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Tom Panos has acknowledged the impact rate rises could have on the real estate profession.
Speaking on a recent episode of Real Estate Exposed alongside REB executive editor Phil Tarrant, the Real Estate Gym founder acknowledged the uncertainty now at play within the profession, thanks to the Reserve Bank of Australia’s (RBA) decision to lift rates by 0.5 per cent earlier this month.
Since then, speculation has abounded that July could see another 0.5 per cent rate hike, with even governor Phillip Lowe now revealing there could be any number of further rate rises before the year is out.
“Whether it’s a client or whether it’s a vendor or a buyer or whether it’s a real estate agent, it’s not doom-and-gloom, but it is scary times,” he prefaced.
From the coach and trainer’s perspective, there was not enough narrative leading up to the RBA’s decision to lift rates, which ultimately led to the shockwaves that have rippled through communities across Australia – least of all, the stock market, which fell hard immediately following the announcement.
“The reason why it’s scary times is when you actually get a change in market, you also get a change in volumes – and in real estate, you get paid for volume, how much turnover there is.
“There is going to be less turnover,” he conceded.
Comparing Australia’s economic situation with that of New Zealand, which Mr Panos pointed out as being about seven months ahead on interest rate rises – having lifted its own rates to 2 per cent from just 0.25 per cent in August 2021, he cited data from Harcourts New Zealand, which he said had reported a decline in volumes between 35 and 40 per cent in response.
According to the coach, the ability of the Australian profession to adapt to a new normal will be very dependent on one’s individual circumstances.
“If you’re a real estate agent, for the last year or two, you’re going home and your money is being averaged out at X dollars.
“You’ve probably bought a car in those two years. You may have invested in real estate. And it’s easy to get into the pattern of thinking, this is my new fixed income. Because if it happens every month for 24 months, it becomes the norm,” he surmised.
“And then all of a sudden you’re going home, and on the 15th of each month, you’re getting X minus 30 per cent, X minus 40 per cent.”
“It all depends on what was that X to start off with, because for some people, they’ll ride it out,” he expressed, adding that they’d chalk it up to a couple of good years.”
For others, operating more as borderline agents, they potentially were only earning a hundred thousand dollars a year.
“And when you start saying, ‘hey, your income might be halved’, that’s a big deal, because you’re going home to your family and you’re looking at your monthly overheads,” Mr Panos indicated.
“Then you’re beginning to do a pro/cons analysis in your head and say, ‘Hey, how long is it going to continue this way?’”
It’s those individuals who the trainer conceded “might start looking at options outside of real estate”.
“I’m particularly concerned with the real estate agents who entered the real estate industry at a time where there was high property price growth,” Mr Panos continued.
Labelling the experience of real estate agents through the lockdowns as “abnormal”, he acknowledged that many times, it led to situations “where the vendor and buyer meet regardless”.
“The role of an agent in that is not too much. They facilitate the process, but they don’t do too much more,” he said.
“That’s the agent that’s very vulnerable – and a lot of these agents have actually jumped in when the market was booming, but they also jump out when the market turns.”
It led the coach to opine that “for the record, the reason why you can actually make a fortune in real estate without having a university degree is it takes a special person to be able to manage the gap between vendor and buyer during ‘normal’ real estate”.
From Mr Panos’ perspective, “you’ve got to be a negotiator. You’ve got to be a deal maker. You’ve got to be able to handle tough conversations. You’ve got to have high product knowledge. You’ve got to have good influencing skills, and you’ve got to have resilience.”
“Now that is normal real estate,” he said.
You can listen to the full conversation here.
ABOUT THE AUTHOR
Grace Ormsby
Grace is a journalist across Momentum property and investment brands. Grace joined Momentum Media in 2018, bringing with her a Bachelor of Laws and a Bachelor of Communication (Journalism) from the University of Newcastle. She’s passionate about delivering easy to digest information and content relevant to her key audiences and stakeholders.
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