Trump’s tariffs: What investors need to know
US president Donald Trump’s tariffs have caused widespread uncertainty and nervousness in the global economy. With so much still unclear, it’s important for property investors to stay informed.
Trump has proposed a universal 10% tariff on all imports and even higher duties on Chinese goods. While these tariffs are aimed at boosting US manufacturing, they could have ripple effects globally, including in Australia.
Will tariffs impact property investors?
For property investors, the direct link might not seem clear, but there are a few key areas where these tariffs could create knock-on effects.
Rising construction costs
Tariffs on steel, aluminium and other building materials could drive up prices globally. Australia, which is reliant on imports for materials, could see a spike in construction costs. This may affect new housing supply and renovation budgets, potentially putting upward pressure on property values as supply tightens.
Global uncertainty
Markets dislike unpredictability. If tariffs continue to escalate into broader trade tensions, global inflation could rise again. This uncertainty may push up the cost of materials, fuel and transport, feeding into higher living and building costs locally.
Interest rates
Trade tensions and disputes can influence central bank policies. If tariffs lead to inflationary pressures central banks, including the Reserve Bank of Australia, could be forced to hold or even raise interest rates. Conversely, if tariffs weaken the economy and reduce confidence, that could lead to lower rates. Either scenario would affect borrowing power and property prices, although in different directions.
Other factors impacting property investment
Investors shouldn’t make hasty decisions based solely on global headlines. Other, more local factors continue to shape the Australian property market.
Local market conditions
The country’s property market has been battling against an imbalance between supply and demand. This has put upward pressure on prices and impacted the rental market, too.
Population growth
Australia’s population growth plays a significant role in property demand. Locations with strong population growth are experiencing increased demand for housing, which has put a strain on the market.
Upcoming elections
In May, we’ll head to the polls for a new federal government. This can impact property in two ways:
- In the lead up to the elections, historic trends show that some sellers adopt a wait-and-see approach, which could tighten the market’s already strained supply.
- Post-election, it remains to be seen what, if any, changes to housing policy we can expect. A change of government could also impact the cash rate, which would affect borrowing capacity for buyers.
Long-term fundamentals of property investing
While short-term market fluctuations can be concerning, property investment should prioritise long-term fundamentals. Investors should avoid making impulsive decisions based on short-term market noise and instead focus on thorough research and strategic planning.
By focusing on well-researched markets and sustainable investment strategies, investors can ride out global tensions and build lasting wealth.