The Fear of Missing Out

Graeme Salt
A wise man sent me an interesting article this week about the Fear Of Missing Out (FOMO).

There’s a confluence of events boosting Australian property prices, especially in Sydney, but none is more pervasive than the Fear Of Missing Out (FOMO).

All investment markets are driven by sentiment, and when it’s impossible to pick up a newspaper without the latest story on 85 per cent auction clearance rates and smashing of reserve prices, potential buyers change their mindset. They may have trudged from one open house to another in 2012, waiting for the no-compromise property, but now they are jumping in before prices rise further.

Nowhere is this clearer than in the First Home Buyer sector – where we are hearing daily stories that first time buyers are being crowded out of the market by investors, especially those with their own Self Managed Super Funds.

Recently, I have arranged pre-approval for a few clients. I catch up with them on a regular basis to see how their search is going on – ‘crazy prices’ are constant responses I get from them. But there are huge variations in how the individual client responds to these prices rises. I will give you two examples: Geoff and Mary:

Geoff has been renting in Sydney’s Inner West for years with flat mates. He decided it was finally about time he bought his own place. Initially nothing he saw was suitable. Now, there are suitable, but expensive properties. Geoff is quite philosophical about it; he has good rented accommodation, he lives happily with flat mates and he knows that either prices will come down or incomes will rise. He is happy to wait.

Mary has been looking on Sydney’s Northern Beaches for a while. She plans to rent out her first place and then move into it. She is worried that she will never be able to afford a place and is thinking about buying in other markets (which she does not know). I regularly receive-out-of-hours calls from her – you can hear the stress in her voice.

Personally, I would much rather be Geoff than Mary – he is much more philosophical and understands that markets go up-and-down.

Like any investment, residential property must be the right asset bought at the right price and the right time, not anywhere based on the need to get into the market quickly due to FOMO. It might be that the recent price rises have already delivered the best returns for some time.

Getting a good price is important – and is often determined by timing. But surely the most important thing is being happy in a place – that is determined by many factors other than money. Personally, I would rather not miss out on happiness.