The Scarcity Principle  

By July 22, 2014 August 6th, 2014 No Comments

ScarcityThe scarcity principle goes like this; a limited supply coupled with a high demand results in a mismatch between the two. In pricing theory, the scarcity principle then suggests that the price for a scarce good or service should rise until demand and supply return to balance.

The real estate market is subject to the same principles as any other market. From month to month and even week to week, the balance between demand for property and the supply of it will vary, depending on a raft of different factors. Making good real estate decisions is all about understanding the balance at any given time and being poised to seize the opportunities as they arise.

At Ray White Maitland, we have a dedicated buyer manager. Acting solely for people who are ready and willing to buy, it’s a value-added service we provide to keep clients who are looking to purchase abreast of what’s on offer. For a long time, there’s been plenty to talk about, with our office consistently carrying at least 45 properties for sale.

But this week, our buyer manager has been practically twiddling his thumbs. After double the usual number of sales in the past 45 days, we have very little left to sell. So he’s left to pass along the bad news to the more than 30 active buyers he’s currently working with that there’s literally nothing for them to purchase.

There’s no telling what might happen next. After all, with many vendors buying into the out-dated notion that spring is the best time to sell, there’ll be a flood of new stock as of September 1st to balance out demand. But for those who are more interested in economic principle than seasonal fallacies, the current dynamics offer clear opportunities for home owners right now – which for the first time in a long time may well include a low stress, off-market sale at a healthy price.

That’s the scarcity principle at work.

All the best

Michael Kirwan