Why Sydney prices are really spiking
Autumn auctions have certainly seen a spike in the fear of missing out bidding syndrome.
But I sense the bigger, more enduring, trigger influencing the rising housing market is of buyers who just don't want to wait as they seek their new post-pandemic lifestyle.
The 'life is too short to dally around' philosophy is the key reason prices have often gone crazy at recent weekend auctions. This mindset is set to be everlasting, and will remain evident even when interest rate rises come our way.
As house prices rise far faster than incomes, it is behavioural economics at work, rather than the traditional economics learnt at university.
It is obvious home buyers are mostly looking for detached dwellings, rather than apartments, which is leading to a fundamental mismatch of supply and demand that is sending prices higher.
"A lot of people are looking to go into bigger places; it's a bit of a COVID impact," Westpac boss Peter King recently noted.
More often than not, it is the locals who are the ones pushing the prices up, sometimes going head to head against expatriates who yearn for the homeland as they see how Australia has managed the pandemic.
The price boost is most obvious among the wealthiest of buyers across the capital cities and the regions, but that's an ever-widening pool these days with Australian household wealth hitting a record last month.
The Australian Bureau of Statistics (ABS) data showed the highest quarterly growth rate recorded since 2009, as household wealth rose by 4 per cent in the December 2020 quarter to a record high of $12,033 billion or $467,709 per person.
Prestige agent Ken Jacobs, of Forbes Global Properties, believes the impact of COVID-19 has caused people "to confront their mortality, resulting in a fundamental change of thinking to act now to improve lifestyle rather than accumulate for the future."
The issue of mortality has also prompted the reshaping of the bank of mum and dad (BOMD). I sense a pivot where the BOMD is now assisting the capacity of buyers in securing their upgrade into bigger family homes. In recent times the BOMD trend saw deposit funds directed into assisting children into their first homes.
Parents are giving, lending or underwriting record amounts of home purchases, making the BOMD Australia's ninth-biggest mortgage lender, according to an analysis by researcher Digital Finance Analytics (DFA). DFA calculates parental contributions are averaging more than $89,000, an increase of nearly 20 per cent in the past year.
Apparently the BOMD has about $34 billion in loans. It has become even more entrenched because of the ageing population demographics, which mean traditional inheritances typically don't come from parents until their children are in their 60s or 70s.
The 'I will take it now' trend is a departure from past generations - especially those who lived through the last depression, with the loss of wealth and jobs prompting extraordinary household fiscal conservatism.
Originally published as Why Sydney prices are really spiking