Experts warn against panic buying
With the high demand for homes boosting Christchurch house prices, experts are warning on the consequences of panic buying because of fear of missing out (FOMO).
High demand spurred by low-interest rates has boosted competition in the Christchurch housing market, prompting many buyers to spend a significant amount of money at auctions or deadline sales as they feel the effects of FOMO.
Harcourts Gold co-owner Lynette McFadden said they had seen buyers who were prepared to purchase a home “at any cost” and pay auction prices “well in excess of what you'd expect.”
“In all my years, I've never seen a market like this. Those spectacular prices are not happening every auction day, but we're probably seeing it every week. There's always a backstory, some people are just desperate to get into a property for one reason or another,” McFadden told Stuff.
Rob Parsons, a mortgage broker at Mortgage First in Christchurch, added that he was the busiest he had been in 24 years – with mortgage approvals now taking two weeks rather than the usual two to three days.
“The market has gone mad. We're not seeing any signs yet of it abating,” he told Stuff. “When the market's quieter people had more time to breathe and get their reports – but with more competition, there's pressure to put in an unconditional offer. Talk to your solicitor first. You might have to invest a bit of money to make sure you're not buying a lemon.”
Urban Edge Valuations property valuer Natalie Edwards said people who failed to buy a home in the past had a “tendency to pay too much,” noting that some sales had collapsed because the bank considered that the price was significantly higher than the house's market value.
“People buying properties on the spur of the moment are not always making the right choice. In a down market, that home might take them two years to resell, or it might have weather tightness issues,” Edwards said, as reported by Stuff.
“[Mortgage] pre-approval doesn't mean you can spend that amount on a house,” she continued. “A rating valuation is just a snapshot done by mass appraisal for rating purposes. The home may not have been viewed at all since it was built.”
