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Here’s how to tell which way the market is tipping

Balanced home market.resize

You must have read it somewhere by now, or if you haven’t let us do the honours: It’s a buyer’s market currently. But what does this ACTUALLY mean?

The state of the property market is driven by supply and demand which in turn is influenced by a range factors such as the state of the economy, interest rates, availability of credit, political and economic stability and so on.

Gerhard van der Linde, MD of Seeff Pretoria East says it is good to think of the market as a scale with buyers on the one side and sellers on the other side. As the numbers alter; more buyers, less sellers or the reverse, the scale tips from a position of balance/equilibrium to favouring buyers or sellers.

Equilibrium/Balanced Market

Equilibrium or a balanced market is when there is good balance between the supply of properties (properties on the market) and the demand for properties, thus enough buyers to match the properties for sale.

In this type of market, there is usually strong activity with plenty of buyers still on the hunt for the right property, but the market is also hinged and can tilt depending on which way the economic pendulum swings. If it suddenly swings with more buyers and fewer properties, then you start heading into a seller’s market.

Seller’s Market

We talk about a seller’s market when the demand for property rises faster than new properties are listed for sale. In this type of market, there is not enough properties to meet the demand from buyers and buyers start competing for a limited pool of properties. The buyer with the best offer – generally the highest price and fewest conditions – then tends to win out the day.

Competing offers then push prices upwards and prices start rising. Sellers can then become more ambitious with their asking prices. Properties also tend to sell quite fast. Offers and prices come in at close to or full asking price and sometimes above the asking price.

When economic and other market forces start bearing down on buyers, demand for property will start subsiding and the market tends to first move back to equilibrium and then to the other end of the scale, to a buyer’s market.

Buyer’s Market

This is the flipside of a seller’s market and it means that the supply of properties for sale now exceed the demand. In this case, buyers can literally pick and choose from a range of similar properties and they can drive down prices. Properties will now also take longer to sell and offers tend to come in at below the asking prices.

In a buyer’s market, the focus tends to shift to market related pricing and according to Steven van Wyk, MD for Seeff Centurion, if you are serious about selling, then you would need to set your asking price at the right level to attract buyer interest and offers.

While each market is very different, there are always opportunities, but you need to understand the various forces that come into play. During a buyer’s market, it follows that buyers can find good deals, but Van Wyk says that at the same time, they may struggle to obtain finance. It is therefore a good idea that a buyer takes a hard look at finances and potentially gets pre-approval before entering the market.

hometimes@pixelbaste.com

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