Block auctioneer Tom Panos claims many Australian real estate agents will not survive as rising interest rates sink the property market Sydney And MelbourneThe biggest fall in domestic prices in two years was
The Reserve Bank of Australia is widely expected to raise interest rates on Tuesday – the first increase in more than a decade – in an effort to contain the rise. inflation,
As rates rise, the demand for property falls, leading to a decrease in real estate values.
Speculation about higher borrowing costs is already making a dent in Australia’s biggest property markets.
Data from CoreLogic showed that Sydney’s average home price fell 0.1 percent in April and 0.3 percent for the quarter to $1.417 million, while prices in Melbourne fell 0.2 percent in April and 0.5 percent in the three months to $1.001 million. Gone – Biggest drop in 2020 since the Covid pandemic lockdown.
Mr Panos warned he was already seeing a ‘real-time’ drop in property values - with homes that would sell for $3 million already for $2.5 million.
‘The drop is happening,’ he told Daily Mail Australia.
The property expert warned that a hike in interest rates could also be bad news for two groups of people: mortgage-holders, should interest rates begin to rise; And what he calls ‘real estate backpackers’, people in the industry for short-term gains.
Block auctioneer Tom Panos has put Australian real estate agents on notice and experts suggest the Reserve Bank of Australia will raise interest rates on Tuesday.
Mr Panos said he had already seen the market fall between five and 10 per cent in the two major cities and warned ‘real estate backpackers’ that their time was up.
As for customers, Mr Panos said that as rates go up, fewer people will borrow less money, which will lower prices for sellers.
“You’ll also see that as rates go up, which is estimated to be two percent, when you look at it as a customer,” Mr. Panos said.
‘You would have been at a lower rate, but as rates go up, you are in for a really big payoff.’
For real estate agents as a whole, change can send some agents packing.
‘There is a low barrier to entry in real estate. You can sweep the streets, go out and do a short course, and you have the ability to be in real estate,’ he said.
‘When the market is good, people are attracted to real estate; For flash cars and Hugo Boss suits. But when the market turns, they run for cover.
Mr Panos said he had a strong sense for ‘commission breath’ when working with new agents, adding that he would not work with people he felt 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 pretty quick if they have ‘commission breath’ and they’re only focused on how quickly and how much money they can make. I reject them.’
The Block auctioneer, who has worked in the industry for 35 years, said that ‘concrete agents’ should see their market share increase as they have long-term goals and stability that ‘Instagram agents’ do not have.
“It’s like Warren Buffett said: ‘Only when the tide goes out do you know who’s swimming naked’,” he said.
Mr. Panos is the millionaire auctioneer featured on Channel Nine’s The Block
Biggest asset fall in years
Real estate data group CoreLogic on Monday revealed the first quarter declines in Sydney and Melbourne property markets since Australia faced a lockdown and restrictions on open houses and public auctions since mid-2020.
The slowdown was the sharpest since the era when the Reserve Bank slashed the cash rate to a record-low of 0.1 per cent.
But with inflation rising to 5.1 per cent in March – the fastest annual pace since mid-2001 – the Reserve Bank is widely expected to raise interest rates on Tuesday.
Three of Australia’s four big banks – ANZ, Westpac and NAB – are expecting a May rate hike, the first from the RBA since November 2010.
Anyone buying a $1 million home with a 20 percent deposit must pay $800,000 to the bank as a new borrower.
As the banks anticipated, a modest increase of 0.15 percent would increase monthly payments by $62 to $3,137 as the cash rate increased to 0.25 percent.
However, banks are also expecting a series hike in rates in the coming year. The RBA predicted last month that a 2 percent increase in the cash rate would result in a 15 percent drop in property prices.
A range of rate increases to that level means that a borrower with a mortgage of $800,000 would increase his monthly mortgage repayment from $833 to $3,908 as a typical variable rate increased from 2.29 percent to 4.19 percent.
Mr Panos says the market has already fallen between five and 10 percent
‘Back to KFC’ for too many real estate agents
Last week, Mr Panos said such a slowdown would mean a lot of agents would be forced to go back to their former jobs.
The real estate guru said, ‘KFC managers are about to leave real estate and go back to KFC.’
‘And you know who’s going to be behind – professionals, people who know how to negotiate, and create urgency where there’s no urgency.’
Mr Panos said the market has already started to dive and banks’ forecasts are two months behind the current reality.
‘I look at the number that day. We are looking at something that was listed for sale for $3million for $2.5million. I can see the drop happen,’ he warned.
‘They are reporting things that are months behind. The market has already fallen between five and 10 per cent.
He said that as rates go up, fewer people will borrow less money, which will lower prices for sellers.
Tough Love: Auctioneer Tom Panos calls on real estate agents to be prepared for plunging housing prices
Michael Farah, Director first hand propertysaid the industry was always an attractive career path for newcomers, but added that there has never been more regulation in real estate.
“Historically it was easy to enter the industry with the limited time required for training and courses, but in my opinion changes in the law regarding training have made it more difficult,” he told Daily Mail Australia.
It takes years to get a Class One real estate license. Will more businessmen exit the industry in tough market conditions? definitely.
‘But this is a cycle that has been seen before and the quality of training and licensing required is only getting tighter and tighter.
This is nothing new, it has been down many times before. We have seen people move out, people will go, but nowadays with the quality of training and the level of licensing, regulations are at an all-time high in terms of safeguarding an important industry.
Mr Farah said ‘the heat has come out of the market’, but the prices seen in the last 12 months were never sustainable.
“The growth over the 12-month period was exceptional and is likely due to a few factors including a rise in natural recovery stock levels earlier this year, concerns around interest rates and national volatility from natural disasters.” upcoming elections,’ he said.
‘It was always going to be unstable. What looks like for buyers, sellers and agents over the next 9 months is a bit unknown but there will certainly be more stability.
‘For buyers and sellers they are operating in the same market, so while transacting they should have more confidence that there is not going to be a huge amount of growth.
According to Mr Farah, the role of agents in this process is expected to ‘return to normalcy’, while the market for potential buyers may improve with less competition.
‘Working with patience and quality buyers will see more results with more properties for sale and fewer buyers around. The first hand director said, the market with less genuine buyers is likely to increase in days, but it is more a return to normalcy.
‘If your seller is genuine and realistic on price, it shouldn’t prove to be too much of an issue.’