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The Block auctioneer Tom Panos claims many Australian real estate agents won’t survive as rising interest rates sink the property market – as Sydney and Melbourne‘s home values suffered their biggest falls in two years.
The Reserve Bank of Australia is widely expected to raise interest rates on Tuesday – the first increase in more than a decade – in an attempt to arrest surging inflation.
As rates rise, demand for property falls, leading to a reduction in real estate values.
Speculation about higher borrowing costs is already denting Australia’s biggest property markets.
Data from CoreLogic showed Sydney’s median house price fell 0.1 per cent in April and by 0.3 per cent for the quarter to $1.417million, while in Melbourne prices fell 0.2 per cent in April and 0.5 per cent over three months to $1.001million – the biggest drops since the Covid pandemic lockdowns in 2020.
Mr Panos warned that he is already seeing property values drop ‘in real time’ – with homes that would sell for $3million already selling for $2.5million.
‘The drop is happening,’ he told Daily Mail Australia.
The property expert warned that a rise in interest rates could also be bad news for two groups of people: mortgage-holders, should interest rates start to soar; and those he calls ‘real estate backpackers’, people in the industry for short term gain.
The Block auctioneer Tom Panos has put Australia’s real estate agents on notice with experts tipping the Reserve Bank of Australia will raise interest rates on Tuesday
Mr Panos said he has already seen the market in the two major cities fall between five and 10 per cent and warned ‘real estate backpackers’ their time is up
For customers, Mr Panos said as rates go up, fewer people will be borrowing less money, which will see prices for vendors decrease.
‘You’ll also see as rates go up, which is forecast to two per cent, that’s when you cop it as a customer,’ Mr Panos said.
‘You’d have been on a low rate, but as rates go up, you’re in for really big payments.’
For real estate agents as a whole, the shift could send some agents packing.
‘Real estate has a low barrier to entry. You could be sweeping the streets, go off and do a short course, and you have the qualifications to be in real estate,’ he said.
‘When the market gets good, people get attracted to real estate; to the flash cars and Hugo Boss suits. But when the market changes they run for cover.’
Mr Panos said he had a strong sense for ‘commission breath’ when working with new agents, adding he won’t work with people he thinks are only in it for short-term money.
‘They were always real estate backpackers. They want to go in and make short-term money,’ he said.
‘I can smell very quickly if they’ve got ‘commission breath’ and they’re only focused on how soon and how much money can they can make. I dismiss them.’
The auctioneer for The Block, who has worked in the industry for 35 years, said ‘solid agents’ should see their market share grow because they have long-term goals and stability that ‘Instagram agents’ don’t have.
‘It’s like Warren Buffet said: ‘Only when the tide goes out do you discover who’s been swimming naked’,’ he said.
Mr Panos is the millionaire auctioneer featured on Channel Nine’s The Block
Biggest property plunges in years
Real estate data group CoreLogic on Monday revealed the first quarterly drops in the Sydney and Melbourne property markets since mid to late 2020, when the Australia suffered through lockdowns and a ban on open homes and public auctions.
The downturns were the steepest since the era before the Reserve Bank slashed the cash rate to a record-low of 0.1 per cent.
But with inflation surging by 5.1 per cent in the year to March – the fastest annual pace since mid-2001 – the Reserve Bank is widely expected to raise interest rates on Tuesday.
Three of Australia’s Big Four banks – ANZ, Westpac and NAB – are expecting a May rate rise, which would be the first from the RBA since November 2010.
Someone buying a $1million house with a 20 per cent deposit would owe the bank $800,000 as a new borrower.
A small 0.15 percentage point rate rise, as predicted by the banks, would see monthly repayments climb by $62 to $3,137 as the cash rate rose to 0.25 per cent.
However, the banks are also expecting a series of rate rises in the year ahead. The RBA last month predicted a cash rate increase to 2 per cent would cause a 15 per cent plunge in property prices.
A series of rate rises to that level means a borrower with an $800,000 mortgage would see their monthly mortgage repayments surge by $833 to $3,908 as a typical variable rate rose from 2.29 per cent to 4.19 per cent.
Mr Panos says the market has already fallen between five and 10 per cent
‘Back to KFC’ for a lot of real estate agents
Last week, Mr Panos said such a downturn would mean a lot of agents would be forced to go back to their former jobs.
‘The KFC managers are going to leave real estate and head back to KFC,’ the real estate guru said.
‘And you know who’s going to stay behind – professionals, people who are going to know how to negotiate, and create urgency, where there is no urgency.’
Mr Panos said the market has already started to dive and that forecasts from the banks are as much as two months behind the current reality.
‘I see the numbers on the day. We’re seeing something that was listed for $3million sell for $2.5million. I can see the drop happening,’ he warned.
‘They’re reporting things that are months behind. The market has already dropped between five and 10 per cent.’
He said as rates go up, less people will be borrowing less money, which will see prices for vendors decrease.
Tough love: Auctioneer Tom Panos calls on real estate agents to brace for housing price falls
Mitchell Farah, the director of First Hand Property, said the industry was always an attractive career path for newcomers but said there’s never been more regulation in real estate.
‘Historically it was easy to enter the industry with limited time needed for training and courses, but in my opinion the changes to law about training has made it more difficult,’ he told Daily Mail Australia.
‘It takes years to get a class one real estate license. In tougher market conditions will there be more practictioners exit the industry? Definitely.
‘But this is a cycle that’s been seen before and the quality of training and licensing required is only getting stricter and stricter.
‘It’s nothing new, there’s been down times before. We’ve seen people exit before, pepole will go, but nowadays with the quality of training and levels of licensing, regulations are the highest ever in terms of protecting a vital industry.’
Mr Farah said while the ‘heat has come out of the market’, the prices seen over the past 12 months were never sustainable.
‘The growth over a 12-month period was exceptional and the natural correction at the start of this year is likely due to a few factors including increase in stock levels, concerns around interest rates, and instability on a national level from natural disasters to an upcoming election,’ he said.
‘It was always going to be unsustainable. What looks like for buyers, sellers and agents over the next 9 months is slightly unknown but certainly there will be more stability.
‘For buyers and sellers they’re operating in the same market so they should have more confidence when transacting that there’s not going to be a huge amount of growth coming.
Agents’ role in the process are expected to ‘return to normality’, according to Mr Farah, while the market for prospective buyers could improve with less competition.
‘Patience and working with quality buyers will see more results with more properties for sale and less buyers around. Less genuine buyers will likely increase days on market however this is more a return to normality,’ the First Hand director said.
‘If your vendor is genuine and realistic on price, it shouldn’t prove to be too much of an issue.’
Source: DailyMail
