Tony Clarke, MD of the Rawson Property Group, explains what a buyers’ market is, how it affects the average homeowner, and what buyers and sellers can do to reach their property goals in today’s market conditions.
What is a buyers’ market?
“A buyers’ market is when there are more properties for sale than there are buyers to buy them,” says Clarke, “so instead of buyers competing against each other for properties, sellers have to compete to attract buyers. As a result, price growth often slows, stagnates or even decreases, and homes tend to linger a little longer on the market.”
According to Clarke, a buyers’ market can be caused by any number of factors, including high interest rates, economic uncertainty, high unemployment rates and even unrealistic property prices.
“Anything that makes property purchases less accessible, or less desirable, to the general public could contribute to shifting conditions towards a buyers’ market,” he says. “This isn’t necessarily a bad thing – in fact, it’s a very important part of the property cycle. These occasional reality checks help prevent unsustainable price growth and protect against property bubbles.”
It should come as no surprise that a buyers’ market is generally considered to be the ideal time for property purchases. Contrary to popular belief, however, buying in a buyers’ market isn’t without its challenges.
“The major benefit of buying during a buyers’ market is that there is a little more breathing room to do your homework and negotiate a fair deal,” says Clarke. “Just because there are more options and less competition doesn’t mean you can low-ball every offer, though. A desirable home at a market-related price will always attract attention, regardless of market conditions.”
Clarke recommends buyers take some time to familiarise themselves with the market so that they can make an educated offer when they find a property they like.
“It’s not a bad idea to expand your search to include more expensive properties,” he says, “since sellers sometimes list at optimistic prices with the intention of being bargained down. You don’t want to miss out on those opportunities – just be very careful not to overextend yourself. Challenging financial times are often the hallmark of buyers’ markets, and you don’t want to bite off more than you can chew.”
Getting too cheeky with your offer can also be risky, not only because you could be outbid by another buyer, but also because sellers sometimes take these things personally.
“Nobody wants to sell their beloved home to someone who clearly doesn’t appreciate its value,” says Clarke. “It’s important to be respectful when making an offer, particularly when you’re offering less than asking price.”
To soften the blow of a lower-than-asking-price offer, Clarke suggests making all other aspects of your offer as attractive as possible. This includes getting prequalified for a bond and minimising any inessential suspensive conditions.
“If you can’t offer the seller their full asking price, at least you can offer them a smooth and easy sale,” says Clarke. “Don’t cut corners on things like home inspection reports, of course, but be open to compromise where you can.”
Selling in a buyers’ market
Unless you’re a first-timer, buying a home during a buyers’ market will likely mean selling a home during a buyers’ market as well. According to Clarke, this doesn’t have to be a negative experience, particularly if you have a strong and experienced sales team on your side.
“The key to selling well in a buyers’ market is to make sure your property stands out of the crowd,” he says. “Accurate pricing and intelligent, targeted marketing are essential, but so are exceptional photographs, compelling descriptions and well-run show houses. If you don’t have the full package, buyers could easily overlook your home, and you could find yourself stuck in limbo for months at a time.”
In challenging market conditions, the quality of your estate agent can make all the difference, and Clarke warns sellers not to be tempted to hand mandates to agents based solely on their proposed listing prices.
“It’s always tempting to go with the agent who promises you the highest sales price,” says Clarke, “but this can be detrimental to your sale, particularly during a buyers’ market. It’s a far better idea to choose an agent who can back up their recommended figures with a solid comparative market analysis which gives you a clear understanding of where your home fits into the market and what competition you can expect from other listings in your area.”