FOMO Fever: Aussies Battle for Fixer-Uppers Amid Rate Rise Rumours

Rising interest rates haven’t deterred Australia’s property market boom, with the national value of homes seeing an 8.9% uplift over the past year to February, according to CoreLogic data. This growth is happening amid widespread expectations that the Reserve Bank of Australia (RBA) might cut rates later in the year, encouraging prospective buyers to secure properties now in anticipation of further price increases.

George Cherchian, a professional from James Chase Buyer’s Advocacy, highlighted the intense competition for properties, including those in less-than-ideal conditions. “There’s been a surge in buyer demand, primarily driven by the belief that now is the opportune moment to buy, before the Reserve Bank potentially lowers rates later in the year,” he explained. This sense of urgency has rekindled fear of missing out (FOMO) among buyers, leading them to consider poorly maintained properties they might have otherwise overlooked.

An example given by Cherchian underscores the current market’s fervor: a semi-detached house in Annandale that went for $1.31 million at auction, far exceeding its $850,000 guide price. “As a result, we’re seeing properties in really bad shape going for prices that would have been unthinkable just a year ago,” he added.

The moderation of construction costs has also played a role in this trend. The latest Cordell Construction Cost Index indicates construction costs have risen by just 2.9% for the calendar year 2023, the smallest annual increase since March 2007, and below the pre-COVID decade’s average of 4%. “With construction costs normalising, the idea of renovating a rundown property has become more palatable. It’s seen as a viable way to add value,” Cherchian said.

However, Cherchian also warned about the potential downsides of purchasing fixer-uppers, citing the unforeseen challenges and escalating costs that can transform an appealing deal into a financial strain. “While the initial lower purchase price of a ‘fixer-upper’ might seem attractive, the reality of renovation can often be a rude awakening,” he cautioned potential buyers.

For those considering a renovation project, he advised a cautious approach: “The best investment decisions are made with a clear understanding of the risks and opportunities involved. So do your homework. Understand the full scope of what you’re getting into, including renovation costs and potential overruns.” Cherchian concluded by warning against making impulsive purchases driven by FOMO, advising that waiting for the right opportunity might be more advantageous than rushing into a venture with numerous uncertainties.