Perth property stampede is driven by herd mentality: Terry Ryder
If an agency offered you a $30 gift voucher to submit your home to an appraisal, with a promise of a $250 gift voucher if you listed it with them, would you believe the appraisal?
This is life in the Perth market today. People are clamoring to buy and making offers above the asking price to secure a property. Agents who can’t get enough stock to meet demand are offering gift vouchers and frequent flier points to entice home buyers to list their properties for sale.
Why is it this way in the Perth market at present? It’s because people are herd animals and in no activity are their pack instincts more alert than in real estate buying and selling.
It was clear in the middle of last year that Perth was heading for a new phase of price growth. All the key indicators that forewarn a rising market were in place. But few people were buying.
Why not, when the buying was good and the future was clear? Because the herd was sitting around in the sun, having a graze. Herd animals don’t like acting independently. They prefer the safety of the pack.
Now the herd is restless. Those who have been sitting on a nearby fence have started to get the splinters out of their butts and join the herd.
Why are people piling in and joining the pack? Because if everyone else is doing it, it must be right – right?
Eventually there will be a stampede. The herd is easily spooked.
This is why we have booms and busts in real estate markets.
The average consumer would rather be part of herd that’s stampeding towards a cliff, than detach from the herd and trot in the opposite direction.
Here’s the rub. No one ever got rich following the herd. Those who achieve notable success move in the opposite direction – or, at least, lead the herd, remembering to break loose before the pack reaches the edge of the cliff, where many herd members will meet a painful death (financially) or sustain major injury.
Two years ago, when the Perth market was going nowhere, there were a lot more houses for sale than there are today. Conversely, there were few buyers, while today, with limited stock available, everyone wants to buy.
Right now, according to reports, we have something akin to panic buying in the Perth market, particularly at the lower end. Many homes are selling within days of being listed or at their first open day. People are getting into bidding wars with competitors and paying well above asking prices.
Were these buyers not in a position to act a year ago, when prices were low and competition was scarce? Did they not see the upward trend coming? Or was it simply that they were afraid to take action outside the comfort of the herd.
This, sadly, is standard behaviour for real estate consumers. Their actions are driven, not by careful research and independent thought, but by the impulse to do what everyone else is doing.
The herd rules.
Terry Ryder is the founder of hotspotting.com.au