Investors’ guide: How to purchase property in a buyer’s market

Whether you’re buying a house, your next rental property, or a holiday home, knowing how the housing market operates can make or break your next purchase.

So, in this article, we discuss in detail the telltale signs of a buyer’s market, how it differs from a seller’s market, and how you can get the best property purchase possible under the current conditions.

What is the difference between a buyer’s and seller’s market?

With real estate a hot topic among Aussies, it’s likely that you’ve likely heard the terms buyer’s market and seller’s market mentioned in passing. 

But if you’ve ever wondered when the best time would be to buy or sell a property, you’ll want to understand the difference between the two. 

So what is a seller’s market? A seller’s market happens when there are more buyers than there are houses for sale. This means that the demand exceeds supply in the property market, causing prices to rise and giving vendors an advantage over property sales. 

On the other hand, a buyer’s market is when there’s an excess of properties for sale and there are fewer buyers looking to purchase real estate. 

To put it another way, a buyer’s market is characterised by high real estate inventory but there’s a shortage of interested home buyers. These conditions give buyers leverage over sellers because when supply is higher and demand is lower, the market is forced to respond.

Under these conditions, sellers must compete with each other in order to attract potential buyers. Typically, sellers will drop their asking prices to stand out in the market. Furthermore, they are much more willing to negotiate offers to prevent buyers from walking away.

How do you know when it’s a buyer’s market?

Signs of a buyer’s market include:

• Increased number of properties listed for sale on the market 
• Due to high competition, some properties sell for below the original listing price, typically with multiple price cuts during the listing period
• Lower demand is causing days on market average to increase
• Transaction volumes or the number of properties being sold decline as demand drops
• Buyers are offered “extra” incentives and perks such as a credit for new flooring or appliances

How do you buy a house or investment property in a buyer’s market in Australia?

Buying property in a buyer’s market can feel like a kid in a candy store: there are a lot of options to choose from, and the chances of finding a real estate gem are high.

But remember: the decision to buy a property is a big one, and it’s not something you should take lightly. If you’re ready to take the plunge, here’s how to use a buyer’s market to your advantage.  

• Take your time

As we’ve mentioned, sale activity tends to slow down in a buyer’s market. So when you’re buying under these conditions, it’s best to take your time because there’s less of a concern about losing out on a property you’re interested in. 

Taking your time when buying can help ensure that you don’t make any impulsive decisions. If you find a property you’re interested in, but its listing price is overpriced for the current market conditions, waiting before extending an offer can work to your advantage. The longer the property for sale sits on the market, the higher the chance the seller may be willing to make concessions on its sale price or selling terms. 

And if there’s someone who swoops in and makes a below-ask price, don’t worry! This means that they’ve set the proverbial floor price, and you now have the chance to outbid them — making your offer much more attractive to the seller.  

• Know the comparable properties in the area 

Shop around the area you’re planning to buy in. Not only will this allow you to make sure you find your ideal property, but it’ll also educate you about the comparable sales in the area, which you can leverage during negotiations. 

For example, a house is listed for $500,000 but you found a property with similar characteristics or features around the same area is listed for $400,000. When negotiating with the seller, you can bring this information to the table to help you lower the sale price.  

• Be aware of the ‘days on the market’ figures 

The longer a home has been available, the more power you’ll have negotiating for a lower price. And if the vendor won’t budge on the price, you can still negotiate for contingencies, seller concessions and repairs. Just remember not to push your luck too much, as it may cause the negotiations to collapse entirely.  

• Partner with real estate professionals 

While we laud investors who have a do-it-yourself approach to doing things, working with real estate professionals can help your property purchase journey become a smooth-sailing one. 

You can choose to work with a buyer’s agent or a real estate agent throughout the process. If you’re just worried about getting your finances in order for the deal, such as getting pre-approval for lenders, hiring a mortgage broker will be your best way to go.  

Should I buy a property in a buyer’s market? 

Generally, real estate investors who are buying a property love buyer’s markets because they’re in the “driver’s seat” when it comes to negotiations.

Due to the high volume of properties available on the market, they can also easily move on to the next potential deal if a seller won’t concede to the terms they have laid out.  

But it’s important to note that real estate markets are cyclical. This means that the longest seller’s or buyer’s market will eventually end as market dynamics change and both buyers and sellers must be prepared when the shift comes. 

Additionally, remember that there are markets within markets across the country. This means that while the bigger cities are now buyer’s markets, there are areas where the conditions are just shifting in favour of home buying — which can be a goldmine for investors. 

And on that note, we recommend enlisting the help of a local real estate agent or keeping a close eye on vital data and trends (e.g. listings, demand and supply, etc.) that can help you navigate the market in order to get the best deal. 

If you’re looking to sell your property in a buyer’s market, don’t worry! We will also have a guide on how to get the best price for your property under this market condition, so stay tuned! 

Disclaimer: The information provided in the article is general and should not be perceived as personalised investing advice. It is highly recommended to consult financial advice from a suitably qualified adviser.

Meanwhile, if you’re looking for ways to position your portfolio for further growth amid shifting market conditions, make sure to listen to this episode of the Smart Property Investment Show. Also, make sure to check our News section for the latest property market reports, insights, news and useful tips and strategies for investors.