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FOMO is fuelling an already red hot market.

Desperate buyers have adopted a "no fear" mentality when buying property says KR Peters Director Peter Nicolls.

Mr Nicolls, who has 45 years' experience in the property game, says a fear of missing out is fuelling an already red hot market.

"Buyers have no idea where to set their upper limit as they understand that property prices have been skyrocketing and the fear of loss is too great," Mr Nicolls said.

"They believe no matter what they pay today that they will not overcapitalize."

He said this was particularly true of properties in a good location or those with a unique 'wow' factor such as great views.

He explained the explosion in property prices was also being fuelled by record low interest rates, government incentives and grants and a loosening of lending criteria by the major banks.

In the March quarter Melbourne's median house value shot past $1 million for the first time, jumping 8.8 percent to $1,004,500. It's a story being repeated around the country.

Mr Nicolls warned buyers that there were danger signs on the horizon as the market peaks.

On Friday 21 May, the CBA announced hikes in its 3-year and 4-year fixed rates for owner-occupiers paying principal and interest by 0.05 per cent. It also increased some interest-only loans by .10 percent.

Mr Nicolls said buyers should expect more rate increases in coming years and prudent buyers should have factored this in when committing to large loans.

He said another danger in the property market was the acute shortage of materials and trades.

"The cost to construct has increased approximately 12 % in the past 4 months. This too will need to be passed on to the buyer," Mr Nicolls said.

"It will be interesting to see how the market reacts after 1 July 2021 when the 50% stamp duty savings to first homebuyers ceases.

"My belief is that the property market has peaked and homebuyers need to tread carefully in order not to overpay because when interest rates rise homebuyers will get hurt."