Cotality’s daily dwelling values index shows that capital city value growth is tracking at around the fastest pace in two years.
Source: Cotality
This follows a commensurate rise in auction clearance rates, which are also tracking at around a two-year high.
Westpac’s latest consumer sentiment survey showed that house price expectations hit a fresh 15-year high in October following a 2.1% monthly rise:
House price optimism is well-founded given the Reserve Bank of Australia (RBA) has delivered three 25 bp interest rate cuts, with most economists expecting at least one more reduction.
The Albanese government’s 5% deposit scheme for first home buyers, which came into effect at the start of the month, has also ushered in a tidal wave of interest from first home buyers.
Mortgage brokers have been overrun with “unprecedented” inquiries from first-home buyers, whereas real estate agents are reporting strong interest from first-home buyers at open-for-inspections and auctions.
Adding to the rush, investor demand has surged. Justin Fabo from Antipodean Macro reported record Google searches for “investment property” in September:
Monthly RBA mortgage credit data also revealed that investor housing credit growth soared by 9.1% in the year to August, the highest in a decade.
Lachlan Vidler, a director at property investment company Atlas Property Group, told The Australian that a fear of missing out has gripped investors as they compete against first-home buyers, resulting in a “market frenzy”.
“A lot of people are coming to us and talking about ‘have we missed the boat, have we missed the market, we want to get in yesterday because it’s just going to send prices through the roof’”, he said.
“There’s a huge sense of FOMO that’s starting to be developed around the marketplace from investors. At the end of the day investors are obviously highly motivated because it’s all about the financial returns and getting the best bang for buck that they can”.
“There’s a lot of nervousness around people who have that little bit of concern that now they might be 5% or 10% behind the pace”.
“Depending on what you’re buying and where you’re buying, you could very easily be paying tens of thousands of dollars more, just because of the sheer nature of competition”, he said.
The frenzy is also likely the strongest in more affordable segments, because these are typically targeted by first-home buyers and investors alike.
“We’re definitely seeing some risk-taking activity simply for people that want to get into the market quickly”, Melinda Jennison the founder and managing director of Streamline Property Buyers noted.
To add insult to injury, total listings are tracking well below average, down 15.6% year-on-year, meaning that we have more buyers chasing fewer homes.
Source: Cotality
In short, bubble-like conditions are developing fueled by falling interest rates, stock shortages, first-home buyer stimulus, and investor FOMO.
What could possibly go wrong?
