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Buyer’s market vs. seller’s market: Know the difference

November 11, 2019 10:00 am by Upside

Anyone who’s studied the property market knows that the 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, they also might not offer much growth potential in the short term if the market is continuing on a downward trajectory.

What is a seller’s market?

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 favourable 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 set to become a seller’s market again due to a forecasted undersupply of housing. This will likely drive Sydney house prices up further, marking the end of the steepest downturn since the 1980s.

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 |

Tips for selling in a buyer’s market

In an ideal world, you would be able sell during a seller’s market when property prices are at a peak and buyer demand is high. But there are a number of reasons why you might need to sell in a slow market, such as a change in family circumstances or because you’re moving to a different area. In any case, there are still things you can do to help secure the best price and sell within a reasonable timeframe, even in a buyer’s market:

Cast a wide net – Instead of waiting for prospective buyers to come to you, you’ll need to get in front of as many eyeballs as possible to improve your chances of selling. In addition to listing your property on the usual platforms, talk to your real estate agent about marketing your property on places like social media and other community platforms to give it as much visibility as possible.

Have your home professionally staged – If you’re planning to sell your home to live in (rather than knock-down), professional home staging can go a long way to getting you the maximum sale price. It helps accentuate the space and gives prospective buyers a view of your home as an attractive, modern space with plenty of lifestyle appeal.

Be flexible – You’ll want to take advantage of any potential opportunities that pop up, and that means being flexible and ready for inspections at any time. Keep on top of those little chores so your home is at least largely presentable for any prospective buyer who wants to make a last-minute viewing, as it could only one to make the sale.

Consider incentives – Buyers are more likely to ask for incentives in a buyer’s market, so consider offering a couple upfront. This could be anything from throwing in the dishwasher and fridge with the property to offering to pay council rates for the first few months after the sale. Think about what you can do to sweeten the deal and get an edge over comparable properties in the area.

Choose a trusted real estate agent – Don’t just go with the most recognisable real estate agency by default. Make sure to do your research and ask the right questions when evaluating real estate agents so you can be confident the person you choose has an in-depth knowledge of your market and a solid track record. Sites like Rate My Agent are useful for seeing other people’s experiences with different agents.

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