HAS FOMO GONE OFF THE BOIL?

Think of the property market like a pot of water on the stove.

For the last couple of years the heat has been at HIGH and the water boiling, bubbling and steaming non-stop.

This week the pot and water just had some of the heat taken out to bring it to a simmer. But there’s still enough water (property for sale) but a little less steam and bubbles (buyers).

Almost overnight, buyers have gone from full blown FOMO (fear of missing out) to ‘Meh!’.

And you don’t have to be a Rhodes Scholar to know why.

The market has transitioned almost overnight from blind confidence to measured cautiousness.

The Reserve Bank acted on the 'by design' inflation being unleashed on Western Economies and, in lock-step, raised the ‘cash rate’.

What that means is that the Banks you borrow from are now buying their wholesale money at a higher rate and this immediately gets passed onto you, if you have a mortgage or want one. As at the 3^rd of May, 2022, the cash rate went from 0.1% to 0.35% - a rise of 0.25%.

This now puts the average retail lending rate for mortgages at around 3.3%. Do your sums and you’ll see the margins banks are making between the cash rate and the retail lending rate. Not a bad day’s work!

But it’s not just that one rate rise that has taken some of the steam out of the market, it’s the ‘threat’ of more to come to combat that naughty inflation - plus we are in the midst of the lead up to a Federal Election. Double whammy!

Is this the end? Will prices crash?

I have bad news for the doomsayers – No.

The market has transitioned almost overnight from blind confidence to measured cautiousness.

Some buyers will head to the sidelines ‘to see what happens’, others will stay in the market but with a revised valuation perception on the homes/properties that interest them.

What does it mean for sellers?

The homeowners who recognise the change in conditions quickest will be those who get the best results sooner.

The hard reality is that in a transitioning/settling market you can no longer test the market with inflated expectations on your pricing. For the time being you will possibly see buyers resist the temptation to chase price any price (FOMO).

The emerging ‘Meh!’ psychology in buyers must not be ignored.

If they have more property to choose from and their sprint to buy has slowed to walk, price realism is critical to a successful sale.

We are transitioning from a steaming hot seller’s market to an even market.

Sure, their will be pockets of the local market, especially the budget end, that will bubble along nicely, but those properties (for sale) that want to turn up the heat and hold on doggedly to yesterday’s price may find themselves on the market longer, and will have to make adjustments to their expectations along the way.

The homeowners who recognise the change in conditions quickest will be those who get the best results sooner.

My Tips to succeed:

1. Stay focussed

2. Find an agent that has experience in a transitioning market

3. Watch buyer activity/numbers like a hawk

4. Be flexible!

If you want to know more about the transitioning market, curious about the value of your home or prepping for a big move click here to get in touch.

Cheers

Craig