Is FOMO back to lift the real estate market?
More buyers wanting homes than there are homes to buy....it's a sure recipe for FOMO
Residz Team 3 min read
NAB has just released its CoreLogic June Housing Market Update and four letters jump out from the page:
FOMO
Yes, NAB is announcing that “an element of FOMO is creeping back into the market” - with buyers becoming more competitive thanks to a short supply of available housing stock.
FOMO is “Fear of Missing Out” and it peaked during the extraordinary property boom of 2021, when stories abounded of people buying houses unseen, often unsuitable homes to boot.
As Trilogy Funds’ Philip Ryan said in LiveWire, FOMO can be dangerous when it spurs buyers to act impulsively and take risks they would normally avoid.
“Desperate to get a foothold in the Australian property market, they may be tempted to buy homes they would not usually consider such as those on busy roads, near train lines or situated on flood plains.”
FOMO is exactly what home sellers want to see return to the property market. FOMO means home buyers exceed their budgets, become less fussy, and ask fewer questions.
While not in the league of 2021 FOMO, the milder 2023 FOMO signals were noted in NAB’s June Housing Market report.
“Amid increased competition, auction clearance rates have trended higher, holding at 70% or above over the past three weeks. For private treaty sales homes are selling faster and with less vendor discounting.”
You can see how the whiff of FOMO returning is exciting the property commentators. Headlines recently have included:
“Sydney house prices jump 3% as FOMO returns”
“FOMO powers Australia’s housing rebound”
“Will buyer’s FOMO emerge this winter season?”
Round up of the capitals
So let’s get granular on where this “element of FOMO '' might be found. Research from CoreLogic shows the combined capitals are performing better than regionals, where migration isn’t as strong.
Sydney
Sydney is leading the charge in rising values. In fact, Sydney’s 1.8% lift in values over the month was the largest monthly gain since September 2021.
Perhaps there is global FOMO on Sydney properties, given the harbour city was recently named the world’s best city to live in!
Certainly it is the premium property sector in Sydney that is lifting the property market.
NAB says that, after recording a larger drop in values, Sydney’s most expensive quarter of the market stands out with the highest rate of growth, gaining 5.6% over the past three months compared with a 2.6% rise in the more affordable lower quartile values.
Advertised stock levels for the three months ending May were 17% below average, demonstrating a gap between supply and demand levels.
Melbourne
Melbourne dwelling values recorded a third consecutive rise in May, (1.6% above its recent low point in February) and it too has low supply of housing stock.
Brisbane
Brisbane has had three consecutive monthly rises (1.4% through May) and advertised stock is extremely low, tracking 40% below the previous five year average at the end of May.
Adelaide
Adelaide housing values were up 0.9% in May, and up 1.2% since March, and values are not far off their record highs. Relatively affordable homes and tight stock levels are supporting upward pressure on values.
Perth
Perth’s housing market is back to record highs with a 1.3% rise in values through May. Advertised stock levels were 41% below average at the end of May.
Hobart
Hobart values were up half a percent in May, the first month on month rise in a year. Advertised listings are above average, while home sales are trending at below average levels.
Too early to call FOMO?
Is it too early to say we are seeing real FOMO in the market? Inflation is still high, interest rates may rise further, many fixed rate loans will convert to variable interest, and there is “the potential for increased mortgage stress.”
If these factors see more homes put on the market, buyers can again take their time, shop around, negotiate heavily, and compare and contrast properties in their price range.
As the NAB/CoreLogic report says, “The outlook for housing markets largely rests on the trajectory of interest rates…..Even if the rate hiking cycle is over, the timing of a rate cut remains highly uncertain.”
About Residz
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- If you’re considering purchasing or renting a house, make sure you download the PEXA Property Report for that address. We have 12 million addresses in our database, with every report offering information on internet speeds, crime trends, bushfire and flood risks, investability scores and a whole lot more.
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