Understanding property market cycles

This FAQ, featuring insights from Samuel Seeff, chairman of the Seeff Property Group, addresses common questions about property market cycles.

Frequently Asked Questions

What are the different types of markets in the property sector?

The property market, mirroring the economy, operates in cycles. Three primary market phases define these cycles: balanced, seller's, and buyer's markets.

• Balanced Market: Characterized by equilibrium between supply and demand. The number of buyers and sellers is roughly equal, resulting in stable prices and neither party having a significant advantage. Properties usually sell for close to or full asking price, and prices tend to be stable.
• Seller's Market: Demand exceeds supply. More buyers compete for fewer properties, driving prices up and leading to faster sales. This is usually characterized by a shortage of properties on the market to meet the buyer demand. Properties then tend to sell faster and achieve higher prices due to competition between buyers for the limited stock.
• Buyer's Market: Supply exceeds demand. More sellers compete for fewer buyers, giving buyers greater negotiating power and potentially leading to lower prices.

How can I determine which market is currently in play?

Typically, if you see reports about property pricing rising rapidly, it is usually an indication that the market favours sellers, and buyers may have to pay more for a home in that particular area.

If you see prices are not growing by much in a particular area it usually means that the market is favourable for buyers, and it indicates that it is a good time to buy. If buyers leave it too long, the market may move into a seller’s market again, especially if a market intervention such as an interest rate cut happens.

Staying informed about property trends through reliable sources is essential. However, consulting local real estate agents provides an accurate assessment, as market conditions can vary significantly between even neighboring areas. Be mindful that market dynamics can shift quickly due to factors like interest rate changes.

What factors influence changes in market conditions?

Several key factors can influence market shifts:

• Economic Factors: If economic growth is weak and people are not getting good increases, it will affect the ability to buy property. This can result in fewer buyers, thus making it more favourable for those who are able to buy. If the economy is good and salaries are growing, you see the opposite because more buyers will flock to the market, thus driving up demand and prices.


• Interest Rates: Interest rate fluctuations affect borrowing costs, influencing affordability and buyer activity.


• Other Costs: Property taxes, transfer duties, and utility costs impact affordability and buyer demand.


• Market Inventory: The balance between available properties and buyer demand is a primary market driver.


• Crime: Crime rates in an area can significantly influence buyer interest and property values.

Are market cycles seasonal, or are they linked to other factors?

Property market cycles are primarily tied to economic and interest rate cycles, not seasons. While seasonal factors can play a minor role, inventory levels and affordability are the primary drivers of market phases.

When is the ideal time to buy or sell?

Ideally, buyers aim to purchase during buyer's markets when prices are lower, and sellers seek to sell during seller's markets to maximize returns. However, personal circumstances often dictate buying and selling timelines. While "buy low, sell high" is the ideal strategy, accurately predicting market shifts is not always possible.

How do market conditions impact rentals?

Market dynamics also affect rental markets. High rental inventory favors tenants, leading to more competitive rental rates. Conversely, low inventory and high demand allow landlords to command higher rents. Economic conditions also play a role, as tenants' affordability can influence rental prices even in low-inventory situations.

How does using an agent benefit buyers and sellers?

Experienced local real estate agents provide invaluable expertise. They can advise sellers on pricing strategies to facilitate sales, even in buyer's markets. Similarly, agents can assist landlords in attracting tenants and optimizing rental income.