Are we now in a ‘buyers market’?

With housing prices falling and interest rates at their highest level since 2008, it appears we are now entering into a ‘buyers market’ but what exactly does this mean?

Simply put, a buyer’s market refers to a situation in which purchasers have an advantage over sellers when buying or negotiating for a property. Anything that increases the urgency of sellers to sell, or decreases the urgency of buyers to buy will tend to create a buyer’s market.

Over the past few years, with interest rates around 0.1- 0.5% (the lowest in over 50 years) more buyers were able to enter the market. Not only were mortgages more readily available, but also buyers could increase their budget due to the lower monthly costs.

What influences the rise and fall of house prices

The UK housing market is viewed as having an ‘inelastic supply’, meaning the number of properties cannot be quickly increased in response to higher demand. So, when more buyers are looking for a property, sellers have the advantage – which is what happened between 2020-2022. It resulted in sellers increasing their asking prices to record level highs.

Now, with the increased interest rates, fewer buyers are able to afford a mortgage, and those that can have typically cut their budget. With fewer people in the market to buy a property, supply (number of houses available) will exceed demand, creating a buyer’s market.

The ideal time to buy

In a buyer’s market property prices decrease and houses typically remain on the market longer. Sellers have to compete with each other to attract potential buyers and often drop their asking price to gain an advantage – hence the falling house prices. Furthermore, they are much more willing to negotiate offers to prevent buyers from walking away.

In summary, a buyer’s market is the ideal time to buy a new home with lower prices and fewer buyers to compete with.