Are we headed for another price boom?

Australia’s housing market has surged over the last five years, with national dwelling values rising a cumulative 38.4% since March 2020 at the start of the pandemic, according to Cotality (formerly CoreLogic).

Now, a confluence of both global and domestic factors has led some in the industry to ask: are we on the edge of another housing price boom?

The ‘Trump factor’, fluctuating interest rates and a persistent housing shortfall are all influencing the market. Here’s how.

Interest rates

A key driver of the most recent property boom was record-low interest rates, with the Reserve Bank of Australia (RBA) reducing the cash rate to as low as 0.10% in November 2020. If we look at the graph below from Cotality, it shows clearly how interest rate cuts stimulated borrowing, which put upward pressure on prices.

In February 2025, the RBA made its first cut in almost two years, and markets are predicting more reductions by the end of the year. 

Lower interest rates typically boost the borrowing capacity of buyers, fueling demand and putting upward pressure on home prices. Combine this with Australia’s chronic housing shortfall, and the fundamentals point towards price growth.

Trump’s tariffs

But this time around, there are new wildcards. Most notably, US president Donald Trump’s trade tariffs. His wave of aggressive tariffs, especially those targeting China, has rattled global markets.

While Australia has been spared the worst, the potential fallout is significant given that our largest trading partner, China, is embroiled in a full-blown trade war with the US.

The trade war could indirectly impact the housing market through rising construction costs. Tariffs on Chinese goods may increase the price of imported building materials, making new homes more expensive to build and potentially slowing down supply.

At the same time, global uncertainty may cause developers and investors to delay projects, reducing housing availability and further driving up prices in a market already struggling with a supply shortage.

Consumer confidence

The current state of the global economy hasn’t only affected the confidence of developers and investors, but consumers too. Household consumer sentiment has fallen to a six-month low, according to the Westpac-Melbourne Institute.

For many Australians, that means delaying big financial commitments, including home purchases. For long-term investors, it may present an opportunity to act with purpose while others wait, especially when supported by a clear and considered strategy.

Stocks versus housing

At the same time, there’s another dynamic at play: the volatility of the stock market, which in early April saw both its largest fall and biggest gain in almost five years.

To avoid this volatility, investors might be looking for safer options. Real estate stands out as an attractive alternative offering greater stability than shares, the potential for long-term capital growth and a steady income stream through rent.

For many investors, it provides a sense of control and connection that paper-based assets often lack. If enough capital shifts from shares into bricks and mortar, it could add fresh fuel to property price growth.

Upcoming elections

Adding another layer of complexity is the federal election and the housing policies being proposed. The Coalition’s proposal to lower the mortgage serviceability buffer could further increase borrowing capacity, inviting more buyers into the market and adding upward pressure on prices.

Another key factor impacting the housing market has been the imbalance between supply and demand. Despite a slight improvement, dwelling approvals are still too low, with just over 16,000 approved in February 2025, according to the Australian Bureau of Statistics. This is compared to the 20,000-plus per month required to meet the National Housing Accord goal of facilitating the building of 1.2 million new homes in the five years to June 2029.

While each of the major parties has put forward their proposals for how to reduce this shortage, it remains to be seen which, if any, housing policy will effectively clear the backlog and stimulate development in the sector.

Until policy translates into approved and delivered dwellings, the supply imbalance remains a dominant market force.

A balanced outlook

So, are we headed for a boom? It is possible, but also not guaranteed. Rate cuts, investor interest and a shortage of supply are all putting upward pressure on prices, but economic uncertainty, political volatility and affordability constraints are acting as a brake.

Finding the balance between these factors is what will influence the outlook of the property market. Explore our step-by-step guide to investing with clarity and confidence.

Thinking of buying before the market shifts again? With research-backed insights and expert guidance, the property investment strategists at Safore can help you make informed decisions and build long-term wealth with confidence. Contact Safore today on 1300 69 77 67 or click here.