As with the economy, 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.
Van der Linde says you can think of the market as a scale with buyers on the one side and sellers on the other side and, 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.Gerhard van der Linde, MD for Seeff Pretoria East, says market forces are always shifting and the market moves through a number of cycles as it is influenced by the various macro and micro economic forces and factors.
So, we might talk of a seller’s market during a favourable economic phase, but then during a period of economic decline, we start talking about a buyer’s market.
Seeff Pretoria East and Centurion explain the key differences:
Van der Linde says you can think of the market as a scale with buyers on the one side and sellers on the other side and, 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.
1. Equilibrium/balanced market
When the scale is in perfect balance, we talk of equilibrium or a balanced market - this 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.
2. 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 are not enough properties to meet the demand from buyers, and buyers start competing for a limited pool of properties.
“While each market is very different, there are always opportunities, but you need to understand the various forces that come into play,” says Van Wyk.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. In this market sellers can 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 even 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.
3. Buyer’s market
This is the flipside of a seller’s market, and means 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, you would need to set your asking price at the right level to attract buyer interest and offers.
Why understanding market phases is important
“While each market is very different, there are always opportunities, but you need to understand the various forces that come into play,” says Van Wyk.
“During a buyer’s market, it follows that buyers can find good deals, but at the same time they may struggle to obtain finance. Knowing the requirements is something that a skilled agent is there to help with.”
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