The property market is cyclical. This simply means that at certain times conditions favour buyers, and at other times they favour sellers.
Knowing the difference will enable you to take advantage of whichever phase the market is in when you are ready to buy or sell.
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Sellers’ market
When more buyers are looking for homes than there are properties for sale, sellers are placed in a strong position to negotiate a higher price for their homes. This is referred to as a sellers' market.
During this stage of the property cycle, agents often talk about buyers queuing up to buy units in new developments, for example. Home sellers frequently receive several offers after a single viewing session as buyers view with each other for the limited amount of stock available.
During this phase, ‘for sale’ boards are quickly exchanged for ‘sold’ signs, and property prices tend to rise more quickly.
This phase of the market is not the best time to be a buyer. First-time buyers, in particular, can find it difficult to contend with rapidly rising prices. Higher prices call for bigger home loans and higher deposits. You also need a higher income to qualify for a home loan under these conditions, and your monthly repayments will be higher.
Buyers’ market
In a buyers' market, conditions are reversed, with more properties for sale than people who are willing and able to buy them. As a result, it becomes far easier for buyers to negotiate better deals, including making a lower offer and more favourable interest rates on home loans.
A buyers’ market can result from various situations.
These include:
- A sudden surge in new developments which increases the number of units for sale.
- A rapid rise in interest rates makes it difficult for prospective buyers to qualify for new home loans.
- A decline in the economy discourages prospective buyers.
Whatever the cause, the effects are the same:
- Price growth slows down.
- Properties tend to stay on the market for longer before being sold.
- The difference between listing and selling prices increases.
This is not the best time to be a seller. However, agents are quick to point out that being in this phase of the market does not mean that properties don’t sell. It simply means you may have to work smarter to achieve a sale.
Tips for sellers
If your property sells in a buyers’ market, you will be in a strong position when negotiating the price of your next home.
It makes sense to do everything possible to achieve the sale as quickly as possible. To achieve this, you need to price your property correctly from the start and ensure it is ready to be viewed by prospective buyers.
To arrive at the correct price, it’s advisable to appoint an experienced and properly qualified estate agent who understands the market in your area. They also need to be in touch with what buyers are currently paying for homes like yours.
The correct agent will be able to advise you on how your home compares to others on the market and the level of buyer demand in your neighbourhood. They will also be able to tell you what your listing price should be in order to attract the most prospective buyers as the property is listed.
To ensure that your home is ready to be viewed, it should be in the best possible condition. Look at your home through the eyes of prospective buyers to see what needs attention.
Keep in mind that buyers who do not have much competition from other buyers and a few properties to choose from are likely to dismiss any property that looks like it needs a lot of work. They will simply move on to the next property on their viewing list.
Writer : Sarah-Jane Meyer