Globally, property, aka real estate markets, are cyclical, known as the property cycle. Cyclical means the events that affect property purchasing power and sales prices are recurrent.
As the market transcends from one stage to another, there’s lots of media attention, and rightly so, as each step has a significant impact on the property sector and the economy.
While events in the global economy are felt everywhere, not all the developed world experience the same stage in the property cycle concurrently, so knowing what’s going on in another region can empower you in the choices you make with property.
You’ll be told there are winners and losers in each stage in the property cycle, and when you’re selling a home or keen to purchase a property, it’s hard not to let market conditions affect your decision-making.
There are a few factors that determine when the property market favours sellers or buyers. Factors and market conditions, including location, economic conditions, and other variables, usually influence the best time to buy or sell a home.
What To Do In A Buyer’s or Seller’s Market
When you hear: It’s a buyer’s market, or it’s a seller’s market, and depending on which side of the fence you are, your expectations are reset to expect more or less. However, we say you pay attention to what you’re told by the media, your real estate agents and mortgage lenders, but don’t let the news ultimately dictate your position.
Control the outcome so you’re not a victim of circumstance. You’re probably thinking: yeah, right, that’s easier said than done and for the less informed among you, you’d be right. However, nothing is black and white; it’s shades of grey and every stage in the property cycle has opportunities. You need to know how to find them.
First Home Buyers
As a first-time buyer, gains can be made by holding off until the property cycle is in a slump, i.e. the purchase price may be less than buying the same property in the boom stage of the process.
However, in a slump, the cost of living is usually higher as there’s less business confidence and growth, and mortgage prices are higher.
Therefore, first-home buyers aim to get onto the property ladder when the timing is for them.
It’s always a good time to buy property when the numbers work in your favour, i.e. contribute a healthy deposit, so you’re borrowing less and within the DTI (debt to income ratio); so fluctuations in the market caused by the stages of the property cycle don’t impede your ability to make the loan repayments including the ‘principal’, so your mortgage is decreasing in value.
Sellers & Buyers Caught By Swift Change In Market
Sellers and buyers can get caught out by a swift change in market conditions and the move from one stage to another.
When buyers have been searching for a property to buy for some time, they can caught out. Property price rises don’t necessarily trigger the need for buyers to readjust their position, i.e. reassess what they can afford and what a lender will allow them to borrow.
Similarly, sellers can get caught out with inflated sales price expectations. Sellers can dig their heels in and refuse to budge on price, so a slowdown can occur as the gap between buyer and seller expectations widens.
When A Seller’s Market Is A Buyer’s Market
What is often not realised is a seller market is a buyer market for homeowners selling up to buy another home to live in.
Home sellers wishing to trade up, i.e. get a larger property or move to a more sought-after location, are also buyers; therefore, when they sell for less, they’re also buying for less.
A scenario: if a seller agrees to a 5 per cent decrease in the sales price of a £300,000 or $300,000 home and the same 5 per cent is achieved when they buy a house that was for sale at £400,000 or $400,000, the homeowner, is essentially better off by 5,000. This is when a seller’s market is also a buyer’s market and vice versa.
Some of the more general conditions that favour the seller and buyer include time of year, i.e. the seasons, local factors, and interest rates.
Best time to sell a home
Generally speaking, the best time to sell a home is in Spring and Summer so that is six months of the year. With the warmer weather, more homebuyers are keen to visit open home showings and go through the rigmarole of moving from their current property.
Low-interest rates attract more homebuyers, too. With a lower mortgage rate, the homebuyer can borrow more and thus pay more for their desired property. Lenders also have confidence that the economy is doing well and there is more job security for the mortgagee.
Local factors that influence the market, such as school schedules, job markets, and climate, can affect when people are more likely to buy.
Best time to buy a home
The best time to buy a home is when there are fewer buyers. Autumn and Winter are the best months for negotiating lower prices. Additionally, their homes stay on the market during the colder months, and sellers can get impatient and want to get the deal done, even if it means lowering the price.
There is also such a thing as year-end tax benefits influencing some buyers like property investors.
Some buyers may be motivated to purchase before the end of the year for tax benefits, such as deducting mortgage interest from their income.
Another factor that can influence when it is a good time for a buyer is the holidays. Some sellers can be more motivated to sell during the holiday season, creating potential buyer opportunities.