Photo: Gage Skidmore from Peoria, AZ, United States of America, CC BY-SA 2.0, via Wikimedia Commons
The Australian property market is bracing for potential shifts in the wake of sweeping tariffs imposed by the United States, with experts predicting a complex interplay of forces that could both dampen confidence and create new opportunities for brokers and buyers alike.
"[Tariffs] are definitely a concern for people," Aaron Bell, a mortgage broker at Home Loans Village, told Australian Broker. "It's one of those difficult things, because it's very hard to work out from that, what are our [official cash] rates actually going to look like? What is that going to do to inflation here in Australia? And then, what will those flows and effects be? So from that perspective, I think people are a little bit more nervous than they were at the start of the year."
US President Donald Trump's tariffs — dubbed the "Liberation Day" tariffs — saw a 10% levy applied to all Australian exports to the United States. While the direct trade impact on Australia, with only around 4% of exports heading to the US, might appear limited, the broader global economic implications are significant and are already being felt in the local property sector.
In fact, news of the tariffs caused markets around the world, including the Australian Stock Exchange, to plummet. And just as volatile as the markets are, Trump then announced via social media that he was pausing the tariffs on some countries, including Australia, for 90 days.
Despite all the upheaval, many economists were quick to say that the tariffs could actually positively impact Australia.
The economic fallout from the tariffs is fueling expectations of sooner and deeper interest rate cuts by the Reserve Bank of Australia (RBA). Financial markets are now pricing in a high probability of a rate cut in May, with predictions of up to three more cuts by the end of the year. The rationale is twofold: tariffs could stifle global growth, necessitating monetary stimulus, while at the same time, Australia might experience deflationary pressures as tariff-affected nations redirect their goods, potentially lowering import prices.
ANZ was quick to predict the RBA would continue to cut the official cash rate (OCR), with expectations that the rate would fall to as low as 2.6% by February 2026. Meanwhile, Australia's three other Big Four banks — Commonwealth (CBA), Westpac and ANZ — all are also anticipating further rate reductions throughout 2025.
Lower interest rates make mortgages more affordable, increasing borrowing capacity and stimulating demand in the housing market. This could act as a counterforce to the negative sentiment, potentially supporting property prices and even leading to further growth, albeit at a potentially slower pace than previously anticipated.
"It's an interesting one. [The tariffs] will probably affect the market. I mean, it can't really not, I wouldn't think, with all the jitteriness of the last few weeks," said Bell, who is based in Pennant Hills, NSW. "But I don't think we're going to see that effect until after it's happened. It will obviously be in prices and that sort of thing. But we won't actually see that effect in prices and that sort of thing for another sort of month or two."
The immediate reaction to the tariff news has been a dip in consumer confidence. Concerns about a potential slowdown in global economic growth, particularly in major economies like the US and China, are making Australians more cautious about big financial decisions, including purchasing property. Westpac's latest survey reveals a sharp fall in consumer sentiment in April, with a more pronounced decline recorded after the tariff announcement. This uncertainty could lead to a softening in buyer demand, especially amongst upgraders and investors and potentially contribute to a slight pullback in auction clearance rates seen in Sydney and Melbourne.
"Businesses will have less and less confidence and we'll see the risks of recession, and that sort of thing, are definitely increasing," said Bell, who added that rate decreases could also be the first signs of a struggling economy.
"The issue with rate decreases is that the jobs market is probably going to be affected," Bell said. "And while people kind of aren't thinking about that right now, if you've still got your job and rates have come down, then fantastic. But broader hurt in the economy is never a good thing for anyone.
"I think we will see rates come down faster, but really just because of the much higher recession risk from a world that is uncertain”.
Siobhan Williams, head of mortgages at Pepper Money, added: "There are some first-time buyers who are maybe a little bit stuck with what's happening in the media and not sure what's going on. But when they start to see that rate come down, I think consumer confidence will certainly be given a bit of a boost."
The impact of these global economic shifts may not be uniform across all segments of the Australian property market. While lower interest rates could provide a broad boost, first-home buyers might face continued challenges if prices are pushed upwards by increased demand, or if they have their savings tied up in riskier investments affected by market jitters.
"Business has definitely picked up," said Tara Gibbs, founder and broker at On Point Home Loans, which is based in regional Milton, NSW. "People are starting to really look at their rates. I feel like everyone was deflated there for a while, just not wanting to do anything. But I think [the lower rates] are making people look."
The current environment necessitates a strategic approach for those looking to enter the property market — and brokers will need to be aware of all the potential ramifications, as well as solutions. Careful consideration of individual financial circumstances and long-term economic outlook are crucial.
For Bell that means "consistently educating everyone through things like social media. But also, email newsletters and just keeping those conversations going. And, if I've got thoughts on different things, I'm generally sharing them with my clients. I see mortgage broking similar to financial planning, really continuing that education piece with them.
"I've seen more clients over the last six months … They're needing to go on hardship because they're increasing repayment, it's just been too big," Bell said. "We've put in some better systems around that and processes, and we're having that conversation earlier with clients. It's not that bigger percentage of my loan book that that's happening to. But in an uncertain world, it's one of those things that I think we need to be more more conscious of for clients. I think moving forward, and certainly at the moment, my focus for those who will be hardest hit is probably on, how do we educate around the hardship provisions that are out there for consumers?"
