Opinion: Goodbye and good riddance to FOMO

Alice Stolz, Domain’s National Managing Editor, The Block fixture and resident property aficionado, shares her insights each week as columnist for Nine Property.

The temperature is dropping at auctions and the mood is shifting in the country’s biggest property markets. Everybody from Federal Treasurer Josh Frydenberg to the local butcher has an opinion on not if, but when interest rates will rise. The ‘tighten your belts’ narrative has started.

But while a rise in interest rates will sting some and undoubtedly pinch many, there is a cohort who may well benefit from a rate rise; first-home buyers.

Affordability is usually what stands in the way of new buyers and their ability to win the keys at auction. The heat and steam in the market for the past 12 months has been stifling and unrelenting for those trying to break in. The result has been a very real fear of missing out, so much so that the weight and pressure first-home buyers have felt to buy something, anything, was often what pushed them to purchase.

Over the past 24 months, two potent ingredients have stoked the fire that has helped the nation see an exponential rise in house prices. Firstly, a lack of supply due to Covid restrictions and rolling lockdowns has resulted in fierce and intense competition at auctions.

Secondly, the availability of cheap credit. Seduced by the lowest interest rates in Australian history, borrowing (a lot of) money seems for some, the only way to get a leg up on the property ladder. But of course the caveat is that those low-interest rates contribute to higher house prices.

But what a difference a few months makes. Buyers are no longer faced with a dearth of listings. Supply and demand are levelling out to a more even keel and so too the intensity and pressure is seeping away. For proof of this, look no further than clearance rates. They haven’t plummeted nor are they in free fall, but they have definitely cooled, with Sydney and Melbourne now hovering in the mid-60s. The gnarly feeling of FOMO that has kept first-home buyers awake at night might ease somewhat, knowing that at the very least they may have more choice and less competition at auction in the year ahead.

“FOMO has left the market,” Domain chief of research and economics Nicola Powell says. “Listings started to increase late in 2021 and that has carried over into this year. This has given many buyers a lightbulb moment, as there’s more available stock and conditions are not as competitive. [When] interest rates rise, people borrow less and demand continues to ease.”

An interest rate rise is most definitely not a silver bullet that will solve Australia’s affordability issues, but it should turn the heat down a notch and banish FOMO from the minds of first-home buyers. No one benefits from buying anything from a place of fear. Goodbye FOMO and don’t let the door hit you on the way out.