Decisions clouded by feeling
A RUSH to enter the property market can cause some potential homebuyers to make decisions based on emotions, which could prove costly down the track.
A new Commonwealth Bank survey of more than 1000 home buyers and investors revealed many purchasers failed to leave emotions at the door when weighing up a property deal.
The study found 75 per cent of property buyers claimed to be rational buyers, but their final decision was significantly influenced by emotions.
The most common emotional characteristic included liking the feel or vibe of a property (37 per cent), an instant attraction to the property (22 per cent) and that it suited the buyer’s personality (21 per cent).
“Given buying a property is one of the biggest financial decisions most of us will ever make, it’s vital the final purchasing decision is based on sound rational judgment and not emotional justification,” said Clive van Horen, general manager of home loans at the Commonwealth Bank.
But leaving emotions at the door was easier said than done, with many buyers frustrated after long months of missing out on properties.
“We’re emotional animals and emotions affect many parts of our lives and decisions,” said Dr Tim Sharp, executive coach and clinical psychologist.
“We can be aware of the emotions and manage them, to minimise the likelihood of making a bad decision.”
The research revealed emotions not only influence which property buyers choose, but also the amount they paid, with 44 per cent claiming they paid more because they liked it.
“We then rationalise it, by later saying the faults or limitations of the house aren’t that important, when in fact they are,” Dr Sharp said.
While emotions played a role at the point end, most buyers begin the process focusing on rational factors.
More space (25 per cent), downsizing (15 per cent) and relocating (15 per cent) were popular purchasing drivers for subsequent homebuyers.
For investors, poor performance of the stock market and other investments were the main reasons to purchase property.
IT’S ALL ABOUT STAYING WITHIN YOUR MEANS AS BEST YOU CAN
“When we start looking for a property we have a very clear objective, for example, needing a bigger house to make room for a new member of the family,” Dr Sharp said. “But as we go through the different stages of looking, we start to become emotionally connected to different drivers, such as imagining ‘how great it would be to entertain family and friends in this room’, or ‘how much the kids would love the garden’. This removes us further from our original objective, and more importantly in some cases, budget.”
With current interest rates at historical lows, buyers should be especially careful not to overstretch their budgets, as mortgage payments will only increase as rates rise.
“It’s all about staying within your means as best you can because the consequences can affect your health, ability to work, relationships, parenting and others,” Dr Sharp said.
Mr van Horen said it was worth constantly revisiting your original objectives for buying a new property and use that to assess homes before making an offer.
“Homebuyers should make sure they only look at properties within their budget and set themselves strict limits when negotiating on the sale of a property,” he said. “Always look at the bigger picture, it’s never worth paying more than you can afford simply because you believe this is the ‘perfect’ property for you.”