Talk of double rate cut highlights impact on property from chaotic share markets

These are, indeed, turbulent times.

The chaos unleashed by Donald Trump’s tariff introduction and then, in the early hours of Thursday morning (AEST, 10 April), an embarrassing backflip has sent share markets on a rollercoaster ride of falls and, at this stage partial, recoveries.

The Reserve Bank of Australia (RBA) at its last meeting on 1 April was hosing down assumptions it would cut rates in May and insisting it was in a wait-and-see mode.

Such is the uncertainty, however, that big four bank NAB on Thursday announced it is expecting not just a 20 May rate cut, but was predicting it would be a previously unthinkable double rate cut of 0.5 per cent.

The large stock market correction on 7 April shook up share traders and unnerved anyone with a superannuation account, prompting investors to reassess their overall investment portfolios and consider whether the share market is the best place to invest their money or if they should be looking into alternative investment avenues, such as property.

Historically, during periods of stock market volatility, investors shift away from shares and towards real estate because property is perceived as a more stable investment.

This leads to increased interest in the property market, and the demand for property subsequently increases. Therefore, the decline in the Australian share market is expected to have a direct impact on Australian property prices, as we start to see investors shift their focus away from equities and into real estate.​

Stock market impact on property markets

What history has shown us, is that when there is instability in the stock market, investors change their investment strategies to seek refuge in tangible assets like real estate, because physical bricks and mortar is perceived to be less volatile and more secure.

This shift in investment strategy could have several implications:​

1. Increased demand

A shift from equities to real estate may boost demand for properties, particularly in major cities like Sydney, Brisbane and Melbourne. This heightened demand can exert upward pressure on property prices especially if there is not enough supply available.

2. Market resilience

The Australian property market has demonstrated resilience in past global economic downturns. During the Global Financial Crisis (2007-2009) and the Covid pandemic, property prices in Australia remained relatively stable or experienced modest growth.

3. Exit Strategy

When the share market stabilises and turns toward positive territory, many investors who moved their money into property, take their money out of real estate to re-invest back into the share markets. If there is a significant volume of investors selling property prices decline as a result of a mass exit.

Economic indicators and interest rates

Economic indicators, such as interest rates, play a crucial role in shaping the property market. Amid concerns over a global economic slowdown and the impact of US-imposed tariffs, financial experts predict that the RBA may implement up to four rate cuts in 2025.

These monetary policy adjustments will have significant implications for property markets, influencing borrowing capacities, buyer demand and overall property prices.​

Lower interest rates can reduce mortgage repayments, and stimulate the property markets even more, making property investment more attractive and potentially causing a property boom in some of the popular investment locations.

A lower Australian dollar, which often accompanies lower interest rates and market uncertainty, can also deter people from investing overseas and encourage foreign buyers to eye Australian property.

Enhanced borrowing capacity and buyer demand

Any reduction in the interest rate will lead to lower mortgage rates, thereby decreasing monthly repayment for borrowers and relieving many families from mortgage stress.

Potential homebuyers will gain confidence because buying a property is suddenly more accessible, so we will expect new buyers to enter into the market, further increasing demand.

Historical precedents

We can learn from history what the expected impact will be on the Australian property market when the RBA announces interest rate cuts.

Following the RBA’s 0.25 per cent rate cut in February 2025, national home prices experienced a notable upswing. There was a 0.4 per cent increase in median dwelling values in March 2025, marking the second consecutive month of growth and reversing a brief period of decline.

If the RBA made four interest rate cuts in 2025, this would likely drive property values upwards.

One important thing to note, is that this impact is not uniform across all regions.

Major cities like Sydney, Brisbane, Perth and Melbourne have shown significant responsiveness to changes in interest rates, but the more affordable regions experience this to a much lesser extent. Not all markets work in unison.

Risks and considerations

While lower interest rates can stimulate the property market, they also pose potential risks.

If we see property prices in some markets increase rapidly, this may exacerbate affordability issues.

The RBA needs to carefully consider their economic policy for the remainder of 2025, because any aggressive rate cuts might begin a ripple of market concern and add to market instability.

Additional reporting by Craig Francis