Interest rate cut fears drive FOMO panic buying, home sellers reap rewards

Sydney homes are reselling for huge amounts above what their owners paid only months ago, with one family seeing an extreme rise due to an unexpected market change.

Panic buying has returned to parts of the housing market this spring as buyers scramble for houses ahead of an anticipated interest rate cut next year that some fear may drive up prices.

The renewed urgency to get into the market has resulted in a spate of massive sales, with unchanged properties selling for up to $530,000 above the prices they traded for only a few months ago.

Ray White chief economist Nerida Conisbee said housing stock shortages have exacerbated the sense of panic among some buyers.

“There was an extreme shortage of stock earlier this year and even though listings are increasing it is still not enough to match demand in some areas,” she said.

Scott and Rachelle Spence, with kids Chanelle and Nathan, resold their renovated house for $2.5m more than they paid in 2020. Picture: Brendan Read

Ms Conisbee added that financial markets were now expecting a reduction in interest rates in mid-2024, which some buyers saw as a potential trigger for another boom in prices.

“Realistically, nobody knows what’s going to happen with rates and if they drop it could be because unemployment is rising so there may not be this price rise but there is a perception of an increase … demand is strengthening.”

Fear of missing out, or FOMO, has been particularly strong in Sydney’s cheaper outer areas, where recent interest rate hikes and the resulting drops in borrowing power have channelled more buyers.

These regions, which included the Blue Mountains, Central Coast, Campbelltown, Hornsby and the Wollondilly area, were also where vendors were most likely to make a profit off their sales.

This Denistone house sold last week for $526,000 higher than what the seller paid for it in March.

Other regions where conditions were boosting vendors’ resale profits were the northern beaches, Hills district, Hunters Hill area and the Sutherland Shire, according to Pain and Gain report by CoreLogc.

The highest median profit – measured by the average difference between the price the vendors paid for their properties and what they sold them for – was in the Hills district at $770,000.

It comes as PropTrack data showed activity in the auction market has been heating up, with nearly 1000 NSW homes expected to go under the hammer this week – the highest volume in more than six months.

Next week will see even more auctions, with Sydney alone to host more than 1000.

Sellers have reaped the rewards. Property records revealed a vendor in Denistone last week traded their home for $526,000 above the price they paid in March. They paid $1.63m and got $2.16m. DA approval was obtained for a new duplex on the site.

This Ryde home sold in August for $600,000 above the price it sold for in November.

In nearby Ryde, a house on North Rd sold in August for $2.35m, $600,000 above the November price.

Further west, in Bella Vista, a house on Northbridge Ave sold for about $455,000 above the 2022 price. And in north shore suburb St Ives, sellers on Yarrabung Rd pocketed $550,000 above the price they paid last year.

Scott and Rachelle Spence recently listed their renovated West Ryde house for sale and, after just two weeks on the market, sold it for $3.93m – about $2.5m above the price they paid in 2020.

“We weren’t totally convinced about selling but this ended up being a fantastic result,” Mr Spence said. “We had a large night on the Saturday it sold. We had friends and family around to celebrate and the wine cellar got a hammering.”

Mr Spence added that the same conditions that boosted their sale made it difficult to find their next home.

“There is almost no stock on the market. We thought more would be coming on in spring,” he said. “FOMO is out there, but it’s wholly and solely because there isn’t much to choose from and some people have a lot of money to spend.”

Their agent Michael Dowling of Pello Property said housing shortages were as much about quality as quantity.

“It’s not just that there’s a stock shortage, there’s a shortage of particular types of properties,” he said.

“Well presented homes that are move-in-ready are really hard to find and those are the properties that are selling very quickly. We’re finding there’s a sense of FOMO at about 60-80 per cent of our auctions and most of them are those types of properties.”

This Bella Vista home recently sold for $455,000 than the price the sellers paid last year.

Damien Cooley, the director of auction house Cooley, said pent up demand was driving the market.

“It does vary a lot by property, but buyers haven’t had choice for some time. There’s been more opportunities over recent weeks but there is still pent up demand because there wasn’t much choice before and many buyers kept missing out. When they see a property they think is the right one, they move quickly.”

Originally published as Interest rate cut fears drive FOMO panic buying, home sellers reap rewards