Advice and Opinion

How to spot a real estate buyers' or sellers' market

Just about everyone knows that the real estate market is cyclical – or that there is sometimes more demand for homes than the supply of properties for sale, and sometimes an oversupply because demand has dropped off.

“What they often don’t know, however, is what this means in practical terms to those who are in the market to buy property and those who are trying to sell their homes”, says Bill Rawson, Chairman of the Rawson Property Group.

“When you hear people talk about a ‘sellers’ market’, for example, what they are really saying is that there are fewer properties for sale than there are prospective buyers – and that sellers are thus in a strong position to negotiate higher prices for the homes they are selling.”

During this stage of the property cycle, he says, one often hears about buyers queuing up to buy units in new developments, for example, or home sellers receiving multiple offers after a single show day as buyers try to outbid each other for the limited amount of stock that is available. It usually also doesn’t take long for any “for sale” boards in the area to become “sold” signs.

“It is thus also the market phase during which property prices tend to rise fastest – and usually not the best time to be a buyer. First-time buyers, especially, can have a hard time keeping up with rapidly rising prices and the resulting need for bigger home loans and bigger incomes to support those loans.”

By contrast, Rawson says, being in a “buyers’ market” means that the situation is reversed and it becomes easier for buyers to negotiate a favourable deal because there are more homes for sale than people who are willing and able to buy them.

“This situation can occur for a number of reasons, such as a sudden surge in new developments and increase in the amount of stock for sale, a decline in the economy which discourages prospective buyers, or a rapid rise in interest rates that makes it really hard for prospective buyers to qualify for new home loans”.

“But the practical effects are always the same, namely that price growth slows right down, properties tend to spend much longer on the market before they are sold, and that there are much bigger differences between asking prices and selling prices.”

For obvious reasons, he says, this is generally an anxious time to be a seller – although it is important to note that being in this phase of the market does not mean that your property won’t sell at all.

“What is more, once it is sold and you have the proceeds in hand, you are going to be in a very strong position when it comes to negotiating the price of your next home, so it is worth doing whatever it takes to achieve your sale within the shortest possible timeframe.”

The key, of course, is to price your home correctly from the outset, and the way to do that, says Rawson, is to enlist the help of a properly qualified and experienced estate agent who knows the market in your area in detail and is in touch with what buyers are actually paying for homes like yours right now.

“An agent like that will give you the best advice about how your home compares to others currently for sale, about the level of buyer demand in your neighbourhood, and about what your asking price should be in order to attract the most prospective buyers as soon as the property is listed for sale.”

It also helps, he says, to ensure that your home is in the best possible condition and “show ready”, bearing in mind that buyers who have many properties to choose from and not much competition from other buyers are likely to dismiss any property that looks as if it needs a lot of work and just move on to the next viewing.