FOBO knocks Christchurch for six: What is it and what is it doing to house prices?

- Buyers in Christchurch are experiencing FOBO, or “fear of a better offer”, and it’s affecting vendor confidence.

- Harcourts Grenadier auctioneer Ned Allison noted a 36% increase in listings, leading to buyer indecision.

- Agents report that while properties are still selling, buyers are waiting for the perfect property and price.

Buyers in New Zealand’s second-biggest housing market have FOBO and it’s a worry for sellers.

FOBO isn’t FOMO – “fear of missing out”. And it’s not FOOP – “fear of over-paying” – although it’s closely related. FOBO is “fear of a better offer” and it has left some vendors in Christchurch in a cold sweat.

Harcourts Grenadier auctioneer Ned Allison said the new phenomenon had crept into the Christchurch market in the last three months.

The appearance of FOBO – a term Grenadier agents had coined – had followed the recent spike in listings in the city (OneRoof figures show almost 3000 extra homes have been listed since September). Buyers have been spoilt for choice, and some are now unsure as to what to do next: should they pounce now or wait for something better to come along.

His agency alone has 36% more properties for sale year-on-year, and some buyers were unwilling to commit, Allison told OneRoof. “It’s not all that easy at times. At times it’s confusing them.”

He added: “Don’t get me wrong, things are moving but things can be a little bit all over the place right now.”

Allison cited as an example a Northwood home his agency had listed. It was the only one of its kind when it went live in October, but by the time the auction three weeks later it was competing against 14 similar properties in the suburb.

“It just shows you how quickly it’s changed.”

Allison said “fear of over-paying” was less of an issue as it was still a pretty fair market for both buyers and sellers in terms of value.

He said the rise in seller confidence on the back of recent interest rate falls had coincided with the traditional spring surge in listings. “There’s a little bit of catch-up as well.”

Harcourts Gold agent Cameron Bailey told OneRoof his agency had also noticed a shift in sentiment. “I’ve never seen our listings board so heavy with listings and the listings for the last few months have been outweighing the sales. Usually, they would be even or there would be more sales so it’s the first time in my 20 years of real estate that I’ve seen our listings outweigh the sales.”

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While he was reluctant to call it an oversupply just yet, he said the surge had given buyers plenty of options. “They have that feeling that they don’t need to rush into anything and they are prepared to wait for the perfect property at the perfect price.”

Bailey said sellers who were unrealistic about price were “just getting left behind”.

“You can see that the good properties are busy and properties with a few challenges or a few limitations are a bit harder to sell so you can really see the difference between what’s good and what’s really good and what’s maybe not so good at the moment,” he said.

Bailey said properties with obstacles such as cladding or busy roads were harder to sell because buyers could go around the corner and find a better one for sale.

Harcourts Gold salesperson Cameron Bailey hasn't seen the listing board so full in his entire career. Photo / Supplied

Bayleys agent Adam Heazlewood had also come across FOBO, but said it was less of an issue at the upper end of the market because many of the properties in that price bracket were few and far between.

However, he had just lost a buyer on a property that was heading to auction this week. The buyer had found something they liked better and bought it instead. “They had already completed some due diligence etc,” he said.

Bayleys Wellington general manager Grant Henderson said there was a bit of FOBO happening in the capital, too. Vendors were feeling confident about the OCR cuts but buyers were not feeling the positive effects.

“So while vendors were going, ‘Look at this, we are off to the races’, the buyers are saying, ‘Oh well, it still costs this much to borrow and there’s no clear signals that it’s easier for me to get more money’.”

Henderson said properties were still selling, but the magic number tended to be between $500,000 and $800,000. Those in the higher price range were spending longer on the market.

“It’s a very tight balance at the moment and it’s a matter of, ‘Why are you selling and why do you need the money?’.”

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