The Sydney property market is red hot, with house prices jumping up another 4.3 per cent and units 2.1 per cent in March.
The rise and rise of property prices has led to the return of property market FOMO, or the fear of missing out, with those on the sidelines feeling the pressure to buy now in case they miss out altogether. We take a look at FOMO, and the impact it’s having on the market here in the inner city and inner west.
Sydney’s property boom
No doubt about it, Sydney’s inner city and inner west property markets are in the midst of a boom. Historic low-interest rates, better-than-expected economic conditions, rising consumer confidence and government stimulus have combined to encourage more buyers into the market and drive prices up across Sydney. We saw Alexandria record the largest median house price increase in 2020, rising by an incredible 30.6 per cent over the course of the year to reach $1.9 million by December.
There have been suggestions that low stock levels are contributing to the tight market. Data from SQM Research shows that while that may still be the case at a national level, in the Sydney market the number of listings is now actually steady year-on-year. Rather, it could be the sheer influx of buyers into the market, motivated by record low-interest rates and readily available finance, that’s driving up prices here. Put simply, buyer demand is outstripping supply.
How is FOMO driving the market?
Emotion often plays a role in property buying, particularly for owner-occupiers, and that’s why FOMO can play a part.
Data from CoreLogic suggests that at the moment, for every new property listing added to the market, 1.1 homes are sold. This intense buyer demand is keeping overall inventory levels low. Combine low inventory levels with record auction clearance rates of up to 90 per cent, and you’ve got a recipe for FOMO.
FOMO has been described by some analysts as a primary driver behind the current property boom. As prices continue to rise, people have a sense that if they don’t buy now, they’ll be priced out of the market altogether. This FOMO results in more people competing for the same properties, pushing prices well above reserve at auction and driving prices up across the board. For example, in March our listing at 33 Gerard Street Alexandria, a three-bedroom terrace in need of renovation, sold for $2.25 million at auction, which was $450,000 - or 25 per cent - over its reserve.
Where is the market headed?
Sydney’s median house price has risen $100,000 since the beginning of the year, and the property market shows no sign of slowing down. In fact, ANZ’s latest predictions forecast Sydney property prices will jump up by a whopping 19 per cent this year and another 6 per cent in 2022. While interest rates are low, finance is readily available and consumer confidence is high, the market is likely to remain strong and so the FOMO effect doesn’t look set to disappear any time soon.
With the market showing no signs of cooling down and prices predicted to rise further, buying now could well save you paying more in a few months’ time. Being realistic about the market, which is changing week by week, and acting decisively, is key to securing your dream property in these market conditions.
If you’d like to know more about buying or selling in the inner city and inner west in today’s property market, get in touch.