Understanding a buyer's versus seller's market

You may well have seen a lot of market commentators refer to the current property market phase as a buyer’s market and that it is a good time to buy, but what does this mean and how does this differ from a seller’s market.

All economies and property markets go through cycles. Markets tend to ebb and flow between being a seller’s market or a buyer’s market. Generally, the economy will have a major effect on the market. During an economic growth phase consumers earn more money and will therefore be more inclined to buy more property. In contrast, when the economy declines, consumers buy less property and tend to offer lower prices.

Generally you can think of the property market as a scale. One the one side you have buyers and on the other you have sellers. If conditions favour buyers then the scale will tip at the buyer’s end and if conditions shift, it will tip at the seller’s end. If conditions are perfectly balanced, we talk about a “balanced market”.

What is a seller’s market?

A seller’s market is when there are more buyers looking for property than homes on the market. This creates competition among buyers for homes and sellers can often receive more than one offer which will drive prices up. It is not uncommon for sellers to achieve more than their asking prices.

During this market phase sellers can also usually put their homes on the market at a higher asking price. Properties tend to sell faster and there is a lot of movement in the market with sales volumes increasing.

What is a Buyer’s Market?

A buyer’s market is when there are more sellers looking to sell homes than there are buyers looking to buy them. We now find sellers competing for a limited pool of buyers. Because properties aren’t selling, you will find more homes on the market.

Buyers will put in lower offers and it will take much longer to sell a property. The overall effect is that it slows down the market as sales volumes drop. Buyers are generally able to negotiate strongly during this phase of the market.

Which is better for sellers and buyers?

While you want to sell in a seller’s market and buy in a buyer’s market, the reality is that there is no right time to sell or buy property. It all depends on your personal circumstances. If you are looking to buy, then of course the current buyer’s market is just right for you. It could, however, be equally opportune if you are selling as you can take advantage of the same favourable buying conditions.