I always get this kind of questions a lot by home buyers:
“How’s the property market today?”
“Eh now buyers’ market leh. Why is your unit so expensive?”
So what exactly is a buyers’ market?
Buyers’ market definition
Buyers’ market means that the supply in the market is more than the number of buyers.
Hence, buyers can keep the prices down.
In this case, the number of properties being marketed is more than the number of buyers.
“Does this mean that ALL properties are much cheaper now?”
Short answer is No. Not all properties are cheap.
However, in my opinion, a market is not just dictated by the supply and demand side.
People often mistake this, thinking that just because it is a buyer’s market everything must go cheap.
If that is the case, iPhones should be selling at half price now.
Understanding the sellers’ mindset
So one should also understand the sellers’ plans and their reasons for selling.
I defined them broadly into three categories: The homeowners, speculators and investors.
The homeowners are sellers who have not much reason to sell.
They usually want to sell to downgrade and cash out to enjoy the profits that their property will yield.
They are not desperate to sell. Their need is just a roof on their head.
The speculators are sellers who are in some kind of financial trouble.
They are the ones creating the mass panic during a crisis in any market.
Most of them are short term investors who take large loans which they cannot afford.
However, some have sudden financial emergencies such as loss of job.
These group of people do not have the holding power to ride through the crisis.
During a crisis, speculators make the bulk of the sellers.
The investors are sellers who wants to sell because they want to acquire something better.
They don’t necessary need to sell, yet they want to sell.
They know that the speculators are selling things cheaply and this kind of opportunity should not be missed.
During a crisis, the market is filled with speculators who are pulling the prices down.
What does this mean for home buyers?
Home buyers need to understand that not all sellers are motivated with money during this time.
Some have the patience to wait till the tides turn.
Giving a low ball offer to a homeowner or an investor type of seller would turn the seller off and, thus, break the negotiation process.
You will gain the upper hand if you understand their selling mindset: homeowners, speculators or investors.
What does this mean for home sellers?
While a crisis might not be the best time to sell, however, if you have the investor mindset, you can turn this crisis into an opportunity.
The bottom line
During a crisis, it is important to prepare accordingly.
Have that emergency fund, invest in things you can afford and remember that markets operate in cycles.
While it may not recover to what it once was, most markets will turn around in the future.
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