Posted on: July 14, 2022 Posted by: Hotel Transylvania Comments: 0

A prominent real estate industry coach says he is “really stressed” after “almost no buyers” showed up to his auctions over the weekend.

A prominent real estate industry coach says he is “really stressed” after “almost no buyers” showed up to his auctions over the weekend in the wake of the Reserve Bank’s third interest rate hike in three months.

Auctioneer Tom Panos has called on the RBA to consider the impact of its aggressive rate hikes on the real estate market, which continued to fall last month led by declines in Sydney and Melbourne.

In a video on Saturday, Mr Panos said he had six auctions that day and only sold one.

“So I was zero out of five till the auction I did this afternoon at 3.30pm in Five Dock,” he said. “I must say to you, the first five auctions were quite sad in the sense that pretty much the only people that were there were the agents and the vendors. I pretty much had no one register throughout the day.”

Mr Panos said buyers appeared to have been spooked after last week’s 50 basis point increase, which brought the official cash rate to 1.35 per cent, and indications of another at the RBA’s next meeting on August 2.

“People have turned around and thought to themselves, man this is getting really scary out there as a buyer – I think there is definitely some of that,” he said.

“So here’s the deal. If the Reserve Bank wanted evidence – because they keep saying in their commentary, we are looking at what our policies of interest rate rises are doing to property – if they really want to look, take it from someone who is there at the frontline, take it from someone who is seeing it right there in the heat of the moment, it has already had an impact.”

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Mr Panos pointed to a PropTrack report published by News Corp over the weekend, which provided a suburb-by-suburb breakdown showing the 12-month and three-month change in house prices.

“There have been 20 per cent drops in three months in certain parts,” he said.

“For instance the Central Coast is one of those. So again, all I’ve got to say to you is – the Reserve Bank please keep your eyes out on real estate. It is having an impact. There is no question about it. It’s concerning buyers, we have vendors who have significantly reduced what they were hoping to get.”

He added that there was a subset of buyers who purchased between late 2019 and the end of 2021 who “now have assets that are now significantly worth less than what they paid for”.

“Now of course that’s not a problem if you’re a normal property person that’s playing the long game and not a bitcoin in-and-out type person trying to time the market,” Mr Panos said.

“But my friends, all I’ve got to say to you is right now, if you are a vendor and you are thinking of selling your asset, you’ve got to be a very brave person to hold off not putting it on now. You want to be putting it on in the next week or two. I don’t want to see you putting it on in September, October, November.”

Mr Panos said the combination of the normal seasonal rush of properties hitting the spring market coupled with up to four more interest rate rises “says to me that you want to be a buyer this spring, not a seller”.

“How do you become a buyer this spring? By being a seller this winter,” he said.

“Sell it now. Get on the phone, get on the front foot, nine o’clock Monday morning ring an agent, say tell me what can you get for my property right now and what do you think the property’s going to be worth in three months time.”

He added, “John McGrath was telling me yesterday that 25 economists across Australia were interviewed on their views on what’s happening with real estate, and all 25 economists turned around and said the same thing, and that is it’s going to get worse before it gets better.”

According to PropTrack’s weekly property review report released on Tuesday, there are 630 auctions scheduled in Sydney this week, up 90 per cent year-on-year, and 700 auctions scheduled next week, up 182 per cent year-on-year.

There are 654 auctions scheduled in Melbourne this week, up 21 per cent year-on-year, and 743 auctions scheduled next week, up 129 per cent year-on-year.

“The number of auctions scheduled to take place over the coming week has continued to slow, though is set to pick up over subsequent weeks with school holidays ending,” said PropTrack economist Anne Flaherty.

“Scheduled auctions are 34 per cent higher compared to the same week last year, however, this was when the emergence of Covid-19 restrictions were limiting market activity. Selling conditions are moderating off the back of rising interest rates and cost of living pressures, and clearance rates are falling. This could impact auction numbers by leading some vendors to opt for alternative sales methods.”

The most viewed residential listing on going to auction this week is “Wavertree” at 92 Newington Road in Marrickville, an “enticing family residence with grand proportions and abundant Edwardian charm”.

Last week’s rate hike came after 25 and 50 basis point increases in May and June.

Economists predict successive increases over coming months will bring the cash rate to 2.1 per cent by the end of the year, costing the average borrower an extra $991 per month.

May’s increase was the first since 2010, as the central bank lifted the cash rate from its record low emergency level of 0.1 per cent to combat soaring inflation.

Consumer prices rose 5.1 per cent in the 12 months to the March quarter, the highest since the introduction of the GST two decades ago.

Interest rate increases have already caused the “sharpest slowdown in more than 30 years”, according to PropTrack’s June report, which showed national home prices fell 0.25 per cent last month.

That was led by continued falls in Sydney, down 0.4 per cent, and Melbourne, down 0.61 per cent.

Nationally, prices are still up 34 per cent since March 2020.

“While prices are down only 0.55 per cent from their peak in March 2022, an outsized rate hike in early June and expectations of much higher rates later in the year continues to slow all markets, with widespread falls seen in June,” the report said.

“The two-speed housing market remains evident. The biggest slowdowns have been in the most expensive markets of Sydney, Melbourne and the ACT.

“Affordable, lifestyle regions of Brisbane, Adelaide, regional QLD and Tasmania have continued to grow, but the slowdown is spreading to these markets, with Brisbane posting its first small fall since the pandemic began.”

In its quarterly update over the weekend, PropTrack analysed house and unit values of 489 suburbs.

The sharpest declines were seen in Nobby in Queensland’s Darling Downs region, where prices fell more than 24 per cent over three months.

That was followed by Mulgoa in Sydney’s outer west, down nearly 23 per cent, and several ACT suburbs – Griffith, Giralang, Hawker, Farrer, Lyneham and Red Hill – all down more than 20 per cent.

NSW Central Coast suburbs West Gosford and The Entrance North were down around 20 per cent.

Other hard-hit areas included Allansford in Victoria, Dandenong South in Melbourne and Larrakeyah in Darwin.

Last week, the building industry peak body also called on the RBA to consider slowing the pace of interest rate rises.

“We are concerned that a continuing regime of steep rate rises risks turning the economic dial too far in the opposite direction and stalling the economic growth needed for the continuing recovery from Covid-19,” Master Builders Australia chief executive Denita Wawn said.

“Time should be given to observe the impact of the monetary policy changes in the economy.”

Commonwealth Bank, which is forecasting house prices in Sydney and Melbourne will plummet by 18 per cent by the end of next year, has said the RBA could be forced to reconsider its course of action.

“Indeed behind closed doors we believe concerns will mount at the RBA if dwelling prices slide too quickly,” Gareth Aird, head of Australian economics at CBA, wrote in his July update.

“We believe the speed and size at which home prices correct lower will ultimately act as a limit to how high the RBA will be willing to take the cash rate.”

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