Why politics won’t derail Australia’s property market

Whether it’s at a global, federal or state level, the political climate can have an immense impact on the property market in Australia.

Amid the chaos of modern politics, it’s easy to get caught up in complicated policies and sensationalised headlines while neglecting to look at the bigger picture.

The reintroduction of US tariffs under Donald Trump’s second presidency and the recent re-election of the Labor government have dominated headlines but their impact on the Australian property market is expected to be less disruptive than may be suspected.

As one of the most resilient asset classes, here’s five reasons why experts remain confident in the strength of Australian property.

1. Interest rates likely to fall as inflation eases

Economists across Australia predict that inflation will continue to decline through the second half of 2025.

Treasurer Jim Chalmers recently hinted that the Reserve Bank of Australia could introduce as many as four interest rate cuts before the year’s end.

The RBA has maintained a cautious stance since the cash rate last peaked at 4.35 per cent in late 2023, however, with inflation tracking downward and global uncertainty lessening demand, rate cuts are likely to form part of the broader economic stimulus strategy.

This will signal good news for homeowners and investors, as lower interest rates will reduce borrowing costs and provide some much-needed relief from the current cost-of-living crisis.

2. Housing prices expected to climb

Historically, interest rate cuts have had a direct upward effect on property prices. Lowered interest rates encourage more buyers to enter the market and boost their buying capacity, thus pushing housing prices up.

With as many as four rate cuts on the table, it’s likely the market could see a further increase in prices, particularly in segments where affordability still allows for growth. As a result, experts predict that the greatest movement will occur in middle-tier suburbs and regional hubs.

Affordability constraints are also likely to drive further growth in the medium to high-density sector, which will see prices for units and apartments outpace houses.

This trend has already been seen nationwide, with unit values rising faster than houses in more than half of all suburbs as buyers opt for a lower point of entry to ownership.

3. Global tariffs to drive up construction costs

While Australia’s direct exposure to the US trade tariffs is relatively minimal - accounting for less than 5 per cent of the value of Australia’s exports – the indirect effects are undeniable.

Trump’s tariff agenda will reintroduce trade barriers on key construction materials such as steel and aluminium, which are globally traded commodities.

Australia won’t be immune to the effects of this and will likely experience an increase in the price of construction supplies. Buyers will ultimately be the ones paying the price, as these costs filter down through the supply chain.

With housing affordability already under strain, further cost pressures may result in increased wait times for construction that will disproportionately impact growth corridors where development is already underway.

4. Labor’s housing promises face pressure to deliver

This election period was fraught with promises to solve the housing crisis from all sides.

Labor’s re-election brings renewed focus on housing policy, including ambitious targets to fast-track tradie certifications, invest in social housing and support the construction of new affordable homes.

In mid-2024, the Labor Government set an ambitious target to build 1.2 million new homes over five years.

Since then, a report by the National Housing Supply and Affordability Council has said new housing supply is already looking to fall short of this target.

While fast-tracking trade certifications may work to alleviate labour shortages, supply shortages and potential pricing constraints as a result of the renewed US tariffs may slow the flow of the development pipeline.

5. Property remains a safe haven

Despite recent volatility in equity markets and global trade tensions, Australian real estate continues to be seen as a stable, long-term asset.

With interest rates set to fall and borrowing conditions likely to improve, market confidence is expected to rebound in the second half of the year. Unlike the sharp swings seen in equity markets, the relative stability of property will see real estate remain a preferred asset of investors.

It’s a reminder that while political developments can undoubtedly influence sentiment and strategy, the fundamentals of property will never change overnight.

Australia’s property market has weathered countless leadership changes, policy shifts and global turmoil, and despite it all, the road ahead for real estate remains strong.