Every man and his dog would already know by now the hot housing markets of Sydney and Melbourne cooled down in the second half of 2015, with an oversupply of properties, higher mortgage rates and government tweaks relating to foreign ownership driving punters away, particularly investors.
As of mid-December 2015, CoreLogic RP Data found dwelling values in Sydney and Melbourne have fallen for the quarter (by 0.99% and 0.73% respectively), although still up strongly for the year (by 12.56% and 11.82% respectively) . There have also been numerous media reports of falling auction clearance rates, particularly in Sydney where rates have fallen from around the 90% mark six months ago to around the 60% mark more recently.
Looking ahead to 2016, most pundits agree property prices will continue to grow, albeit at a more modest pace. However, while the market will likely be more subdued overall compared to 2015, first home buyers (FHBs) look set to continue driving the momentum in the market in 2016. Because as it turns out, it is not just holidays, parties or other social events that young Australians have a fear of missing out (FOMO) on, FOMO is also evident in their efforts to secure their first home.
Research conducted by CoreData in late November 2015 found FHBs are increasingly looking to buy their first property sooner, with more than two in five (43.9%) intending to buy in the next six months, up from 33.6% in 2014. They are also increasingly decisive, with close to half (48.2%) intending to make the final purchase decision themselves, up from 42.4% in 2014.
The desire to buy sooner reflects the growing number of FHBs who believe ‘now is a good time to buy property’, with close to three quarters (74.3%) holding this view, up from 65.2% in 2014. It also reflects the view that mortgage interest rates will rise, with more than two in five (44.8%) believing rates will increase steadily over the next two years, up slightly from 42.5% in 2014.
However, more than four in five (81.9%) would still be looking if rates were not as low as they are now, up from 70.1% in 2014, suggesting FOMO is prevalent among a large number of FHBs.
While not all areas will experience solid growth in prices as a result of FOMO among FHBs, their ongoing pursuit of the Great Australian Dream suggests that overall, the growth in prices could continue for some time to come.