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Property FOMO alive and well

FOMO stands for “Fear of missing out” and it is alive, well and growing across all segments of the market. In the most recent Corelogic Newsletter (8 March 2021), that trend is occurring at the higher end of the Capital City Markets – particularly in Sydney and Melbourne, reinforcing the view that the smart money believes “recovery” is in full swing. When you throw a combination of ultra-cheap interest rates, a lack of housing as 450,000 Australians return home and clamour for a unit or a house and a Government that has instructed Banks to “lend“ then what could you really expect? The question is whether it will continue and how it will end?

We are already seeing the signs of a property bubble in full swing with stories of properties being bought and sold within 4 month periods and attracting a $400,000 increase in valuation and with properties going well above the reserve. We have all seen the news and heard the stories.

The signs of change probably lie in the three fold increase to the US Treasury rates in the last six months. A more than subtle change probably unobserved by many but with significance. Remember, Australian Banks still receive greater than 60% of their monies from overseas (principally the USA). As a result, when rates increase and they will, the banking sector will have no option but to pass on these rates regardless of the Reserve Bank settings. Right now the “music continues to play” and the game goes on, especially given the rollout of the vaccine and the expectation that immigration levels may return in the next couple of years to keep the property market going. Property is a long term investment and there are many periods where the property market is illiquid (ie. an absence of buyers), so let’s not get caught up in the false hubris that the current conflagration of rare circumstances will just continue.

As we know trees don’t keep growing to the sky. Its an artificial cycle.


Warning: These are the views of the author and are not specifically the views of Future Gen Wealth. The article should not be construed as Advice or a personal recommendation and is designed for the purpose of education and discussion.

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