Australian housing market: FOMM (Fear of Making a Mistake) replaces FOMO (Fear of Missing Out)
- Posted By Ndl 1 Realty
The Fear Of Missing Out (FOMO) that previously propelled the property market to unprecedented levels during the pandemic has now been replaced by the Fear Of Making a Mistake (FOMM), resulting in a state of apprehension for both buyers and sellers, as highlighted by experts.
Presently, individuals are experiencing unease due to the looming possibility of further interest rate hikes, compounded by conflicting forecasts on property prices and a general sense of nervousness surrounding the limited housing supply. These prevailing factors have made it increasingly challenging for people to confidently commit to significant decisions regarding their residential properties.
“I think in the last four or five weeks, we’ve really gone from FOMO to FOMM,” said Welsey Bucello, an agent at Melbourne’s Nelson Alexander Brunswick.
“People want to move, but while we’re getting record numbers of potential buyers coming through our properties, we’re then seeing very few bidders on auction day.”
“For instance, we recently had 150 people go through a three-bedroom house at 242 Albion Street in Brunswick, but then only two bidders turned up.”
“The week after, we had 100 people go through another house at 19 Ford Street but then when we were made an offer pre-auction, we took it and ran, as people are just too scared at the moment to bid, so we thought we should.”
This prevailing trend is now observable across Australia, and in the bustling city of Sydney, buyers' agent Dan Sofo, who also happens to be the founder of Unicorn Buyers Agents, has observed a significant surge in the Fear Of Making a Mistake (FOMM), particularly within the segment of the market characterized by inexperienced buyers and vendors.
Interestingly, those buyers who fall under the Baby Boomer generation and have accumulated experience in multiple markets, navigating various cycles, seem to exhibit higher confidence in their decision-making abilities. Conversely, the majority of other market participants find themselves engulfed in a state of hesitancy, where the overwhelming sense of uncertainty has rendered them seemingly immobilized and unable to take decisive actions.
“If you’re only buying your first or second house, or selling for the first or second time, we’re finding a lot of people are just bewildered at the moment by what’s happening in the market,” he said.
“There are so many contradictory signals in the media about interest rates, inflation and whether or not we’re sliding into a recession, and people are confused and wary.”
“The buyers are saying, ‘What happens if I make a mistake and pay too much?’ The vendors are worrying that they won’t find anywhere else to buy when they sell their homes. So, we’re all doing a lot of appraisals at the moment, but people are just not acting on them.”
Extensive research into long-term market trends has consistently demonstrated that succumbing to the Fear Of Making a Mistake (FOMM) should not impede individuals from making crucial decisions concerning their property investments.
A notable study conducted by Dr. Nicola Powell, the Chief of Research & Economics at Domain, focused on house price cycles across Australia's combined capitals over the past three decades. The study's findings revealed that the property market does not typically undergo erratic boom or bust phases; instead, it experiences periods of notable gains, often characterized by surges, which are subsequently followed by more moderate declines or periods of stability.
These findings underscore the importance of informed decision-making, as the property market tends to exhibit a degree of predictability and stability over the long term, despite short-term fluctuations. Such insights can provide valuable reassurance to prospective buyers and sellers grappling with the Fear Of Making a Mistake, encouraging them to approach their property futures with a balanced perspective.
“When property prices are falling, that can understandably make many Australians feel uncertain about their property journey,” Powell said.
“But it’s important to remember that property has historically moved through upswings and downturns, and there are lessons that can be learnt from previous price cycles.”
“Our analysis of directly comparing the steepness and duration of an upswing and subsequent downturn since 1995 supports the argument that it is not timing the market that is important, it is the time spent in the market that counts.”
Indeed, the research findings highlighted that historical rises in the property market have reached as high as 32.7 per cent from trough to peak, while price declines have typically hovered around 3 per cent from peak to trough.
Such fluctuations in property prices are considered normal and should serve as a source of reassurance for new buyers and sellers. Property investment is inherently a long-term endeavor, and therefore, short-term fluctuations should not unduly worry them. Understanding the market's cyclical nature can instill confidence in individuals to make well-considered decisions regarding their property transactions.
By recognising that occasional ups and downs are part of the market's natural rhythm, prospective buyers and sellers can gain the perspective needed to approach their property ventures with a sense of confidence and a focus on long-term objectives.
Mr Sofo shares the sentiment and advises that those new to the market should learn from the actions of experienced participants who continue to engage actively. However, predicting the duration of this Fear Of Making a Mistake (FOMM) outbreak and its impact on market activity remains challenging.
Property expert, Mr. Scott Aggett, from property negotiators Hello Haus, points out the difficulties arising when both buyers and sellers are affected by FOMM, leading to prolonged periods of indecision.
Despite the fact that the available stock on the market is considerably lower than the five-year average, sellers are refraining from listing their properties due to the challenge of finding suitable alternative residences. While some sellers are eager to relocate for reasons like job or lifestyle changes, the lack of attractive options in the market is hindering their decision-making process.
“Hopefully that will loosen up as we move towards spring and more property comes onto the market,” Aggett said.
“But the buyers are a real challenge. They’re sitting back as they’re not sure how much to pay. While prices are recovering generally, affordability is still low and interest rates might still rise, and borrowing capacity is shrinking.”
“So, they’re scared of committing and putting in too much money. They’re like deer in the headlights. But the more experienced buyers are coming in and investors are returning with more confidence, and they’re the ones keeping the market turning over, and showing how it can be done.”
First National Real Estate's Chief Executive, Ray Ellis, posits that an additional contributing factor to the phenomenon of Fear of Missing Out in the real estate market is the growing incidence of building companies facing insolvency, coupled with extensive media coverage concerning problematic new apartment developments.
The absence of foreign buyers has created challenges for developers seeking approval from financial institutions for their projects, thereby exacerbating uncertainties in the real estate market. Concurrently, the traditional means of financial support from family members, colloquially known as "the banks of mum and dad," are also dwindling due to the rising cost of living.
“These factors all get into people’s psyches and affects them,” Ellis said. “But people should try to break the cycle by looking at new opportunities.”
“Fixer-uppers, so long out of vogue, may be an affordable way to get into the market now while new areas are opening up, like The Gables in Sydney’s Hills district and are offering affordable homes. People have to search for the opportunities, but they are there if they can have the confidence to try.”