What Trump’s victory means for Australia’s property market

Scott Kuru November 7, 2024 5 min read

Image by AI Goldis/AP

KEY POINTS

Donald Trump’s stated policy platform - particularly on imposing import tariffs on overseas goods coming to America - could have implications for stoking global inflation
The prospect of a Trump victory has already seen financial markets push back their timing of interest rate cuts in Australia
Affordability constraints have seen property buyers turn to more affordable markets in Australia - a move that could be amplified by a Trump victory

In one of the most extraordinary political comebacks of all time, Donald Trump has regained the US presidency with a resounding victory over Democrat contender Kamala Harris.

It’s less than four years since “The Apprentice” star left the Oval office in disgrace after being voted out of office by the American people and appearing to incite the January 6th 2021 assault by his supporters on the US Capitol.

There’s been plenty of speculation about what a second Trump presidency might mean for the United States, for wars in the Middle East and Ukraine and for relations with China.

But what are the implications of a Trump win for Australia - and specifically the Australian property market?

Interest rates

Probably the most immediate impact a second Trump Presidency will have on the Australian property market comes in the form of interest rates.

In recent weeks, as the prospect of a Trump win became stronger, financial markets pushed back their expected timing of rate cuts in Australia.

A few weeks ago, markets were pricing 4 cuts of 0.25% or a total of 1% in cuts to the official cash rate by the Reserve Bank next year.

Currently (as of the 7th of November 2024), markets have fully priced in just one interest cut by the RBA next year - and not until May.

The thinking on markets is that inflation globally is likely to be higher under a Trump presidency.

“If Trump’s policies boost US inflation, there could be a global flow-on, including to Australia, resulting in higher than otherwise RBA interest rates”, says AMP’s Chief Economist Shane Oliver.

“Trump’s tendency towards lower taxes and pressure for lower interest rates could reignite global inflation, which might force the Reserve Bank of Australia to raise interest rates,” agrees Ray White’s Chief Economist Nerida Conisbee.

“An overheating US economy would impact the inflation rate in Australia.”

One of the key reasons for this is the President-elect’s threat to impose tariffs of 10-20% on all imports into the United States, with a 60% tax on goods from China.

“This would take the average US tariff rate on imports from around 2.5% to at least around 17%, a level last seen in the 1930s, and it was a disaster then!” says AMP’s Shane Oliver.

Ironically, Donald Trump is threatening to do this at a time when inflation is falling in the United States.

“It'll make the problem significantly worse,” says Australian-born economist Steven Hamilton, who’s Assistant Professor of Economics at The George Washington University in Washington DC.

“There's no doubt about that.

“Raising the price of every single imported good by 10 to 20% can only do one thing to inflation,” he told ABC News.

“The hope that we have, actually, is that he doesn't do what he said he'd do.”

The cash rate in Australia has now been at a 13-year high of 4.35% for 12 months now, as the Reserve Bank tries to pull core inflation back into its target 2-3% band.

If global inflation ticks up again, the RBA is likely to be forced to leave rates higher for longer and perhaps even raise them again.

Home prices

Home prices have been growing in Australia despite high interest rates, but the pace of growth has slowed as affordability constraints bite.

If rates stay higher for longer because of developments like trade wars, price growth could slow further.

However, we’ve already seen a “flight to value” in real estate markets.

This means apartments in expensive cities like Sydney could see more price growth at the expense of houses, plus there could be even more focus on affordable suburbs, as constrained buyers adjust their budgets.

CoreLogic’s latest monthly Home Value Index showed there’d been a slight easing (-0.1%) in Sydney home values in October.

However, the decline was not uniform, with the largest falls in the most expensive areas of the Sydney market, with a -0.6% fall in upper quartile house values over the month and a -1.1% drop over the past three months.

“In comparison, Sydney’s lower quartile house and unit values both recorded a half a percent rise in values in October,” CoreLogic’s report says.

CoreLogic’s Research Director Tim Lawless says the stronger performance across the more affordable end of the market is a consistent theme across the capital cities.

“A combination of less borrowing capacity and broader affordability challenges, as well as a higher-than-average share of investors and first home buyers in the market, is the most likely explanation for stronger conditions across the lower value cohorts of the market.”

With population pressures showing no sign of easing and a continuing housing supply shortage in Australia, a Trump presidency could actually have the effect of driving up soaring prices even more in affordable Australian suburbs.

Big cities to benefit?

“As an open economy with high trade exposure to China, Australia is vulnerable to an intensification of global trade wars under Trump, particularly if it weighs on demand for

Chinese exports,” says AMP’s Shane Oliver.

“An OECD study showed that Australia could suffer a 1.2% reduction in GDP as a result of a 10% reduction in global trade between major countries.

“Resources shares would be most at risk, and the $A would likely fall (and we have already seen a bit of that).”

Any impact on the resources sector, particularly the demand for iron ore, could have a significant effect on property markets, particularly in Regional Western Australia and Queensland.

Perth property prices underperformed for years following the end of the last mining boom, but a severe housing shortage at a time of extremely high population growth, plus a more diverse economy now, are a combination which look set to continue to support the strong price growth we’ve seen in that market over the last 3 years.

Americans looking to move here

Another factor when considering the implications of a second Trump presidency for Australian real estate is expatriate Americans.

Australia’s largest property platform, Realestate.com.au, recently reported that the number of US-based searches to buy Australian property had soared 51% over the year to July, as the prospect of a second Trump presidency became clearer.

REA Group, which owns the portal, points out there’s no doubt that some of those US-based searches would be coming from Australians living overseas thinking of returning home, but the sustained growth in searches over the past five years suggested it was unlikely to be just Aussie expats alone.

“The standard of living and the robust economy in Australia are drawcards for property seekers from the US,” REA Group senior analyst Karen Dellow says.

Ms Dellow says searches for properties in Victoria and Melbourne increased by 130%, noting an increase in overall searches peaked when polls suggested Donald Trump was favoured to win.

It’s an interesting thought that progressive Americans - dismayed by the prospect of a second Trump term - may be considering a move halfway across the world to the place that former Premier Daniel Andrews liked to call “Australia’s most progressive state.”