a sense of FOMO amongst buyers.

Don’t get caught out

I can understand why buyers are concerned with the markets running away so quickly.

Especially first home buyers who are not bringing a “trade-in” to the market.
However, established homebuyers are also usually sellers and will benefit as the value of their existing home increases.
So don’t get caught out and make some of these mistakes I’m seeing buyers make because of FOMO
  1. Compromising on Location – desperate to get into a particular suburb, some buyers are now looking at buying on or too close to main roads or train lines or flood-prone areas, rather than buying in an adjoining suburb they can afford.
  2. Overspending – FOMO is causing some buyers to take financial risks by exceeding their budgets or spending their last cent to get into this market and they have nothing left over for the inevitable expenses that occur when moving home.
  3. Avoiding Due Diligence – in a rush to beat the competition, some buyers are waiving cooling-off periods or not conducting essential building and pest inspections or strata searches.
  4. Ignoring Repairs and Defects – other buyers are biting off more than they can chew and end up purchasing properties with structural issues that are likely to lead to problems they should have avoided, and potential huge repair bills.
  5. Buying off the Plan – despite knowing new and off the plan apartments make poor investments, some buyers are hoping the market continues to rise to cover the premium they paid for buying this type of secondary property.

 

Article Source: propertyupdate.com.au

Brisbane

Travel bans fuel Brisbane’s $30 million auction splurge

Brisbane

Expats and upgraders are splashing major cash on prestige properties across Brisbane with more than $30 million in real estate transacted from 38 auctions on Saturday.

The auction clearance rate was 81 per cent, compared with just 22 per cent this time last year.

Off the back of continued travel bans, property punters say buyers are continuing to pour millions into homes instead of holidays, and stranded Aussies are fuelling the prestige market from afar for fear if they don’t buy soon, they’ll miss out when borders open.

It’s a trend McGrath Estate Agents Cleveland agent Pamela Neilson said had spurred more than a handful of top sales in her area in the past few months, and one that helped her clock the city’s highest recorded auction on Saturday, after an upgrader forked out $4.35 million for a Raby Bay mansion.

 Brisbane

11 Grenoble Place, Raby Bay QLD 4163

“I’m seeing more transactions now between $2 million and $3 million (than I have in a long time). We’re finding this market is just continuing to move and I can’t see it quietening down,” Ms Neilson said.

“The biggest thing is expats at the moment and I have clients from London to Chicago, all wanting to come home but they want to get into the market now.

“I sold two [sight unseen] to expats just last month.”

 Brisbane

Marina views from 11 Grenoble Place, Raby Bay.

Although it was a local buyer who scored the winning bid on the sprawling Ray Bay home at 11 Grenoble Place, Ms Neilson said the incredible result was indicative of the sheer appetite for luxury homes in the Queensland capital, and also in Raby Bay, where high-end sales had surged in the past six months.

“We had 52 groups through the property and five offers prior to the auction. I think the massive land size of 2479 square metres [fuelled the interest] but also the big pontoon, the glorious views and the tennis court,” Ms Neilson said.

“It all needs updating, but it’s just so private, and after a renovation this property could be worth between $7 million and $8 million.

“The Raby bay area is also a lot stronger [than it has been in years]. The area is getting more attention now – people are finally waking up to it and the people trying to move in have probably missed out.”

Ms Neilson said it was only back in August the suburb price record was smashed with the $8.5 million sale of 1990s Aussie pop star Daniel Jones, of Savage Garden.

In the inner city, an old cottage on a tiny parcel of land clocked an incredible $1.55 million under the hammer on Saturday, after six registered bidders battled it out for a minuscule piece of dirt in “Brisbane’s best suburb”.

 Brisbane

210 Arthur Street, Teneriffe QLD 4005

The green and yellow four-bedroom abode, at 210 Arthurs Street, Teneriffe, occupies just a 256-square-metre block but with houses frequently clocking more than $2 million in the chic neighbourhood, selling agent Brett Greensill, of McGrath New Farm, said the home was a little piece of gold.

“It´s a small slice of land but, of course, Teneriffe is the most expensive suburb in Brisbane so to get a little slice of the best suburb [is still fantastic],” Mr Greensill said.

“We had six registered bidders, and there was an excellent crowd. The lady who turned out to be the underbidder started off with a cheeky bid of $600,000 but then the next bid was about $1.1 million.

“The reserve was $1.5 million, so we sold it for just over, and five of the six bidders were local.

“I actually sold this house in 2013 for $815,000 when it was first renovated. Here we are not even 10 years later and it has almost doubled. And, in the past six months (alone) this house gained probably 10 per cent (in value).”

Mr Greensill said the sale was another top result in a booming market where houses in particular were streaking ahead of apartments amid insatiable buyer appetite.

“Brisbane has always had headwinds of varying degrees but since Christmas we’ve had tailwinds (in the housing market).

“We have also had lots of conversations with expats recently.”

Other high-end sales across the city included one of Highgate Hill’s original homesteads at 77 Hampstead Road, which sold for $2.6 million through Luke Croft, of Ray White South Brisbane.

Brisbane

UNDER CONTRACT 77 Hampstead Road Highgate Hill QLD 4101

Built about 1890, the seven-bedroom, five-bathroom home mixed modern chic with heritage touches after an incredible architecturally renovation.

Under the $1 million mark selling agent Bevin Powell, of Ray White Annerley, set an office record for registered bidders after 30 hungry home-hunters battled it out for a four-bedroom brick home at 3 Appleyard Crescent, Coopers Plains, which sold for $816,000.

“This was an amazing auction, the property market is still hot right now but having said that, I’m not sure we’ll have another auction like this one for a while. The winning bidder purchased the property for their parents,” Mr Powell said.

 

Ray White Queensland chief auctioneer Mitch Peereboom said across their Brisbane agencies top results were fetched alongside soaring clearance rates with the high-end sector swelling.

“The marketplace is particularly strong in the $800,000 to $1.5 million range. We know buyers are selling and then have been looking to upgrade and that bracket is performing excellently,” Mr Peereboom said.

 

Article Source: www.domain.com.au

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Opinion

Property Industry Expects Interest Rate Rise

Property industry confidence levels are near record highs but there are rumblings that interest rates could to increase soon.

The ANZ/Property Council industry survey for the March quarter found confidence levels has improved drastically since the pandemic started, led by the residential sector.

The survey canvassed the views of more than 830 respondents—including, owners, developers, agents, managers, consultants and government—across all major industry sectors and regions.

The results revealed respondents also believe there will be an interest rate increase during the next 12 months.

This comes as the Reserve Bank of Australia closely watches the housing market as “cyclically low-interest rates and rising asset prices create a risk of excessive borrowing”.

According to the RBA financial stability review, this could lead to financial instability particularly if lending standards are weakened, which could expose lenders to large losses.

Interest rate changes

Property Industry

^Source: RBA 

For the meantime, the Reserve Bank decided to hold the official cash rate at 0.1 per cent for the fifth time in a row.

Despite expecting an interest rate rise, survey respondents were confident about work expectations, national growth and house prices in the next year.

Property Council of Australia chief executive Ken Morrison said the expectations for house prices were at the highest level in the survey’s 10-year history.

“When the property industry is confident it is exceptional news for the entire national economy because it employs so many people—more than 1.4-million Australians,” Morrison said.

“While the economy still faces significant challenges, the property industry is clearly buoyed by the speed of our turnaround and the strong demand they are seeing, particularly in the residential and industrial sectors.”

ANZ senior economist Felicity Emmett said that for now the combination of record low mortgage interest rates and targeted stimulus was clearly supporting the housing sector.

“Property sentiment has improved again, reflecting stellar economic performance, a large pipeline of work for the coming year and a strong outlook for property prices,” Emmett said

The survey also revealed an easing of concerns about the office sector as more CBD workers return to their work places.

 

Article Source: theurbandeveloper.com

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Brisbane

Property confidence stages remarkable comeback

property

The latest results from the ANZ/Property Council Survey reveal surging confidence levels in Queensland’s property sector, despite the slower than anticipated return of workers to major business precincts.

Property industry sentiment in Queensland bounced from 124 points in the December 2020 quarter, to 144 index points in the March 2021 quarter. The result shows that industry confidence has nearly tripled since the height of the COVID pandemic, when a low of 58 index points was recorded during the March 2020 quarter. A score of 100 is considered neutral.

Property Council Queensland Executive Director, Chris Mountford, said the results were nothing short of phenomenal, however, it was critical that the positivity was not taken for granted.

“The results highlight a remarkable recovery for Queensland’s property sector, which proved resilient throughout the challenges of last year and is now spearheading the State’s economic recovery,” said Mr Mountford.

“The industry has recorded strong results on most metrics of success, from crane counts to property clearance rates, to our own quarterly confidence surveys.

“However, we do need to maintain some degree of caution as these positive results were recorded prior to Brisbane’s most recent lockdown, and while the benefits of Government stimulus programs continue to be felt.

“It is well documented that these lockdowns cost our economy millions and impact on the confidence of employees to return to their places of work.

“Office occupancy within Brisbane CBD has stagnated at circa 63 per cent, showing the road to recovery for our city centres has clearly not been as smooth as in other property sectors.

“With the end of JobKeeper and the ever-present spectre of another lockdown, there is clearly a need to support our CBDs and the many businesses that rely on the daily visitation of workers, students and tourists to make ends meet.

“Over the coming months, the Property Council will be working with its members, Brisbane City Council and the Queensland Government, to implement a plan to support our city centre and ensure it continues to drive Queensland’s economy,” concluded Mr Mountford.

 

Article Source: www.miragenews.com

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