Buyer, seller or neutral markets - what are they and why the matter?
At some time or another, we’ve all heard the terms “buyer’s market” and “seller’s market” being bandied about in the world of real estate. Still, many people are not sure what these terms actually mean, how they could affect them as they buy or sell property, and if there is ever a moment of balance between the two (there is!).
This short article explains what is behind the terms and takes a look at how different markets can have a significant influence on the experience of buying or selling a home.
The seller's market - what is it?
As the name suggests, a seller’s market, also known as a “hot” market, is one that is especially favourable for those selling their property. This usually ties in with an upwardly mobile market or boom period, where demand outstrips supply. In a seller’s market, increased competition among prospective buyers to secure the limited number of properties available on the market can push property prices up, which is great news for vendors. Buyers are often willing to accept properties without making many (or any) demands, pay more than the asking price, and may bid very competitively at auction. Clearance rates are high, and properties are on the market for much shorter periods, often just days or a couple of weeks, as they are snapped up in the general frenzy.
What are the signs of a seller's market?
- Properties sell very quickly
- Sales prices tend to exceed listed prices
- Even less attractive properties sell quickly and for relatively high prices
- Auction clearance rates are higher than normal
- Seller’s don’t need to compromise or offer incentives to attract buyers
- The number of listings is comparatively low
How can a seller's market affect me?
As a vendor, this is clearly the optimum time to move your property. You are likely to get a higher sale price, better exchange conditions, and a faster turnaround for your property. Even so, fast-paced sales can catch you on the hop if you don’t have all of your inspections done and documents ready to go at the very start of your campaign, so make sure that you have expert help getting everything in place if you are selling in a hot market. As a buyer, this can be a trying time to find a property. You will face a lot more competition, and sellers are less likely to compromise on price or contract contingencies. Planning and research are the keys to success. Get pre-approval for your home loan so that you can make your best offer confidently and quickly. Research the area you want to buy in and draw up a list of non-negotiables for your home. This will save you valuable time, as you won’t be caught up inspecting homes that are not right for you and can focus exclusively on the ones that will suit your needs and your budget.
The buyer's market - what is it?
This type of market usually comes when there is a downturn in the property cycle and demand starts to dry up, often due to wider socio-political or economic issues. Less demand generally leads to lower sales prices, much more time, sometimes months, on the market, and greater flexibility from vendors, all of which favour the buyer.
What are the signs of a buyer's market?
- Properties take a lot longer, sometimes months, to sell
- Sales prices tend to be lower than expected
- It’s significantly harder to move less attractive properties
- Auction clearance rates may fall
- Seller’s may need to compromise or offer incentives to attract buyers
- The number of listings is relatively high in comparison to previous averages
What does a buyer's market mean for me?
As a vendor, a buyers' market can be challenging, although it’s still possible to achieve great outcomes, especially if you have realistic expectations and call on the help of experts. You may find it necessary to invest a little more time and money in preparing your property for sale to attract the greatest number of potential buyers and stand out from other properties in your area. Being patient and willing to negotiate or provide certain incentives to a buyer will also work in your favour if you need to sell in a buyer’s market. As a buyer, you will find a buyers’ market much less frenzied and stressful. You will be able to look around at properties that are spending much more time on the market and, perhaps, negotiate a better price or contract conditions to suit your needs. Research is still important, as is knowing what you want from a property. The good news is that you are more likely to find one that ticks all the boxes in a buyer’s market!
The neutral market - what is it?
As the property cycle turns, there is often a moment of balance between supply and demand. This is known as a neutral market as it doesn’t favour sellers or buyers but provides a relatively stable environment, with steady prices, average stock levels, and an expected time on the market of 4 to 6 weeks.
What are the signs of a neutral market?
- Properties tend to sell within 1-2 months
- Sales prices are generally very close to listing prices
- Average property prices remain relatively stable
- There is an equitable balance between properties for sale and buyers in the market
What does a neutral market mean to me?
Buyers and sellers are generally on par in a neutral market. There is room for negotiation on both sides, and all parties are likely to walk away from a property deal feeling satisfied.
A final word
Absolutes are uncommon in real estate, and markets can be very complex, changing quickly in response to wider, and often unexpected, geopolitical and economic issues. Despite these complexities, understanding and recognising the hallmarks of each market type can be a huge help when it comes to deciding whether the time is right for you to sell or buy a property. Always seek expert help from your trusted real estate agent, and consult with your financial advisor before making any major decisions.
Other buying, selling and investing articles and resources
Guide to property investment success in NSW
Selling a house or apartment in NSW eBook
Buying a house or apartment in NSW eBook
