What to do in a FOMO stampede?

Hi All,

I need some advice ideas..... I'm posting here instead of the "where to buy" forum because this is a more generic question about the economics that have led to the current FOMO demand blitz.

Background:
I'm an (Aussie) expat living overseas. I have finance approval with a non-prime lender with a high interest rate relative to the major lenders. My budget is healthy at approx AUD$2m, but I'm worried about this FOMO bubble. I'm looking to buy in a particular area in Sydney, and have a local buyer's agent on the job there. Properties that only a few months ago were well within my budget are now slipping beyond reach.

Key question...
Should an investor in my approx situation just jump on this FOMO bandwagon asap or will things settle down and is it worth waiting a few months? (The latter feels risky because maybe prices will stabilize but not decrease).

There is the option of changing location, but perhaps that's more a question for the "where to buy" forum.

 

Do you have a relative in Sydney? Is there a risk that advice on a forum like this might be less useful than a relative that has your back?

Then they could say 'go for it' or 'hang back' depending on what you are seeing and what they can see on the ground.

Also why not get a normal loan with a good interest rate?

The problem we are having is the public statements about cheap money and ppl wanting to buy not what the house is worth but what they can service based on cheap money. So do you want to be part of that? If so get some cheap money and jump in. If not, then it may be a long expensive wait bc we are told there are 2 years of cheap money to be had.

Not easy from Qatar, can't even get back for a week to check thinsg out

 

This forum has some pretty experienced property investors though. It's a decent source of relatively unbiased info.

The problem with the lending criteria is that a) a few years ago there was a tightening of loans to expats, and then when covid hit this tightened even further. ANZ changed their rules in the midst of an application way back in feb last year and this basically cut in half what I could borrow, but in the long run, borrowing more now still works out better (even at a higher interest rate, which I'll refinance asap anyway). Maybe in hindsight I should have done that yada yada, hindsight is wonderful..... in hindsight ;-)

My situation is sort of the opposite of the cheap money. I just cannot access that as an expat right now, however it becomes a little easier via a refinancing pathway within 6-12 months following acquisition.

 

Bottom line is no one knows .

there’s lots of people who believe that Sydney will keep on going up another 10-20 % .

im looking on from the sides thinking it’s crazy . Just around the corner someone paid 4.5 for a nice house in a standard at in turramurra and that seems the normal .

The only thing that might keep things going are the low rates as there seems to be a perception they will stay low for a couple of years .

the wealth effect of increasing prices is helping boost the economy at the moment and given we’re still coming out of Covid , I can’t either party wanting to stop it , certainly not liberals .

Once rates going up to more normal rates there may be some people in pain , but I’ve heard that said many times in the past and most times it hasn’t come true ...

Australia used to ride on the sheep’s back but now it seems to be more on the suburban block ....

cliff

 

My expat friends have been getting around 3% (or just under) for investor loans at 70% LVR. Is that similar to what you are getting?

That is great that you have a $2m budget. Nobody knows the future, all one can do is keep informed of what's happening on the ground, adapt and be flexible. For example, you can consider widening the net to other areas in Sydney or even outside Sydney.

 

Heck no, that is way better, and I'm under 70% LVR too. Can you send me a pm if you can with further details. tbh I'm rather peeved at the mortgage broker. Partly my fault for not pushing but he was way too lazy last year. I wanted to buy in Aug-Oct.

 

2.49% here (fixed 1 year) at 80% LVR. Pre-approved Jan 2021.

 

My guess is current prices in many areas will hold and probably grow more before stabilizing. I don't see post stabilizing prices below current prices, generally speaking. Of course anything could happen but I believe the probability of my guestimation to be 7-8/10.

 

I've no crystal ball, but I agree with @Sackie.

 

This has to be with a major lender. The only expat loans at that time (as informed by my broker) at that rate were ANZ and Macquarie. My income is not taxed though, whereas those lenders treat the gross income as taxed, hence chopping the amount they would approve by a good 40%. Had I gone that route the max I could borrow would have equated to 50% LVR. Hardly a risk for the bank. We still end up better off in 15 yrs though, by borrowing more now and copping the higher interest rate for a time until we can refinance.

 

Put your helmet on, bullet proof vest, a bat and run in hard and smash the competition out of the park

In all seriousness what’s your goal? Is it an investment till you move back?

 

Q: What to do in a FOMO stampede?

A: You learn your lesson, and next time there's a lull in the market and while no one is buying... and all the doomsayers are telling you to wait for the huge crash, you ask yourself: do I really want to go through this again? Do I really?

 

Smart people stand out of the way and observe the madness, all while looking for better opportunities that the mob in their frenzie ran past

You are doing the right thing using a buyer's agent

 

Is the crystal ball of someone who's been in the game for years better than yours? Not really.

From a general perspective, I don't know about buying NOW but I know this....when the heat is gone and the lull ensues, don't hesitate then. Don't listen to the noise and don't listen to the naysayers.

When the herd is staying in the trenches, you come out to hunt. You may not pick the bottom but you sure as hell won't be buying at the top.

 

To all those saying strike the next time there is a lull... your borrowing capacity was hit like everyone else's in 2018, and you like everyone else were holding on to your good quality bricks in 2020.

People think they can outwit the market.

 

Mine was hit sure, but I did all my buying before 2015, and squeezed one final one out in 2017.

(and I bought another last year but that was cash).

 

I was scratching my head to at the crazy prices but once you look at it closely it makes sense. Based on the same actual payment in 2016 to today ppl can service much more debt, way less stock than normal especially in some suburbs. All the grants in place it’s brought out ppl from the wood works and a huge amount of upgraders. I wonder if you have seen this before as you have been around the block a few times?

I believe the Sydney median will reach 1.38m by end of next year, based on last 6 months of activity. I have also noticed it’s a 3 tier market as well.

 

Only the people stretching to their full borrowing cap.
Borrowed half what a bank offers us now, would have been so much better off buying in 18... still wouldnt have used full cap and prices were much lower

 

Investing is a long term game, so really the aim should be to get into a good quality asset instead of trying to time the market.

If you buy something that is: well located, well built, close to amenities, straight-forward to rent out with a decent return that fits in with your cashflow goals (can assist with rent appraisals if needed), then you should be in a good position when the next cycle rolls around.

 

QUDOS (Qantas Credit Union).