Is real estate safe from a global stock market crash?

By resorting to 19th century economic models, the Donald Trump-engineered global stock market crash has seen multi-trillions of dollars wiped from major international indices.

Trump himself actually cited this era as justification of the tariff formula seemingly composed on a beer mat and applied without nuance to all countries.

“In the 1880s, they established a commission to decide what they were going to do with the vast sums of money they were collecting. We were collecting so much money so fast, we didn’t know what to do with it. Isn’t that a nice problem to have?”

Times have changed since the 1880s. People no longer travel by horse-drawn omnibus or communicate over long distance by Morse code and telegraph.

Tariffs anywhere near the scale unleashed by the Trump administration are reminiscent of the financial panic of 1873, in which European nations and North America imposed huge protectionist trade barriers in attempt to shore up domestic economies. It failed spectacularly.

The 1930s’ Great Depression came about through the sort of astonishing wealth disparities seen today but just as in 1873, governments responded by imposing large tariffs. History repeated itself and the problem only got worse.

Fast forward almost a century and the US economic policy foisted upon the world last week more resembles the fever dream of an 1800s robber baron than that of the president of the world’s largest economy in a time of globalisation and free trade agreements.

We are heading for a self-induced, economic nuclear winter, and we should start hunkering down.

- Bill Ackman, Founder and CEO, Pershing Square Capital Management

On Monday (7 April), the Australian share market lost $160 billion within a minute of opening. The US is forecast to slide into recession.

Stock market turmoil on this scale reverberates through every aspect of the financial world and Australia’s property market is no exception.

So, what does history – for those who do choose to pay heed to it, perhaps unlike some Presidents – teach us about where real estate markets might head if the market was to crash even further or the downturn be sustained for a lengthy period?

The 2025 financial landscape

Throughout 2024, share markets around the world had been on a tearaway run to record levels around the world in the years since the pandemic.

From New York to London and Tokyo, 14 of the world’s 20 biggest stock markets had hit record highs. Then came a burst of volatility in early August, when Japan’s Nikkei Index lost 12.4 per cent of its value in a day before adding another 10 per cent the next day, and the US and Europe markets contracted very sharply.

Whether this latest market panic is a ‘healthy correction’ or the harbinger of more turmoil to come is unclear at the moment.

There is still, of course, the risk of an expanded Middle East conflict, or even the same eventuality beyond Ukraine and deeper into Europe. There’s still China’s slowing economy, aggressive tariff response and its unpredictable regional sabre rattling. And in any market correction, there is always the potential for a global herd reaction that could throw a major spanner into the whole international economic system.

And there is there is the instability of US policymaking. Policies are enacted, withdrawn, stalled and overturned by legal challenges.

A nervous administration is already laying the groundwork for a possible reversal of what has so far been an absolutely disastrous tariff introduction.

US Commerce Secretary Howard Lutnick said on the weekend that the different countries’ tariffs, which are set to come into force on 9 April, could be in place for “days and weeks”.

Property’s historic resilience

As Covid proved, when Australian property was seen as a safe haven in an uncertain world, even the complete freezing of global supply chains was not enough to pull the real estate market down.

When property prices did last fall in Australia, during 2017–18, it was matters closer to home that were the driver. There was no economic crisis, and property prices had been rising steadily in the years before.

Low interest rates and loose lending policy have always driven price growth more than almost any other factor.

In 2017 and 2018 low interest rates had everyone borrowing whatever they could get their hands on.

In response, lenders became very strict and APRA came down with some very hard-hitting policy changes as a result of the Financial Services Royal Commission.

When people could no longer throw wheelbarrows of money at property, prices retreated.

For now, the likelihood of property market crash appears fairly remote, even if far from out of the question.

If there is a massive stock market crash on the scale of the GFC, property is likely to respond slowly to such volatile scenarios. With the current low rate of loan delinquencies few sellers would be forced to offload property and therefore add supply to the market that might lower prices.

The current imbalance between housing supply and demand that has driven prices to record levels around the country are not being addressed, population growth is still high even if migration levels are being reduced, and interest rates are easing.

With those parameters in play, even if stock market tremors become a fully-fledged quake, property prices are unlikely to have their foundations shaken.

But in the era of Trump, nothing can be taken for granted.

Hedge fund manager Bill Ackman, a billionaire and staunch Trump supporter, raised the bar to a level at which anything could be possible and from which property in Australia might not be immune.

“The president has an opportunity to call a time out and have the time to execute on fixing an unfair tariff system.

“Alternatively, we are heading for a self-induced, economic nuclear winter, and we should start hunkering down.”

Make of that what you will.