Melville Real Estate Vlog Ep. 16 | MGP Property Skip to main content

Understanding the dynamics of the Property Market…

To start off, let’s explore the fundamental concept of “Market Value”:

“Market Value is the estimated amount at which a property should be exchanged between a willing buyer and a willing seller in an arm’s length transaction, after proper marketing, and with both parties acting prudently and without compulsion.” This is a type of value estimate that only a Licensed Valuer can legally provide.

A Market Price is slightly different being the ‘actual’ price a willing buyer will pay, and willing seller will accept. What a real estate agent typically provides in an appraisal is an estimate of Market Price.

What the valuer and agent provide are essentially the same thing; however, what is important to understand, is how the actual market price is determined. That boils down to market mechanics.

The real estate market is influenced by several Key Market Drivers such as:

  • The Economy
  • Population Growth
  • Affordability
  • Interest Rates
  • Unemployment
  • Supply and Demand
  • Government Policy
  • Consumer Sentiment

When most of these Key Market Drivers are strong, property prices tend to rise, and when they are weak, prices tend to decline.

The drivers will determine market trends and indicative pricing, but it is that agreement between the willing buyer and willing seller at the time of sale which ultimately determines the market price. While marketing and negotiation strategies have some influence on price, they only operate within a relatively small range, varying from say $10k to $100k (or more), depending on the price point.

Everyone has heard the comment, “that property is overpriced.” However, it’s essential to remember that if a property sells at a particular price, then that is the price determined by the market. Not every market participant will agree with the price, but the market is made up of thousands of people, and as a whole, has concluded what the market price for the property will be.

Understanding how the property market operates can be invaluable for sellers. It equips them with the knowledge to gauge the likely price which will also assist in recognising when an unrealistic price is presented to them by an agent. There’s no magic bullet that can fetch a price higher than what the market is willing to pay.

In conclusion, the property market is a dynamic realm shaped by numerous factors. Recognising the significance of Market Value and Market Price, understanding the Key Market Drivers, and recognising the effect of market mechanics, empowers individuals involved in real estate transactions. Armed with this knowledge, sellers can navigate the market confidently, make realistic pricing decisions, and engage effectively with real estate agents. Remember, understanding the market sets the foundation for successful property transactions.

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