The Big Picture: How U.S. Tariffs Affect Australia

This week, the United States shocked Australia by introducing a staggering 10% baseline tariff on all Australian imports. While Prime Minister Anthony Albanese called the move “not friendly”, Australia won’t retaliate to avoid hurting households. Markets reacted fast; the ASX200 dropped 1%, and the Aussie dollar dipped.

Though only 5% of Aussie exports go to the U.S., the bigger worry is global fallout. Key partners like China face even steeper U.S. tariffs (24%-34%), which could slow their economies and reduce demand for Australian resources.

But there’s a twist: economic experts say these trade tensions might push the Reserve Bank of Australia (RBA) to cut interest rates, which could fuel property prices.

Construction Costs in Property Market Set to Rise Again

Building or renovating? Brace for higher bills. U.S. tariffs could hike prices for imported materials like steel or timber. This adds to existing pain – building costs have already jumped 28% since 2019.

According to the Australian Bureau of Statistics (ABS), the average cost to build a new home or new dewlling went up from around $345,000 in 2019–20 to about $444,000 in 2023–24 – that’s almost a 29% jump.
CoreLogic’s data supports this data, showing building costs are now 30.8% higher than they were before the pandemic.

These price hikes are mainly due to things like timber and steel shortages, rising labour costs, and supply chain issues.

Why it matters for Property Investors of First Home Buyers?

• Builders may delay projects if materials get too pricey, worsening Australia’s housing shortage.
• Fewer new homes = more competition for existing properties = higher prices.
• First home buyers eyeing new builds should budget extra or consider established homes.

Some global suppliers might redirect goods to Australia at lower prices. But don’t bank on it – specialty materials (like U.S.-made products) can’t be replaced overnight.

Interest Rate Cuts: A Gift for Buyers?

Markets now expect the RBA to cut rates three times in 2025, starting as soon as May. Lower rates mean cheaper mortgages and higher borrowing power. For example:

• A 0.5% rate cut could save $200/month on a $600,000 loan.
• Cheaper loans often push property prices up as buyers compete.

After the RBA’s surprise February rate cut, home prices rose 0.4% in March 2025. Analysts say every RBA rate cut since the 1990s has boosted prices. This time could be no different.

For first home buyers: Lower rates might make that dream home fit your budget. Lock in pre-approval now to act fast.

Investors Eye Property as a Safe Bet

Global chaos? Aussie real estate stays steady. Investors are rushing back, with 1 in 3 planning to buy in 2025. Here’s why:

• Rental crisis: Vacancy rates are at 1% – landlords have the upper hand.
• Rents are rising: Capital city rents jumped 1.6% in January alone.
• Yields look sweet: Gross rental yields of 4-5% are common, and falling rates could make mortgages cheaper than rent income.

Read More: Australian Property Market Soars: March 2025 Home Value Index Breaks All-Time Records

Property investors also bet on long-term demand. Migration is rebounding, and population growth means more housing needed. Even if tariffs hurt the economy short-term, property’s “bricks and mortar” appeal remains.

First Home Buyers: Why Now’s the Time

If you’re ready, here’s your moment:

1. Rates are dropping: Cheaper loans = bigger budgets.
2. Prices are rising: Delaying could cost you. Home values hit record highs in 2024 and keep climbing.
3. Grants up for grabs: Use schemes like the First Home Owner Grant ($10k+) or stamp duty discounts to cut costs.
4. Avoid build risks: Opt for established homes to dodge soaring construction costs.

Pro tip: Explore off-market listings to beat the competition. Liviti’s experts can help find hidden gems.

Outlook: Why Prices Will Keep Climbing

Four factors will drive growth in 2025:

1. Demand vs. Supply: Australia needs 200,000+ new homes yearly but builds far fewer. Tariffs could worsen delays.
2. Cheap loans: Rate cuts will lure more buyers into the market.
3. Investor FOMO: Fear of missing out will push prices as investors chase yields.
4. Rental crunch: Low vacancies mean landlords can hike rents, making properties even more attractive to investors.

Even with global trade jitters, Aussie housing’s fundamentals are strong. As one economist put it: “Property might be the winner in this tariff mess.”

U.S. tariffs add uncertainty, but Aussie property looks bulletproof. For investment property buyers, waiting risks paying more later. For investors, it’s a chance to grab high yields and growth. Stay informed, use expert advice, and act while rates are low.

Property investment experts at Liviti can help you navigate this market – from off-market deals to finance tips. Reach out today to make your move.