War, petrol prices and property: what it means for investors in 2026

War, petrol prices and property: what it means for investors in 2026

Major conflict in the Middle East can shift investment outlooks quickly, and property is no exception. With inflation expectations rising and petrol prices surging, the near-term outlook for real estate has clearly changed.

Even if the war were to end tomorrow, the property market is likely to take a modest hit. That said, Australian real estate is still expected to weather the storm relatively well.

How is that possible, and which parts of the market are best placed?

How the economy is shaping the property outlook

Heading into the crisis, the economy was reasonably strong.

One of the foundations of a healthy property market is a solid economic base. National accounts showed a 2.6 per cent annual growth rate in the December quarter, the fastest in almost three years.

However, consumer spending was already beginning to weaken before the closure of the Strait of Hormuz. With fuel prices now soaring, consumer confidence has taken a further hit.

The longer the current conditions persist, the greater the drag on the economy and, by extension, the property market.

Property market trends: prices, auctions and buyer sentiment

So what is likely to happen to the market?

The property market’s trajectory this year mirrors the broader economy: stronger than it felt in the first quarter, but with clear challenges emerging.

Nationally, home prices rose 9.4 per cent in the year to the end of March 2026. Perth (20.9 per cent) and Brisbane (17.7 per cent) led the charge, while Melbourne (3.2 per cent) and Sydney (5.6 per cent) lagged.

Now, uncertainty is creeping in. Auctions are being postponed in higher-priced Melbourne suburbs such as Brighton, Canterbury, Williamstown and Malvern.

Attendance at open inspections is also declining, particularly in the affordable apartment segment and, to a lesser extent, across middle-ring family homes.

This emerging ‘wait and see’ sentiment is not ideal for vendors, but it may create opportunities for investors.

Why property markets remain resilient in times of crisis

One of the enduring characteristics of real estate is its resilience during volatile periods.

Just months ago, there were queues outside gold exchanges. Those have since disappeared. Crypto markets have gone quiet, and stock market investors are increasingly cautious, with some major funds even restricting withdrawals.

These markets are vulnerable to rapid shifts in sentiment. Real estate is not.

Selling an investment property typically takes at least six weeks to arrange, and homeowners are often reluctant to sell unless absolutely necessary.

This slower transaction cycle acts as a stabiliser. Like a handbrake, it reduces impulsive selling and limits the volume of stock coming to market during times of uncertainty.

A clear example of this dynamic was seen during the Global Financial Crisis. While many OECD nations experienced unemployment rates of 9 to 11 per cent, Australia’s peak was contained at 5.8 per cent.

Housing prices softened for around six months before rebounding strongly as confidence returned.

Investors who bought strategically during that period were well rewarded.

Opportunistic property buying in uncertain markets

Periods of disruption often bring opportunity.

A consistent pattern in buyer agency activity is that crises, whether financial, pandemic or geopolitical, tend to draw out contrarian buyers.

In recent weeks, we assisted a first home buyer to purchase a unit in the building she was already living in.

Originally bought for $495,000 just before Covid, the property had underperformed. Rising interest rates and geopolitical uncertainty ultimately pushed the owner to sell.

After extensive negotiation, the property was secured for $390,000.

While not investment-grade by our usual standards, the purchase made sense for the client. She retained her lifestyle and is now paying approximately $500 less per month on her mortgage than she was in rent.

We expect to see more of these opportunistic transactions in the current environment.

Premium property outlook as interest rates rise

Conditions have clearly shifted, particularly at the top end of the market.

Two months ago, expectations of falling interest rates supported confidence, especially for premium properties.

Now, inflation is likely to remain higher for longer, while economic growth softens.

As a result, properties in the top 25 per cent of the market are likely to see flat conditions this year. In the prestige segment (the top five per cent by value) modest price declines are possible.

Best property investment opportunities in 2026

Despite the challenges, there remains a solid case for property investment.

For the remainder of 2026, conditions are likely to favour properties at or below the median price in capital cities, and around the median in major regional centres.

Demand in these segments is underpinned not just by economics, but by life events such as household formation, births and family changes.

Last year, I outlined the best types of investment leveraging the decline in average property size.

Those property types, two-bed villa units, relatively affordable standalone family homes and established homes on large blocks in well serviced suburbs, have just had their case strengthened as the best weighted options for investors in 2026.

Australian real estate remains the world’s safest investment, with relative stability that other more volatile assets simply cannot match.

Now, all we need are world leaders who also behave with a little more predictability.