Beware of ‘sizzling’ markets


I’m happy to see that confidence is finally returning in many markets across Australia, in particular the NSW markets.

Despite forecasts of weaker economic activity in the coming months, homebuyers and investors are out in force to get their hands on available properties. Auction clearance rates are up across the board in Sydney, and some anecdotal reports show that  enquiries have gone through the roof over the past few weeks. Real estate agents no longer have to chase buyers and are now busy fielding offers.  

The great thing about a market on the rise is that, if you find a good property at the right price, you could ride the wave on its way up and see an immediate increase in value on your purchase.

And herein lies the challenge. You could also get swept up by the excitement of the buying process and the perceived competition. This is where you could potentially get burned.

If you let yourself get carried away by irrational exuberance or unsustainable buyer enthusiasm, you could end up buying a mediocre property and paying a premium for it.

This usually happens if you face a lot of competition from emotional homebuyers who would pay anything to get their dream homes. If your offers have been rejected too many times, you might be tempted to enter the heated bidding war.

But thinking that there’s not enough property to go around is the surest way to overpay and lose money. If the market you’re looking at is getting a bit too hot for you, with multiple offers on a property’s first open day, don’t stick around and play the homebuyer game – you’re going to get burned.

Instead, ensure that you get your finances in order and crunch the numbers. It’s important to establish your bottom line, and don’t get tempted to pay more than is necessary to secure a property.

If the seller won’t accept, move on, perhaps to another suburb with similar fundamentals but slightly lower prices. Remember: the deal of the century comes every week. There are plenty of properties for your hard-earned cash.

The point is, when people start paying ridiculous amounts of money for properties that weren’t even getting any interest just a few months ago, you should be wary. This is a sign that overconfidence in the market is taking over, and there is a chance that prices in the area will overshoot to an unsustainable level that will take many, many years to correct.

You don’t want to be left holding the baby when this happens.

Nila Sweeney is the managing editor of Your Investment Property magazine, Australia’s favourite property investing magazine. For extra dose of inspiration and motivation, check out her personal blog at



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Nila Sweeney is managing editor of Australia’s leading property investment magazine, Your Investment Property, Canada’s only property investment magazine, Canadian Real Estate Wealth and Your Mortgage magazine. An active property investor herself, Nila owns a number of properties in Australia and overseas. She has worked as a TV journalist for CNBC Asia and CNN International for more than 10 years and has been writing about the Australian property markets for more than eight years.

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