dave

fear of missing out disease

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http://smh.domain.co...0704-2pd3z.html

As Sydney's property market "sizzles" home buyers are catching "fear-of-missing-out disease", a leading buyer's agent says.

Property values shot up 2.7 per cent in June, according to RP Data, and Australian Property Monitors auction clearance rates averaged 75 per cent over the month. Nine out of 10 of the reported auctions in the inner west sold under the hammer last weekend.

It's a far cry from last June when the Sydney average was 54.5 per cent.

According to Rich Harvey, of Propertybuyer, the market for property under $1 million is "sizzling".

Advertisement“Buyers are frantically chasing properties with little regard of comparative values,” Mr Harvey said.

Although the improving market is encouraging many sellers to put their homes on the market – APM recorded the second-highest number of June auction listings last month and the highest number of June auction sales – agents are still complaining of a stock shortage in many suburbs.

Belle Property Surry Hills principal Charles Touma said listings were down by more than half in his area and he agreed with Mr Harvey's assessment.

"There's a lot of panic buying going on," Mr Touma said. "There's a real fear that the market is going to continue rising and they are going to miss out.

"And you have to be aggressive because there aren't a lot of properties to fall back on: the low stock and low interest rates are all contributing to this."

Making matters worse was the high number of investors.

"A few years ago there were very few but now they're back and it's fair comment – people are fearful," Mr Touma said. "Investors are pushing up the prices and they're obviously pushing up the owner occupiers."

He said that among his agency's best sales in June was a two-bedroom warehouse conversion apartment at 208/188 Chalmers Street, Surry Hills, which had more than 200 inspections in three weeks and sold prior to auction for $885,000. Off the back of that, Belle sold 510/188 Chalmers Street, Surry Hills for $835,000.

Mr Harvey said the message for buyers is simple. "It is more crucial than ever to conduct a thorough analysis of property value to avoid the mistake of overpaying," he said.

“Many buyers are catching the FOMO disease - the fear of missing out is clearly driving some buyers to become emotional with the transaction."

Examples he gave of buyers paying too much included:

  • A two-bedroom, two-bathroom apartment with a car spot in Stanmore, which his agency appraised at $725,000; the vendor expectation was $750,000 and the property sold for $795,000.

  • A two-bedroom apartment with a car spot in Mosman that had six contracts and four offers after the first open. Two of them were above the asking price and the property sold on the Monday after the first open.

  • A two-bedroom apartment with a car spot in Wollstonecraft, with a price guide of more than $650,000. It had nine registered bidders and the property sold for $784,000 at auction.

  • A two-bedroom apartment with a car spot in Crows Nest that had an auction bidding guide from $620,000. The agent expected $680,000 but the property sold for $740,000.

  • A two-bedroom apartment with a car spot in Queenscliff that had a $650,000-plus price guide. The agent indicated $700,000 should secure the property but then changed this figure to $750,000 after the first open where 52 groups inspected the property and 14 contracts were issued. It goes to auction this Saturday.

Mr Harvey said that last year there were typically three or four bidders at auctions in the key Sydney markets. "This year we are seeing around seven to 10 bidders on high quality properties.”

He reports a 20 per cent jump in buyer's agent work in the past six months as a result of increased confidence in the property market.

“We are getting multiple requests from frustrated buyers seeking a leg up with the research and negotiation tactics," Mr Harvey said.

"They want to find properties before they hit the general market and pay fair market value.”

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As Sydney's property market "sizzles" home buyers are catching "fear-of-missing-out disease", a leading buyer's agent says.

Ooh! Sounds painful.

What are the symptoms?

You break out in a cold sweat everytime someone mentions houses.

You have large sores on the ends of your fingers, from handling your savings.

Your eye-balls pop out of your head when you see another "SOLD" sign.

You have an uncanny feeling to shake your partner and say; "I told you we should have offered more - see its sold."

Uncontrollable crying as you watch the removalist truck pull up at the house you missed out on.

A truly horrible and insidious disease that should be avoided by buying now - right now! No not tomorrow; today!

Hurry up - life is running out you know. You only have a finite life, and therefore a finite time to buy.

Isn't that what they want us to believe?:huh:

And what is the opposite of faith - 'fear'.

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"They want to find properties before they hit the general market and pay fair market value.”

I always wondered if the above statement is true. I'm guessing it is referring to Buyers Agents. Lot of the BA's sell by saying they can find properties before it even hits the market. Don't know how effective that statement is in a hot market.

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The only other time I've heard the term FOMO was in relation to the behaviour of a baby/toddler.

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You break out in a cold sweat everytime someone mentions houses.

Your eye-balls pop out of your head when you see another "SOLD" sign.

You have an uncanny feeling to shake your partner and say; "I told you we should have offered more - see its sold."

I cant believe Im saying this but I've the above symptoms :(

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I cant believe Im saying this but I've the above symptoms :(/>

I'm sorry hpk.

I wrote it tongue-in-cheek.

I'm sorry if I offended you, or anyone else out there, that actually feels this way.

Teach me to think before posting - once again.

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I cant believe Im saying this but I've the above symptoms sad.gif

you're not alone hpk, have been looking at the market the past few months(Sydney) with the wife and anything half decent is getting crazy offers,

my job is now looking dodgy thanks to the continuing outsourcing of IT jobs - this has 'cured' the symptoms in us

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you're not alone hpk, have been looking at the market the past few months(Sydney) with the wife and anything half decent is getting crazy offers,

+2

Anything half decent is getting bought before I can even have a look at it. I'm looking at a place tomorrow and already the agent is putting the hard word on me that there are two other interested parties having their second / third look this weekend. Great, potential bidding war potentially against people willing to pay BS prices. I mean, the bank is willing to lend me a crazy amount that would see me paying my whole salary plus a part of my wife's.

I'm sorry, anyone that says that the market is "dead" just isn't trying to buy.

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+2

Anything half decent is getting bought before I can even have a look at it. I'm looking at a place tomorrow and already the agent is putting the hard word on me that there are two other interested parties having their second / third look this weekend. Great, potential bidding war potentially against people willing to pay BS prices. I mean, the bank is willing to lend me a crazy amount that would see me paying my whole salary plus a part of my wife's.

I'm sorry, anyone that says that the market is "dead" just isn't trying to buy.

It might be just me but when I transitioned from "wanting to buy" to "having bought" I then spent the next year wondering what I had missed in my inspections and expecting the whole thing to explode in flames or fall down the hill or something.

So the cure to FOMO might be worse than the disease. If you are afraid of missing out you are probably going to be f*cking petrified when you realise how much of a burden you have taken on.

And I bought for 3x salary, I can only imagine it is so mind blitheringly disturbing for people that buy at 10x that they have to tell everyone how awesomely well everything is working out as some kind of psychological defence mechanism.

(all things being equal I am glad I bought but I would be stunningly rich now if I hadn't - all the things that people say are great about owning a house cost more cash, renting I was saving about triple what I do now)

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On Wednesday I had 6 inspections lined up

On Friday evening I have 2 left, one that has the two other couples having their second / third look, the other is "meh, it'll make for a good comparison with the other 5".

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I mean, the bank is willing to lend me a crazy amount that would see me paying my whole salary plus a part of my wife's.

I'm sorry, anyone that says that the market is "dead" just isn't trying to buy.

G'luck Easy Tiger. I sincerely hope you find something! A single income is no longer enough to buy some homes unless you are earning 120k+

I'm buying now because of family circumstances but renting is still an option for us.

Edited by hpk

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saving by renting is kind of like the smokers myth, that if you add all the costs for 20 years of smoking you could have bought a ferrari, . i always ask the zealot, " wheres your ferrari ?"

same with renting, the money doesnt appear in your bank as savings, you spend it. maybe on over seas holidays and not so nice new cars, but i rarely see anyone renting with wads of cash.

Edited by savagegoose

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saving by renting is kind of like the smokers myth, that if you add all the costs for 20 years of smoking you could have bought a ferrari, . i always ask the zealot, " wheres your ferrari ?"

same with renting, the money doesnt appear in your bank as savings, you spend it. maybe on over seas holidays and not so nice new cars, but i rarely see anyone renting with wads of cash.

It depends SG. We save about 5k per month. The interest that would be payable on a mortgage is more than we pay in rent. While property values rise at inflation or less then we are no worse off renting. The interest that accrues on the savings helps offset the rent. Probably equivalent to an offset account on a mortgage I suppose. It takes some discipline but the less we need to borrow then the less interest over the life of the mortgage we pay. Been O/S twice in the last twelve months the money for which we save in a separate account. You have to live though. Not being a debt slave and having to tow the line at work also means I can take risks and improve my salary. I still smoke as well which I need to stop. :smoke:

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you're not alone hpk, have been looking at the market the past few months(Sydney) with the wife and anything half decent is getting crazy offers,

my job is now looking dodgy thanks to the continuing outsourcing of IT jobs - this has 'cured' the symptoms in us

Speaking of curing symptoms - what helped my sig. other was when we instituted a policy of "living like we're paying a mortgage".

This means that every pay a goodly chunk of money (roughly equivalent to paying a mortgage {on a place where we would like to live} over 10 years, if we pay today's prices) gets transferred into a savings account and we live only on what is left. This has turned the household budget from a "buy basically whatever you want, any time you want and save the balance" affair to one where you have to have an eye on cash flow and plan larger purchases ahead of time (i.e. reasonably tight).

So now I can ask the sig. other "are you prepared to be locked into living like this for ten years?"... and the answer is no, because doing this has given a very hands-on indication of the sort of reduction in living standards we would have to face. And it's just not worth it.

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saving by renting is kind of like the smokers myth, that if you add all the costs for 20 years of smoking you could have bought a ferrari, . i always ask the zealot, " wheres your ferrari ?"

same with renting, the money doesnt appear in your bank as savings, you spend it. maybe on over seas holidays and not so nice new cars, but i rarely see anyone renting with wads of cash.

I had 15 x 90 day term deposits with one maturing every 6 days and just put my "mortgage" payments into that. It worked and I had a good deposit when I finally found a place I wanted to buy. Like Peachy it was good because by the time I had a mortgage I was already used to the financial position.

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thats a great plan, the term deposit, and putting in what mortgage payment would be,. when im financial ill try that for a year. lol

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less we need to borrow then the less interest over the life of the mortgage we pay.

I can see this working out for someone wanting to buy in few years and can put forward more than 50% in deposit. It does not benefit someone looking to buy in the next one or 2 years, unless of course we have a recession smile.gif

Edited by hpk

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I can see this working out for someone wanting to buy in few years and can put forward more than 50% in deposit. It does not benefit someone looking to buy in the next one or 2 years, unless of course we have a recession smile.gif

Sure it helps if you are in a position to save more than average. If you can't save at least 1K a month on top of rent then I would question whether you were in a position to buy. I wouldn't buy without a significant buffer to account rates at least 300 points higher than now. We're in that position happily. However, it still depends on a couple of other factors.

If you believed houses were too expensive and would fall (even if just in real terms as they have in the past few years) then why wouldn't you to hold off? You mentioned recession and I agree this is a risk. Interest is front loaded so negative equity is a risk for the first few years for new entrants. People with established mortgages and equity don't need to worry so much as they can sell and walk away. Job security should be of great concern to new entrants given the amount of debt that FHB are being asked to acquire.

I'm in Canberra and so there are some special circumstances to be fair. I'm a permanent public servant that works in IT and so job security is an issue regardless of who wins the election. The picture is further complicated by the propensity of conservative governments to outsource IT to the private sector as the Queensland government are doing.

These are risks particular to Canberra residents of course and I personally will wait to see how the wind blows for a while longer. Canberra might be unique in the country as being the most at risk of falling prices due to the drive to cut public expenditure. 5400 less public servants in an economy driven by little else will hurt. If we both survive the cull then property could be significantly cheaper than now.

If you believe that prices will rise dramatically in the next few years and you will boost equity through capital gains then you should probably buy. With interest rates as low as they are it should be going crazy in theory. I still would like to hear your theory why the property prices will rise dramatically though? Where is the money coming from?

Wage inflation?

Easing credit restrictions?

Overseas buyers?

Convince me and I'll pull the trigger myself. :)

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On Wednesday I had 6 inspections lined up

On Friday evening I have 2 left, one that has the two other couples having their second / third look, the other is "meh, it'll make for a good comparison with the other 5".

Inspected those two properties today.

One had four offers on it placed today (two more were expected tomorrow) with the "winning" offer $5k over asking and the second highest bidder prepared to pay $10k but played it "smart" with a $2.5k over asking offer. Second highest bidder was an investor, winning bidder was a FTB.

The other house the seller had an air of desperation about him.

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the second highest bidder prepared to pay $10k but played it "smart" with a $2.5k over asking offer. Second highest bidder was an investor, winning bidder was a FTB.

I don't get it? Isnt it a bad idea to expose your max offer? Why would the buyer say the max 10k over and only offer 2.5k over? Im guessing he suspects the FTB finance may not go through? What is stopping the agent from making up offers and forcing the 2nd highest to bid more?

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Sure it helps if you are in a position to save more than average. If you can't save at least 1K a month on top of rent then I would question whether you were in a position to buy. I wouldn't buy without a significant buffer to account rates at least 300 points higher than now. We're in that position happily. However, it still depends on a couple of other factors.

Wage inflation?

Easing credit restrictions?

Overseas buyers?

I wasn't referring to the saving capability... its about how long one is prepared to wait before buying and the interest they would have saved by not buying now.

For ex, if someone wants to buy a place with say 200k deposit and borrowing 330k to purchase a 550k home inlc stamp duty & other expenses. If they decide to wait for another 2 more years and can save 30k p/year, the deposit at the end of Yr 2 would be approx 280k. Now assuming the area they wanting to buy has had 4% growth the price would be 603k, they still would need to borrow 320k. The interest they would have saved by not buying earlier would have been 18k approx (5.19 IR).. in the end they would saved less than 10k and yes don't forget the money you would paid for rent... all of this is assuming the IR does not change drastically during the 2 yr period, which is unrealistic assumption and some probably will say so is my example biggrin.gif do check this out - link

The above is assuming the price grows 4-5% each year, which has been the case in the suburbs I've been looking for the past 5 yrs. I see buying a home as a long term investment, of course things change if you are there for investing and selling for profit.

Edited by hpk

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What you posted is classic fear-driving stuff - buy now or miss out forever because things are going to get even more expensive even faster.

To that I say "LOL".

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The above is assuming the price grows 4-5% each year, which has been the case in the suburbs I've been looking for the past 5 yrs. I see buying a home as a long term investment, of course things change if you are there for investing and selling for profit.

You seem better versed in salesman spruik than investment jargon, but have you ever heard or read the disclaimer on retail investments "past performance does not guarantee future results"? No need to feel alone or embarrassed, prior to the GFC highly experienced vested interests on Wall St also forgot that historic performance wan't a great indicator of future performance.

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I wasn't referring to the saving capability... its about how long one is prepared to wait before buying and the interest they would have saved by not buying now.

For ex, if someone wants to buy a place with say 200k deposit and borrowing 330k to purchase a 550k home inlc stamp duty & other expenses. If they decide to wait for another 2 more years and can save 30k p/year, the deposit at the end of Yr 2 would be approx 280k. Now assuming the area they wanting to buy has had 4% growth the price would be 603k, they still would need to borrow 320k. The interest they would have saved by not buying earlier would have been 18k approx (5.19 IR).. in the end they would saved less than 10k and yes don't forget the money you would paid for rent... all of this is assuming the IR does not change drastically during the 2 yr period, which is unrealistic assumption and some probably will say so is my example biggrin.gif do check this out - link

The above is assuming the price grows 4-5% each year, which has been the case in the suburbs I've been looking for the past 5 yrs. I see buying a home as a long term investment, of course things change if you are there for investing and selling for profit.

I'm not sure I understand your example hpk. Some of the maths doesn't seem to tie out. So I plugged your figures into a rent vs buy calculator.

Please let me know if I have misunderstood your assumptions.

Here's what I think you are saying:

I've put 4% growth on the property per annum but I've put the same as return on my investments. (for balance)

The 350k loan reflects the added purchase costs (stamp duty and legals/loan app fee) which makes the property purchase price 530k.

The rates costs of 400 per quarter is based on ACT rates for a 500K property and the stamp duty is also ACT.

RentVBuyAssumptions_zpsbb339d0b.jpg

The results:

RentVBuyResults_zps70481f33.jpg

Under the assumptions stated (and it's all about the assumptions after all) The renter would be 20K better off than the buyer after 2 years. If you then add the 60k the renter has saved during the ensuing 2 years the loan required to purchase the property in 2 years is ~255K rather than the original 350K.

Edit: I suppose the stamp duty if the renter buys after two years soaks up the 20K savings but the loan is still less.

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I made a typo. In my calculation I was meant to say 220k savings and a 330k loan amount, adding the stamp duty and other expenses the total purchase price is 550k.

The savings while renting would have been 20k and rent paid for 2 yrs would be approx 38k. Whereas the loan repayments without including maintenance costs and council/water rates would be around 33k. I did not include annual maintenance assuming you buy a home that doesn't require any major repair in the first 2 yrs.

Purchase price of a home after 2 yrs would be still 603k. You would still need to borrow 363k at year 2 to buy a home. The point Im trying to make is that you dont borrow less by saving more within such a short period, unless there is something major impacting the price.

I used 5% for home price growth and you have made an assumption saying IR will not go down any more than 4% in the next 2 years? I suppose you could say my assumption of 5% is vague too but I took that from past sales over two years. A home which was purchased 2 yrs ago for $470k is now up for sale asking price over 499k. The owner has done bit of reno probably worth max 8-9k. Highest offer received was 540k+ - that to me is almost 7% price change. The same suburb has recorded 9% price increase since last year, of course thats just media price.

I agree some crazy buying going out there and unemployment scare is the only one thing that can slow this down. Please feel free to disagree.

Edited by hpk

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