Avoiding FOOP – fear of overpaying – in the Australian housing market

• Last year the Australian housing market was experiencing FOMO, now it is experiencing FOOP
• In the auction markets, low-ball offers are becoming more common
• Domain's John Foong says trends such as FOOP represents changing markets

Last year, when Australia was in the midst of a heated housing market, the fear of missing out (FOMO) exacerbated the situation further.

Weekly asking prices skyrocketed. While SQM Research data shows prices nationally were around $636,000 at the of 2020, this increased dramatically to $760,000 at the end of last year, before peaking at $815,000 in June of this year.

National

Since then, asking prices have been on the decline, thanks to several cash rate rises.

In light of this the FOMO market has now evolved to become FOOP – fear of overpaying.

This has become apparent in the auction market.

During July, FOOP breeders made an appearance across the Sydney market, making low-ball offers that were not in-line with current market conditions.

“While Sydney’s auction clearance rate improved slightly from last month – up to 45.30% – our auctioneers said that ‘FOOP’ bidders were reasonably common, but they weren’t having much luck because of their unrealistic assessment of the current market,” Apollo Auctions Director Justin Nickerson said.

“Conversely, many buyers in most markets understand that their current lending limit won’t last forever, so they are keen to transact and are bidding at fair and reasonable price points.”

Justin Nickerson, Apollo Auctions

FOOP part of ongoing market changes

But what does this mean to the overall housing market?

“Australia’s changing housing market has many buyers and sellers feeling wary,” said John Foong, Domain’s Chief Revenue Officer.

“The news that many sellers are experiencing ‘Fear of Overpaying’ is a great example of how market changes and inconsistencies can result in reduced confidence in buyers.

Mr Foong, however, said the situation clearly indicates that an agent’s core role to deliver the best result for their client is more important than ever.

“Working with your vendors to market a home successfully, and managing their expectations to ensure they finish the vendor journey happily involves accurate, insightful advice and market insight. In a market where clear guidance is sought more than ever, agents must do everything they can to achieve this,” he said.

“This means utilising the right data, seeking the best intel and making use of digital tools to deliver.

Mr Foong noted that there will always be some form of “fear in the market”, which vendors, sellers and agents ultimately have to accept.

“Ultimately, when an agent manages their vendor well, it gives buyers clear and transparent choices. With a clear opportunity in place, buyers will know what they’re being offered – no second guessing – and both buyer and seller happy.”