Buyer, Seller And Neutral Markets - What Are The Differences And What Do They Mean To Me?

30/09/2020 | 5 MIN READ

Anyone who has studied the property market, knows at different times, the scales tip in favour of buyers or sellers, but what does this actually mean, how does it impact you as a buyer or seller and what happens if the market is neutral and no one has an advantage. Here’s a look at each of the different markets and the signs to look for to determine what market your suburb or area is in.

Timing the real estate market is complex. It can change quickly depending on wider economic, political and unexpected global issues like the pandemic we are experiencing now. However, understanding the different markets and signs to look for can help you when determining whether it’s the right time to buy or sell.

What is a seller’s market?

A seller’s market is a real estate term that describes a market where demand exceeds supply, or in other words where there are more real estate buyers than sellers. Effectively, there are not enough properties on the market for all the interested buyers, so demand for property outstrips supply. This often leads to multiple buyers interested in a single property, resulting in bidding wars and in many cases higher than expected sale prices.

Needless to say, if you are considering selling, selling in a seller’s market is preferable. But how do you pick a seller’s market?

Signs of a seller’s market?

Homes are selling for high prices - even in ‘original condition’
Sale prices are exceeding listing prices
Compared to previous months or years the number of properties on the market is low
The percentage of successful sales and auction clearance rates are higher than normal
The economy is on the rise
Low days on market - Properties are selling rapidly and sold stickers are quickly being added to signboards
Sellers don’t offer incentives or discounts

What does this mean if you are a buyer?

During a seller’s market demand is high and sellers are often inundated with multiple offers. Prices often rise, more buyers offer non-contingent contracts and are less likely to ask sellers for concessions or changes to the contract.

If it is a seller’s market and properties are being snapped up quickly it may be better to put down your best offer first. This is where doing your market research becomes important. Knowing what you should be paying for the property based on market data and discussions you have had with the Sales Agent, is key to having your offer accepted.

Tips on making an offer in a seller’s market

Don’t offer lower than the listing price
Consider offering a larger deposit
Don’t request favours or have too many conditions to the sale
Offer the seller a few extra days to move out after settlement
Submit pre-approval of your loan and proof of funds documentation

What does it mean if you are a seller?

If you’re lucky enough to be experiencing a seller’s market in your area, and you’re keen to sell your property, now may be a great time. To make the most of the market ensure you:

Work with your agent to create a strategy that is focused on delivering outstanding results
Understand what similar properties in your area are selling for so you can gauge your pricing
Prepare your home for sale as you want to encourage as much buyer competition as possible, as competition can equal higher prices
Invest in a strong marketing campaign to reach as many buyers - passive, active, local and out of area including
- Signboards
- Advertising on real estate portals eg realestate.com.au, domain.com.au, allhomes.com.au etc
- Database marketing
- Paid social media advertising
- Letterbox drops
- Print media
- And other options your agent would suggest

What is a buyer’s market?

The term buyer’s market refers to when the conditions are more favourable to buyers. This occurs when there are more properties on the market than there are active buyers. If buyers have a range of properties to choose from within their price range and limited competition from other buyers, they are in a stronger position to negotiate the sale and potentially purchase a property for less than the original listed price.

What are the signs of a buyer’s market?

There are a higher number of properties for sale or auction than in previous months or years
Properties are consistently selling for less than expected
Properties stay on the market for longer than the average
Current listing price is lower than previous purchase price
Asking price for properties start to drop
Sellers start to offer ‘extras’ as part of the sale eg: longer settlement

What does this mean if you are a buyer?

In a buyer’s market whilst you may have more choice and therefore feel like you have more time to make a decision on what to buy and how much to offer, if you have found your dream property, do not wait to put an offer in. Go in with a strong offer and go in quickly.

Tips on making an offer in a buyer’s market

Understand recent comparable sales
Talk to the Sales Agent about what the owner may accept
Go in with a strong offer based on market conditions
Submit pre-approval of your loan and proof of funds documentation
Be prepared to negotiate and make sure you are ready for a ‘yes’

What does it mean if you are a seller?

Selling in a buyer’s market can be a great time to make an upgrade. If you are selling and buying in the same market, you can potentially jump ahead into a property that may be unobtainable in another market.

If you are selling in a buyer’s market, you need to stand out in the marketplace for buyers to notice your property. Ensure you:

Know your local competition and how much they are pricing their property at
Price your property appropriately and accurately
Highlight key / unique features of your property
Prepare your property for sale to make it more enticing
Be flexible and ready to negotiate
Consider offering incentives such as longer settlement or discounting your price

What is a neutral market?

The third type of market is called a neutral market and as the name suggests it doesn’t favour either a seller or a buyer. It implies there are no large ups and downs in demand, supply or price.

Signs of a neutral real estate market

If you look at the number of properties that have been listed for sale over previous years, the current listings numbers are average
Property sale prices are close to the listing price
The average price of a property is neither increasing nor decreasing
The number of buyers is stable
Properties are selling within 4-6 weeks after listing

A final word

In most cases, property markets aren’t strictly a buyer or seller’s market, but rather a mix of both. For example, most cities and regions in Australia have suburbs where supply is greater than demand and vice versa, creating a mix of both buyer and seller markets.

However, understanding and being able to recognise the signs of the different real estate markets is important when buying and selling. Your local McGrath Real Estate Agent is highly aware of the current conditions, whether it is a sellers, buyers or neutral market. To talk to them about your local area click here.