Three strikes

Rising oil prices have hit the economy amid renewed conflict in the Middle East, with increased costs and general economic worries appearing to dampen demand for housing.

Big bank Westpac has now predicted another triple increase by the end of this year, which would take the cash rate to 4.85 per cent, with no reduction until 2028.

Property researcher and consultant, Cameron Kusher, said the drop in auction approvals and weak price growth in Sydney and Melbourne were signs that the market was already struggling ahead of more financial pain for mortgage holders and potential buyers.

“The market is currently expecting two interest rate increases this year and possibly more than a third,” he told news.com.au.

Two interest rate hikes take us back to the highest interest rates we’ve had since 2011. The third takes us back to the highest interest rates we’ve had since… the global financial crisis hit.

“So a lot of people haven’t had interest rates this high, and obviously property prices and mortgage sizes are bigger than they were in 2008.

“I think for all those reasons … I’m doing well with the property.”

Financial markets last week began pricing in three more rate hikes in Australia by the end of the year, which would raise the cash rate to 4.85 per cent.

There have already been two visits in 2026, which economists had predicted even before the Iran war broke out due to high inflation.

Wespac’s chief economist, Luci Ellis, said the bank’s move reflected “a long and slow supply disruption given the improved forecast… and the Strait of Hormuz is closed for eight weeks and traffic is slowly recovering afterwards”.

“It also reflects the surprisingly rapid flow of higher petrol and other oil-based products prices to other Australian prices,” he said.

“We believe that the RBA will respond to this price behavior by tightening monetary policy more than would otherwise be necessary.”

He said the Reserve Bank would take a “once, twice shy” approach to reducing the rate of deficit reduction from February 2028.

Canstar’s model showed three more trips could add $457 a month to a $600,000 loan repayment, $609 for an $800,000 loan and $762 to $1 million from the start of 2026.

Canstar’s director of data, Sally Tindall, said borrowers were in for a tough year if Westpac’s forecast was correct.

“While other major banks are raising the same rate, Westpac is now predicting an aggressive course, which will take interest rates to levels not seen since the GFC collapse,” he said.

“The effect of higher fuel costs has already started to push prices up elsewhere. The RBA may feel it has to act because once prices go up, they rarely come back down.”

Mr Kusher said that while the 4.85 per cent interest rate was not historically high, it would change behavior in the property market.

He said: “I think the people who will be doing business are the people who really have to sell.

“The people buying will be people who may have sold up and had to move to something smaller or people who are really looking for bargains in this market.

“So I don’t see, if this war continues, if inflation continues to rise, if interest rates have to rise, I don’t see a situation where there will be enough demand in the market to raise prices.”

SQM Research this month predicts house prices in Sydney and Melbourne will fall in 2026 due to the impact of war in the Middle East, something Mr Kusher agreed with.

“Obviously Melbourne has been underperforming for a long time, but Sydney is the most expensive market in the country.

“I think prices are going to go back up there. And I think some of the big cities, even though prices continue to go up, that growth rate is probably going to slow down, especially as interest rates go up.

“I don’t think we’re looking at a catastrophic fall, but I think we could see prices drop by four or five percent.

“And depending on how long interest rates stay high, we could see some more falls in 2027.”

Auction license fees are coming down

Depending on the source, the reported rate of auction clearance from the weekend varies across multiple data sets. But many believe it has fallen in recent weeks.

Results reported by realestate.com.au on Monday showed an approval rate of 48 per cent from more than 1700 homes listed for auction between March 23 and 29.

Of these, 451 were pre-auctioned, 220 passed, 723 were withdrawn and 386 were sold under the hammer.

This does not capture the full results as there were 2072 NSW auctions scheduled during that period. Another private sale was made in 1536.

Cotality data from the week ending March 29 put Sydney’s approval rate at 57.9 per cent, while Domain reported an approval rate of 55 per cent – down from 65 per cent in March 2025.

ANZ Chief Economist Shane Oliver, speaking to Domain Statistics, said the result meant deflation was imminent.

He wrote to X.

It seems that the price of money will fall.

Realtor Tom Panos has been chronicling his decline on social media, and earlier told news.com.au that a “perfect storm” had hit the property market.

He said on Saturday that of the twelve auctions he was scheduled to oversee, five of them were sold that day.

“We have also seen a trend of properties being pre-sold or cancelled,” he said.

Mr Panos had previously said that there are two emerging markets – with low-cost properties still seeing strong demand.

But, he said, “now we are seeing for the first time the low cost involved”.