The Psychology of Condo Buyers: Why FOMO Rules the Market

The Singaporean property market has long been a hotbed of competition, where oversubscribed condominium launches are a regular occurrence. Beyond practical considerations like location and pricing, a powerful psychological phenomenon often drives this frenzy: Fear of Missing Out (FOMO). Leveraging principles from behavioural economics, we can uncover why FOMO plays such a significant role in condo buying and how it fuels oversubscription.

1. Scarcity Bias: The Allure of Limited Availability

Scarcity is a cornerstone of human psychology—when something is perceived as rare, its value automatically increases. Developers and agents often highlight oversubscription numbers, creating a sense of urgency. For example, when a project is reported to be "4.3 times oversubscribed," buyers feel that securing a unit is akin to winning a limited-edition prize.

• How It Works: The fear that a desirable opportunity will disappear spurs buyers to act quickly, even if they are unsure of their decision.
• Real-Life Effect: Buyers may submit multiple cheques even when they don’t fully intend to purchase, just to "get a unit".

2. Herd Mentality: Following the Crowd

Humans are social creatures who tend to mimic the behaviour of others, especially in uncertain situations. If hundreds or even thousands of people are interested in a particular project, individuals are likely to assume that the project must be a good investment.

• How It Works: Seeing large crowds at show flats or hearing about friends registering for the same development reinforces the belief that the project is "the one to get."
• Real-Life Effect: This behaviour cascades, turning moderate interest into an overwhelming rush.

3. Loss Aversion: The Pain of Missing Out

Loss aversion, a well-studied behavioural economic principle, states that people feel the pain of losing something more acutely than the pleasure of gaining something equivalent. In the context of condo buying, the idea of losing out on a potential capital gain or a dream home is a strong motivator.

• How It Works: Buyers often rationalise their rush by convincing themselves that missing the launch means missing a once-in-a-lifetime opportunity.
• Real-Life Effect: This pushes even cautious buyers to overextend their budgets to secure a unit.

4. Anchoring Effect: Setting Perceived Value

When developers release promotional pricing or early-bird discounts, it sets an anchor in buyers’ minds regarding what constitutes a good deal. Even if subsequent price increases still fall within the buyer's budget, they feel compelled to act before the perceived "value" diminishes.

• How It Works: Early-bird prices create a reference point, making buyers feel they are getting a bargain by acting early.
• Real-Life Effect: Buyers rush to secure units, fearing they’ll end up paying more later.

5. Social Proof: Success Breeds Success

When oversubscription numbers are publicised, they act as social proof that the development is a worthy investment. This is especially effective in Singapore’s tight-knit communities, where word-of-mouth recommendations hold significant sway.

• How It Works: People trust the wisdom of the crowd, interpreting high demand as a sign of quality or potential for appreciation.
• Real-Life Effect: Buyers are more likely to choose a project simply because it appears popular.

6. Instant Gratification: The Thrill of Securing a Unit

Modern buyers crave immediate results, and the competitive nature of condo launches provides a rush of adrenaline. Winning a ballot or being among the first to choose a unit feels like an achievement in itself.

• How It Works: The process of submitting cheques, balloting, and securing a unit taps into buyers’ desire for instant gratification.
• Real-Life Effect: Buyers prioritise the short-term satisfaction of "getting in" over long-term considerations like affordability.

7. Status and Prestige: The Condo as a Social Symbol

In Singapore, owning property is often seen as a status symbol. Condos in high-demand areas or with luxury features enhance social prestige, making them highly desirable.

• How It Works: Buyers equate owning an oversubscribed unit with being part of an exclusive group.
• Real-Life Effect: This status-driven motivation overrides purely practical concerns.

8. Gamification of Buying: The Lottery Effect

The ballot system for popular developments turns condo buying into a high-stakes game. The process of waiting for results or competing for limited units heightens excitement and emotional engagement.

• How It Works: Buyers feel they are participating in a lottery, with the reward being a unit in a highly coveted project.
• Real-Life Effect: Even those who were initially hesitant may join the fray for the thrill of it.

9. Emotional Anchoring to Brand or Developer Reputation

Reputable developers create a sense of trust and reliability. Buyers feel reassured that a project by a well-known developer will hold its value or be completed on time.

• How It Works: The brand becomes a psychological anchor, driving demand regardless of market conditions.
• Real-Life Effect: Buyers flock to branded developments, fearing that lesser-known options might not deliver the same returns.

Conclusion: Why FOMO Isn’t Always Rational

FOMO drives buyers to act impulsively, often making decisions based on emotion rather than logic. While oversubscribed developments can be great investments, buyers should remember that not every "hot" project will deliver the promised returns. Understanding the psychological triggers behind these decisions can help buyers approach the property market more rationally, ensuring they make choices aligned with their long-term goals.