‘Selling in a heartbeat’: Surging buyer confidence fuels housing FOMO

Households are feeling more confident about the year ahead following a third interest rate cut by the Reserve Bank, setting the scene for a new wave of FOMO to hit the property market.

Consumer sentiment reached a 3.5 year high in August according to the latest Westpac Consumer Sentiment Index, with households feeling more upbeat about their finances, the economy and the outlook for house prices.

Perhaps most noteworthy from the data is a surge in homebuyer sentiment, with the ‘time to buy a dwelling’ index up 10.5% compared to July, and 37% higher than a year ago – albeit down on the long run average.

This follows an interest rate cut by the RBA earlier this month, which brought the official cash rate down 25 basis points to 3.60%.

“The RBA rate cut gave a substantial boost to housing-related sentiment,” Westpac head of Australian macro forecasting, Matthew Hassan said.

Three quarters of consumers now expect property prices to rise over the next 12 months, setting the market up for a strong spring selling season according to REA Group senior economist Anne Flaherty.

“When people strongly anticipate that home values are going to be higher, it might drive them to purchase sooner than later,” Ms Flaherty said.

“As we head into spring, the combination of lower interest rates, improved budgets, and recovering sentiment is setting the stage for a ramp-up in housing activity.”

Auctions already heating up

When buyers have more confidence about their prospects and anticipate price growth ahead, the fear of missing out (FOMO) can also become a factor.

Anecdotally a slower winter has already begun to heat up, with some property experts noticing that Saturday auctions are already getting busier.

Melbourne-based Buyer’s agent Cate Bakos is already seeing a higher level of buyer energy than in previous weeks.

“It’s been building up but this past weekend I felt the difference,” Ms Bakos told realestate.com.au.

“Bidding was much stronger and you can certainly see high motivation from some buyers, and a willingness to pay more than where I would have thought market value sat.”

Ms Bakos largely operates in Melbourne’s inner- and middle-ring suburbs and says the question she’s getting most from clients is how to act quickly before the impact of rate cuts really takes hold.

While Melbourne is picking up, Brisbane is continuing to race ahead.

Founder of Ideal Buyers Agency, Jade Fitzgerald says that near misses among people that are financially ready is what’s fuelling FOMO.

“The speed of turnover is creating its own pressure,” she said. “Buyers who might have been hesitant a few months ago are now realising they don’t have the luxury of time.

“In that early million-dollar range, homes are selling in a heartbeat — many are transacting within the first weekend on the market. We’ve had buyers miss out by just a few thousand dollars, which shows how tight the competition is.”

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Ms Fitzgerald says the mood is less about confidence and more about a fear of being left behind.

“Even without strong confidence, there’s this undercurrent of urgency — if they wait, they’ll miss out, and if they miss out too many times, they’ll be priced out,” she said.

Whether it’s confidence or a sense of urgency, Westpac’s numbers suggest the end to a long stretch of pessimism around Australia’s economy. Although it remains to be seen if optimism prevails should prices rise further.

At present, the PropTrack Home Price Index shows home prices reached a record high in July, up 0.3% last month and 4.9% over the year. A median-priced Australian house now costs $915,000, while a unit is worth $678,000 the data shows.

Tough competition for aspiring homebuyers

Ms Flaherty says that while the latest rate cut has been great news for existing homeowners with mortgages, it isn’t as clear cut for those looking to get into the market.

“By making it more affordable to borrow, buyers can typically offer more money when purchasing – pushing property prices higher in response,” Ms Flaherty said.

“This was seen in 2020 when the slashing of the cash rate to just 0.1% triggered one of the fastest episodes of property price growth seen in Australia’s history.”

She expects strong selling conditions for sellers in the coming months, while buyers face tougher competition.

“Two interest rate cuts is one thing, but when you have three in a six month period that’s really going to help boost confidence.”

“Prospective homeowners could see higher levels of competition when looking to buy, with vendors enjoying robust selling conditions.”

The post ‘Selling in a heartbeat’: Surging buyer confidence fuels housing FOMO appeared first on realestate.com.au.