Buying in a seller’s market: Agents reveal how to withstand mounting pressure to overpay

Low interest rates and a housing shortage have put first-home buyers under renewed pressure, but there is a trick to getting good value, housing experts reveal.

First-home buyers will need to be more organised and disciplined this year to withstand mounting pressure to make snappy purchasing decisions and pay more, housing experts have warned.

It comes as home prices surged across most of the country over the tail end of 2020 and look poised to grow by bigger margins this year.

CoreLogic data revealed prices increased by an average of close to two per cent nationally over the past three months, with regional areas recording even bigger average rises at four per cent.

The increase was attributed to a range of forces, including a rise in panic buying as property seekers raced to secure homes before further price rises.

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CoreLogic head of research Tim Lawless said low interest rates and a shortage of available housing were creating additional “urgency” and buyers were under more pressure to act quickly.

First-home buyers reported feeling overwhelmed at high pressure auctions. Picture: David Swift

Most capital city suburbs were now “seller’s markets” and buyers outnumbered listings, he added.

Real Estate Buyers Agents Association president Cate Bakos said it was natural for first-home buyers in the current conditions to develop FOMO – the fear of missing out.

“The problems come when there’s frustration,” she said. “Buyers keep getting outbid and they see prices go up. Eventually they start going well over budget just so they can end the search.”

Ms Bakos said the solution was to become an expert on local prices. “Buyers who are repeatedly outbid are usually going for properties that are out of their budget to start with,” she said.

Current market conditions are encouraging buyers to make snappy decisions. Picture: Gaye Gerard

“Sold prices for comparable properties are a better indication of price than what the agents quote, which is usually much lower ... Once you study sold prices, you get a better idea which properties are really in your price range.”

Mortgage Choice’s James Algar said a telltale sign a buyer wasn’t ready to purchase yet was if they were seeking pre-approval for a loan without researching prices in their chosen area.

“Very often they haven’t got a clue what they need to spend because they haven’t looked at sales or even decided what area they want to buy in,” Mr Algar said.

Most first-home buyers discovered the properties they liked were actually above their initial budget and FOMO was a natural response to that, Mr Algar added.

“When you keep seeing someone else offer huge amounts, it gets normalised and you’re encouraged to do the same.”

Jack and Shellee Panada purchased their first home in Woolooware Bay, a new development in Sydney’s Sutherland Shire.

Binvested founder Nathan Birch, who has bought more than 200 properties, said good buying required “discipline” and “confidence”.

“You need to have a pretty strong idea of what a property is worth and that takes work. It’s a lot of research,” he said.

“If you’re going to auction you need to decide before it starts exactly what you’re prepared to pay and stick to it. Don’t go over, keep the emotion out of it.”

Ms Bakos said first-home buyers should keep in mind agents usually went to great lengths to put home seekers under pressure.

“It is their job,” she said. “They want you to feel like you might miss out, so that you will stretch your budget.

Buyer's advocate Cate Bakos said first-time buyers should not try to outsmart agents.

“Sometimes it helps to simply ask the agent if there are any other offers on the table and, if they are putting pressure on you to make an offer, find out if there is a genuine vendor deadline.”

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First-home buyers were better off keeping agents onside, Ms Bakos added. “A common mistake first-time buyers make is thinking they can outsmart the agent. Agents are usually very experienced at negotiating and have been doing it for years.

“Don’t try to force their hand. If you do something to make an enemy of the agent everything will be much harder.”

This first-home buyer’s special report is published in partnership with Westpac.