How does supply and demand effect the price of property?

We all hear from time to time the term ‘supply and demand’ - though what does it really mean and how does it affect the market place, the mood of a buyer and the price that a vendor may ultimately achieve for their property?

Supply means is the amount of stock, i.e. houses and apartments, for sale on the market at any given time. Demand can be described as the amount of willing, qualified buyers who are confident and able to buy at any one point in time.

Supply and demand drives the market place and the price of property. Over the past five years there has been a low supply of properties for sale in South East Sydney. Most home owners have been reluctant to sell their properties for many reasons, including the costs involved and due to the shortage of properties available to purchase.

The auction system is a great indicator of what supply and demand is like, as it allows buyers to compete in an open market place. If there is a shortage of properties for sale, the auction system flourishes and buyers ultimately end up paying more than they initially wanted to secure that property. If there is an oversupply of properties for sale, buyers have more choice, days on market are much longer and some vendors may become desperate or fearful their property may not sell at all and drop their price expectations.

In this instance, pressure is taken off buyers and most buyers can pick up on the mood of the market and act accordingly. The strong message is that when the mood of the market softens, genuine buyers should be ready to buy and take advantage of lower prices and less competition.

N G Farah controls a significant market share in the South Eastern region of Sydney and our company is a great indicator of supply and demand. At present we have approximately 60 properties online which are best described as good quality houses, semis, older style art deco apartments and modern apartments. All properties are located in our privileged coastal and parkside market, and not to forget our six high-calibre development projects on sale through N G Farah.

After five years of steady growth, the market is having a rest and buyers have decided that they are not as desperate to buy property. Vendors are still achieving good prices though it is much rarer to see properties go for more than $100,000 over reserve. In March 2016 N G Farah had a record sale for a house in Forsyth Street, Kingsford where it sold for $1 million over the reserve price and in September 2017 we had a record sale for a two bedroom, strata apartment on Maroubra beach selling $420,000 over the reserve.

The South East of Sydney is considered one of the most desired and liveable regions in Australia. Property prices are strong and demand for properties is always steady, what the market and the mood of the market will ultimately determine is the prices people pay for what’s available at any one point in time.