Westpac bank warns of interest rate rises, huge drop in property prices

The Block auctioneer Tom Panos has warned real estate agents to brace for the looming housing price drop – with one of Australia’s biggest banks forecasting a plunge.

Both Westpac and the Reserve Bank of Australia have forecast double-digit falls in property prices with interest rates expected to rise from next week and keep going up.

Westpac on Friday predicted a 14 per cent fall in property prices in Sydney over the next two years, and a 15 per cent plunge in Melbourne.

The dramatic developments led Mr Panos to warn real estate agents in a social media video that they may find themselves forced out of the profession and back to their old jobs in fast food.

Tough love: Auctioneer Tom Panos calls on real estate agents to brace for housing price falls

Tough love: Auctioneer Tom Panos calls on real estate agents to brace for housing price falls

‘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.’

Real estate agents tend to rely on commissions when a property they are selling is sold.

Therefore, with decreasing dwelling prices, many can expect a hit to their pay packets.

Westpac is predicting that smaller cities will be less affected over the next two years, with small drops followed by a quick recovery.

Perth prices are forecast to fall by five per cent, Brisbane to grow by one percent, and the nation’s prices overall are expected to tumble by 11 per cent.

Property price forecast: 2022-24

SYDNEY: 2022 (- 3 per cent); 2023 (- 9 percent); 2024 (- 2 percent)

MELBOURNE: 2022 (- 3 per cent); 2023 (- 9 percent); 2024 (- 3 percent)

ADELAIDE: 2022 (+ 3 per cent); 2023 (- 4 percent); 2024 (+1 percent)

BRISBANE: 2022 (+ 4 percent); 2023 (- 4 percent); 2024 (+1 percent)

PERTH: 2022 (flat); 2023 (- 6 percent); 2024 (+1 percent)

HOBART: 2022 (- 2 percent); 2023 (- 6 percent); 2024 (- 2 percent)

AUSTRALIA: 2022 (- 2 percent); 2023 (- 8 percent); 2024 (- 1 percent)

Source: Westpac

Three of Australia’s big four banks – Westpac, ANZ and NAB – are forecasting the cash rate rising from a record-low of 0.1 per cent now to 2 per cent by 2023.

Just three weeks ago, the Reserve Bank of Australia predicted an increase in the cash rate to two per cent would cause Australian property prices to plunge by 15 per cent.

The RBA is widely expected to raise the cash rate next week – on May 3 – by 0.15 percentage points, following the biggest inflation surge in 21 years of 5.1 per cent.

This would be the first official increase since November 2010.

Westpac economists Bill Evans and Matthew Hassan said the property boom that began in late 2020, when the RBA slashed rates, had just about finished.

‘The more compressed and earlier interest rate tightening cycle also means the rapid run-up in Australian dwelling prices over the last eighteen months is almost certainly over,’ they said.

Westpac is predicting that smaller cities will bear less of a brunt over the next two years, with small drops followed by a quick recovery.

Westpac is predicting that smaller cities will bear less of a brunt over the next two years, with small drops followed by a quick recovery.

Westpac is predicting that smaller cities will bear less of a brunt over the next two years, with small drops followed by a quick recovery.

Mr Panos warned real estate agents they'll be headed back to work in fast food due to the rise in property prices

Mr Panos warned real estate agents they'll be headed back to work in fast food due to the rise in property prices

Mr Panos warned real estate agents they’ll be headed back to work in fast food due to the rise in property prices

Get ready for a DOUBLE DIGIT plunge in property values: Warning house prices could plummet by more than $200,000 in the next year – but it’s an incredible opportunity for first home buyers

By Stephen Johnson, Economics Reporter

Australian homeowners are being warned to brace for a 15 per cent plunge in house prices with the big banks now all expecting a rate rise next week and more to follow.

The Reserve Bank of Australia is widely expected to raise the cash rate on May 3 by 0.15 percentage points from a record-low of 0.1 per cent following the biggest inflation surge in 21 years.

Three of Australia’s Big Four banks – ANZ, Westpac and NAB – are expecting the RBA to increase the cash rate on Tuesday, marking the first increase since November 2010.

They are also expecting the cash rate to hit two per cent by 2023 for the first time since May 2016, which would see monthly repayments on a typical $600,000 mortgage surge by $625 within a year.

Three of Australia's big four banks - ANZ, Westpac and NAB - are expecting the Reserve Bank to increase the cash rate on Tuesday, marking the first increase since November 2010. They are also expecting the cash rate to hit two per cent by 2023 for the first time since May 2016, which would see monthly repayments on a typical $600,000 mortgage surge by $625 within a year (pictured is a Melbourne auction at Glen Iris)

Three of Australia's big four banks - ANZ, Westpac and NAB - are expecting the Reserve Bank to increase the cash rate on Tuesday, marking the first increase since November 2010. They are also expecting the cash rate to hit two per cent by 2023 for the first time since May 2016, which would see monthly repayments on a typical $600,000 mortgage surge by $625 within a year (pictured is a Melbourne auction at Glen Iris)

Three of Australia’s big four banks – ANZ, Westpac and NAB – are expecting the Reserve Bank to increase the cash rate on Tuesday, marking the first increase since November 2010. They are also expecting the cash rate to hit two per cent by 2023 for the first time since May 2016, which would see monthly repayments on a typical $600,000 mortgage surge by $625 within a year (pictured is a Melbourne auction at Glen Iris)

Just three weeks ago, the RBA predicted an increase in the cash rate to two per cent would cause Australian property prices to plunge by 15 per cent.

‘Estimates using a model of the housing market that takes into account historical relationships between interest rates and both demand and supply factors suggest that a 200 basis point increase in interest rates from current levels would lower real housing prices by around 15 per cent over a two -year period, relative to the baseline model projection in the absence of an interest rate shock,’ it said in an April 8 report.

Nationwide, the Australian median property price has surged 18.2 per cent during the past year to $738,975.

A 15 per cent plunge of $110,846 would only take middle-range prices back to about $628,129, CoreLogic data showed.

Australian borrowers are being warned to brace for a 15 per cent plunge in house prices with the big banks now all expecting a rate rise next week with more to follow (pictured is Sydney auctioneer Karen Harvey taking bids for a Hurlstone Park house)

Australian borrowers are being warned to brace for a 15 per cent plunge in house prices with the big banks now all expecting a rate rise next week with more to follow (pictured is Sydney auctioneer Karen Harvey taking bids for a Hurlstone Park house)

Australian borrowers are being warned to brace for a 15 per cent plunge in house prices with the big banks now all expecting a rate rise next week with more to follow (pictured is Sydney auctioneer Karen Harvey taking bids for a Hurlstone Park house)

Sydney’s median house price has climbed by 20.6 per cent to $1.403million in the year to March.

A a 15 per cent drop would see values ​​fall by $210,473 down to $1.192million – or May 2021 levels.

In Melbourne, median house prices have risen by a more subdued annual pace of 11.9 per cent.

A 15 per cent drop would see values ​​fall by $149,856 – from $999,037 to $849,181 – hitting the lowest levels since May 2017.

In Perth, where values ​​climbed by just 7.2 per cent over the year, a 15 per cent or $85,216 fall in house prices – from $568,108 to $482,892 – would see the median level sink to a June 2009 low, in a market that peaked in 2014 after the last mining boom.

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