Fear Of Not Getting Out!
The Australian Financial Review released an article on Sunday stating that while the fear of not getting out fast enough to preserve their capital has motivated some sellers, for others who are slower to accept the falling market, fear turns to regret.
Some investors are acting decisively to beat the the property clock, dropping their reserve prices to meet the market before it falls any further and wipes out whatever gains they have made on their investment.
Following the revelation in AFR Weekend that the property downturn has left the buyers of as many as 450,000 properties in Sydney and Melbourne with homes worth less than what they paid, weak weekend clearance rates point to the emergence of FONGO, or the fear of not getting out before prices fall further.
In Melbourne, buyer’s agent David Morrell said some vendors are still pitching properties too far above the market and are yet to recalibrate their expectations. With uncertainty as the federal election looms, buyers are keeping their powder dry.
So here’s what I think.
There are 4 critical parts to all of this.
- If you bought a house in most Sydney or Melbourne markets before 2016, you would be anywhere from 50% to 100% up on your investment. For example, property purchased for $600,000 may be around $1 million in value now.
- If you bought after 2016, that is a different conversation and easy to say now, but there were better cities and towns to invest your money in from that period onwards.
- You should never put yourself in a position where you need to sell your assets. You may want to sell them, but not needing to sell them gives you the upper hand to see the market fluctuations through any period. Sophisticated investors would have already taken their equity out of those gains 12 months ago, so effectively the market can fluctuate all it wants to if you do not need to sell, as you have your cash buffers and property in blue chip cities.
- If you didn’t do point 3 and release your equity, and also have to sell, you should be still at least 50% up on your initial investment you bought prior to 2016. It is almost impossible to save that sort of money so this property has worked out pretty well for you.
There should never be a need to apply FONGO unless you WANT to SELL!
Get in touch with me if you’re feeling the FONGO – always happy to chat about your investing journey and share some of my experiences. You can reach me at email@example.com.