Many Australians are rushing in and buying properties because they have a fear of missing out, according to new research.
The Commonwealth Bank recently surveyed 1,098 Australians aged 18 and over who had bought a property in the past five years or who were looking to buy within the next two years.
It found a majority of home buyers (65 per cent) believe property prices are being steered by a fear of missing out that was causing most (58 per cent) to rush in and negotiate a price before they had done their due diligence.
The survey also found that 71 per cent of subsequent home buyers would pay over the odds if they needed to find somewhere to live urgently.
Nearly half of the first home buyers (49 per cent) agreed they probably paid more for their home but that they really liked the property and didn’t want to miss out.
Also, nearly one in five (19 per cent) subsequent home buyers admitted they paid more than they had budgeted for when they purchased their last property because they did not want to miss out.
General manager of home loans at the Commonwealth Bank Clive van Horen said a competitive market place would always increase buyers’ fears of missing out, but it could potentially lead to regrets down the track.
“It’s easy to get caught up in the drama of the marketplace rather than taking advantage of their previous home buying experience to help them make the best financial decision,” Mr van Horen said.
“Equally, investors need to research the market carefully to ensure any decision they make is based on a rational analysis of the financial benefits and risks rather than an emotional reaction to wanting a specific property.
“While interest rates are currently low, home buyers need to be prepared for future fluctuations, so any property purchase needs to be seen as a long-term financial investment.”
Director of RT Edgar Boroondara Glen Coutinho agreed with the findings, telling Real Estate Business most people he was dealing with felt the market was on the rise.
“A lot of people are now rushing out and buying property,” he said. “They’re in the mindset they’re moving into a rising market, and most people think property prices are going to go up seven to 10 per cent and they want to buy something quickly.”
Mr Coutinho added that in his market, buyers were offering over the odds to secure a property.
“Some of them are offering [$50,000 to $100,000] more than what the vendor wants because they’re factoring in the future value of the property and they’re just buying it because they don’t want to be beaten at auctions.”
CEO of Starr Partners Douglas Driscoll told Real Estate Business there was a sense of “blind panic in certain quarters”.
“The growth trajectory in terms of price is fairly steep at the moment and there really is no obvious sign of it slowing down in the short to medium term,” he said.
“There are people that are jumping on the train because they’re scared of being left behind otherwise.”
Mr Driscoll added that the rush to buy property and the rapid change in the market meant buyers did not have the luxury to do their due diligence.
“What they’re probably researching yesterday, today it might not be relevant,” he said. “I think they’re trying their best but because of the pace of the market, I think it’s increasingly difficult, irrespective of the fact that we live in a digital age with more information than ever before.”