While the World Panics, Property Prices Rise – Here’s Why(And Why We’ve Been Saying This Since 2022)

Markets around the world are wobbling. There’s talk of stagflation, trade wars, and global showdowns and slowdowns. People are watching their super balances drop, bounce and drop again as the share market violently swings on almost daily announcements.

In addition, at home in Australia, we have a federal election to contend with.

Despite this turmoil, house prices just hit another record high. Again. CoreLogic has confirmed what we’ve been seeing on the ground; despite the noise, Australian property continues to climb.

And while we don’t get too caught up in medians (the numbers reported as evidence of this growth), the trend is clear. This is exactly what we forecasted in September 2022, when the mainstream commentary was all doom and gloom.

Back then, we said: prices would rise, supply would tighten, and when interest rates dropped, the market would surge. That prediction is now playing out as we are on the precipice of the ‘surge’ as rates fall.

Supply is the Core Issue

The housing crisis isn’t new, and it’s not easing. The supply of homes for sale, rent, or construction remains extremely limited, and that’s not changing anytime soon. Likely in our lifetime.

Why? Because increasing the housing supply isn’t something federal governments can fix. Real solutions rely on a dedicated, strategic and coordinated approach by all levels of government and all political, bureaucratic and public servants. Despite posturing, there is still a massive lack of understanding of the real causes, the will to learn and therefore, any scope for any substantive change. In other words, it will get a lot worse before we see any hint of a turn around.

Pent Up Demand + Lower Rates = Price Surge

Interest rates will fall, and when they do, it won’t just mean cheaper repayments. It will unlock borrowing capacity for thousands of Australians who are currently, based on capacity, not desire, sitting on the sidelines.

Our modelling shows that for every 0.25% drop in rates, borrowing power increases by around 2.5%. So, the touted 0.50% drop in interest rates by many financial market analysts would mean around a 5% increase in borrowing power.

Yet, as pointed out above, not only are we not meeting current demand (actually going backwards), there is no scope to concurrently deliver more homes. So what happens when more buyers compete for the same number of properties?

Prices rise (which they are doing already, month on month) at a pace commensurate with the increase in buyer capacity and willingness to purchase. I.e. rapidly. As we saw in the latter part of the pandemic.

Global Turmoil Creates Local Opportunity

Wealth is moving here with more financial migration of millionaires than anywhere else in the world, and investors are looking for a safe place to park their money.  People are moving here en mass with long-term projections suggesting more growth than will be added in supply to meet new demand – so forget about solving the current undersupply.

Recent international events have amplified this trend. President Trump’s “Liberation Day” tariffs, announced on April 2, sparked global market shockwaves. The Dow Jones fell over 1,600 points the very next day, one of the largest single-day point losses since the pandemic. Since then, volatility has continued. Wall Street’s VIX index – often called the “fear gauge” – has surged, reflecting global uncertainty and jittery investor sentiment. Similarly, the ‘bounce’ back on the tariff pause was almost as dramatic, but stocks remain below the prior highs (overreaction is always very fast, corrections much, much slower – it took more than a decade for Australia to reach the prior market high of the ASX post-GFC as an example).

Imagine if property prices fluctuated like the share market every day. There would be chaos. Thankfully, residential property offers a very different experience. It’s steady, backed by fundamentals, and doesn’t swing wildly with political headlines. It’s a less liquid asset (speed at which it can be sold), yes, but it has far greater security and stability. It is prudent to note, however, that like most things, the liquidity statement is a generalisation. The right type of property always has a higher liquidity, and this is the type of property we suggest our clients should be investing in – those with higher demand so, thereby, higher growth, yield and easier to sell should the need arise. It all comes down to the strategy..

As financial markets reel, there’s a growing consensus that interest rates will be cut. The markets are now pricing in a 0.50 percent rate cut at the RBA’s next meeting in May. If that happens, mortgage holders will benefit immediately, and investor activity is likely to rise sharply.

With a lower Australian dollar and heightened international uncertainty, Australian property looks increasingly attractive to global and local investors alike. The falling Australian dollar, while tough on imports, makes property and investment here even more attractive to overseas buyers. Combine that with rising construction costs, persistent supply chain issues, and strong demand, and you have the perfect storm for continued price pressure.

Property Has Proven Itself. Again.

Some will still be tempted by the idea of “buying the dip” in the stock market. But here’s what history shows us. If you take the last six major share market crashes and track property prices five years before and after, Australian property values kept rising.

The share market may bounce around with global shocks, but property performs well when the fundamentals are strong, and right now, they are. The only real brake is macroprudential policy that affects money supply, lending caps or assessment rates. When that happens, it just reinforces the advantage for those who are already in the market and drives the undersupply deeper.

As always, risk comes from a lack of knowledge, and the people who benefit from this next phase of growth will be the ones who arm themselves with the right knowledge and move early.

The Outlook Is Clear

We’re expecting protracted price growth long term, with a ramp-up in the rate of growth through the rest of 2025 and well into 2026. Price growth will ‘slow’ again, but not reverse, not for the right types of homes in the right areas anyway.

Unlike trying to pick the share market, this isn’t speculation. This is based on the evidence of the fundamentals and has been proven time and again.

So, while others panic or are paralysed by fear, this is your opportunity.

The simple fact is, if you’re waiting for the housing market to crash, you might be waiting forever. And the longer you wait, the more it’s going to cost you to get in. Moreover, you can make money in any asset class in any market if you know what you are doing or have the right team to support you.

Want to understand what’s really going on in the market?

Read the Sunshine Coast Property Market Update and connect with our team for a free property strategy session.
Because where the media zig, we zag, and we’ve been right for decades. Just ask these guys!