A fifth rate hike could put agents under fresh pressure, with tighter borrowing limits, cautious vendors and more price-sensitive buyers set to reshape listing campaigns and sales negotiations.
All four major banks have tipped a Melbourne Cup rate hike following higher-than-expected inflation, with the RBA expected to lift the cash rate to 4.85 per cent, its highest level in 18 years and back to levels last seen in 2008.
PRD chief economist Dr Diaswati Mardiasmo said a fifth cash rate hike would further test agents’ ability to secure listings and buyers as uncertainty mounted over prices and borrowing costs.
As the cash rate increases, Mardiasmo said buyers’ borrowing power will shrink further, slowing sales activity and forcing agents to adjust their approach to pricing and negotiations.
“Higher borrowing costs would reduce borrowing capacity, potentially slowing buyer demand, moderating price growth, and reducing transaction activity in the housing market,” Mardiasmo told REB.
Under modelling, a 0.25 percentage point increase tomorrow would add $92 to the monthly repayments for a borrower with a $600,000 loan and 25 years remaining, taking the cumulative increase across the five hikes since February to $456 a month.
As the cost of living continues to increase, Mardiasmo said the fifth rate hike’s impact was expected to be greatest among highly leveraged investors and buyers who relied heavily on debt, particularly those who had entered the market with smaller deposits.
For agents, she said a smaller pool of eligible buyers could make properties harder to sell, while uncertainty around price growth could leave some vendors reluctant to list until market conditions became clearer.
Vendor expectations put under pressure
Mardiasmo said a fifth rate hike would test agents’ skills, making it harder to win listings and manage vendor price expectations as buyers grew more price-sensitive and values came under pressure.
She said that as vendors became more cautious about listing their properties, agents would need to rely on recent sales evidence, listing stock and buyer enquiries to support their pricing.
With buyers facing tighter borrowing limits, she said that agents would also need to help sellers adjust their expectations to reflect a smaller pool of eligible purchasers and less competition for their property.
She also urged agents to track average vendor discounting for houses and units in their specific suburb or postcode, giving sellers evidence of the gap between asking prices and actual sale prices.
“This might be a tough conversation, but with data proof it can be a source of creating trust and even help the vendor sell the property faster at the correct price, instead of longer days on market with multiple price reductions.”
Additionally, she said that agents would need to keep vendors informed about changes in buyer enquiry and competing listings, particularly if a property was attracting interest but failing to generate offers.
“Having that evidence early could help prevent unrealistic price expectations from dragging out a campaign.”
Negotiations were also expected to become more complex, with buyers seeking greater flexibility on price, finance conditions and settlement terms.
Mardiasmo said agents would also need to keep deals moving as buyers and sellers clashed over price, with vendors forced to choose between accepting lower offers or holding out for prices purchasers could no longer afford.
Local data key as market conditions shift
To ensure their pipelines, Mardiasmo said agents needed to become the local data authority as negative national market headlines risked unsettling buyers and sellers.
“Agents must focus on hyper-local data. Manage seller price expectations early, target active cash flow investors. In tough times like this, data and communication build trust.”
She said agents should regularly update their databases with local research and communicate with clients, acknowledging the broader market’s challenges while explaining conditions in their own area.
“This included keeping track of recent sales, listing volumes, buyer enquiries and changes in vendor discounting, allowing agents to identify shifts in demand before they were reflected in broader market reports.”
Mardiasmo said current evidence would also help agents show whether a suburb was holding up better than the national picture or experiencing sharper price adjustments.
Similarly, she said that agents should also assess each buyer and seller’s individual circumstances, from borrowing capacity and property needs to the urgency of a move, rather than relying on national market trends to guide their advice.
She said that despite a more difficult market, agents should also continue engaging with their databases rather than relying solely on new enquiries.
“Cutting through the noise by focusing on the person as an individual is crucial in a higher interest rate environment.”
Opportunities amid a changing market
Despite the expected slowdown, Mardiasmo said markets with strong rental demand, low vacancy rates and solid population growth could remain attractive to buyers.
PRD data showed the time-to-buy a dwelling index rose to 88.4 points in October, up from 80.4 points in September.
Queensland, NSW, Victoria and Western Australia had also recorded monthly improvements, suggesting buyers remained interested in the market despite continued caution.
Affordable city apartments, Darwin and regional hubs were among the areas she identified as potential opportunities, particularly where rental stock shortages had continued to push rents higher.
“These markets could give agents opportunities to work with financially secure investors seeking stronger rental returns,” Mardiasmo said.
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