De­ci­sions clouded by feel­ing

The Courier-Mail - Property - - REALESTATE - TIM MCIN­TYRE

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.”

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