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The difference between a buyer’s market & a seller’s market

May 2, 2018 9:00 am by Upside

Anyone who’s been involved with property knows that the property market scales often tip in favour of buyers or sellers – and knowing the difference between the two is key to getting the best bang for your buck no matter which side of the fence you’re on.

But what does it really mean when people say it’s a ‘buyer’s market’ or a ‘seller’s market’? Here’s a rundown.

What is a buyer’s market?

In a buyer’s market, real estate is more affordable because supply exceeds demand. This means there are more homes on the market than there are buyers – putting downward pressure on prices.

In a buyer’s market, properties not only tend to sell for less, but they also tend to stay on the market longer before an offer is made (known as ‘time on market’). Less interest from buyers means vendors need to price their properties more competitively to sell within a reasonable timeframe.

Although a buyer’s market typically means properties are cheaper to buy, it doesn’t necessarily mean that those properties offer much growth potential in the short term.

What is a seller’s market?

As you can probably guess, a seller’s market is the opposite of a buyer’s market in that demand exceeds supply, meaning vendors can usually sell their properties quickly and at a high price.

In a seller’s market, time on market tends to be low and so do auction clearance rates, while median home and unit prices are high. Under these conditions, vendors are less likely to budge on price simply because they have more negotiating power. It’s also not uncommon for properties to sell above their list price in a seller’s market as buyers compete for the hottest commodities.

Seller’s market and buyer’s market examples

The United States housing bubble and subsequent bust from 2006 to 2012 is a good example of seller’s markets and buyer’s markets at their extremes.

During the mid-2000s, historically-low interest rates and lax lending rules meant more people were able to take out mortgages – inflating property values due to high demand and creating a seller’s market.

The housing market crash that followed as a result of increased foreclosures and other factors drove demand down and supply up – creating a buyer’s market.

On our home soil, some experts speculate that Sydney – Australia’s largest housing market – is moving from an extreme seller’s market to a more balanced market as property price growth slows and APRA (Australian Prudential Regulation Authority) cracks down on lending regulations. Interestingly, this is driving higher demand for Melbourne real estate and creating a home-selling wave there.

To see how home sales in your area have been trending, take a minute to request your free online property value estimate. This report includes comprehensive data on historic and comparable sales in your area, so you can see how your home fits in.

How to tell if it’s a buyer’s or seller’s market

In most cases, property markets aren’t strictly favourable to buyers or sellers but rather a combination of both. For example, most cities in Australia have suburbs where demand is greater than supply and vice versa, creating pockets of both buyer’s markets and seller’s markets.

So while there’s no golden rule for either, here are some of the typical characteristics of buyer’s and seller’s markets:

Buyer's market Seller's market
Time on market for properties Longer Shorter
Auction clearance rates Lower Higher
Property prices Lower Higher
Rental yields Higher Lower

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