Safe as Houses?

Global markets are currently experiencing significant disruption from Trump’s “Liberation Day” tariffs. As economic uncertainty grows and share markets display considerable volatility, is residential property a safe haven?

The uncertainty triggered by Trump’s tariff policies has created substantial turbulence across financial markets worldwide. This volatility is clearly reflected in the VIX index—often referred to as Wall Street’s “fear gauge”—which recently recorded an unprecedented increase. When the VIX rises sharply, it indicates market expectations of significant price fluctuations and heightened investor concern.

​Following President Trump’s announcement of the “Liberation Day” tariffs on 2 April 2025, the Dow Jones Industrial Average plunged 1,679 points or four per cent drop on 3 April 2025. This marked one of the most substantial single-day point losses since the 2020 COVID-19 market turmoil. ​Then again last night, the Dow Jones experienced another volatile session, ultimately closing down 349 points, or 0.9 per cent. These sharp declines were driven by investor concerns over escalating trade tensions and the potential economic impact of the newly imposed tariffs.​ Imagine if houses had a daily ticker price on them? It would cause widespread panic.

This economic upheaval has dramatically altered interest rate expectations. As of 8 April, markets anticipate an almost certain 0.50 per cent cut at the next RBA meeting on 20 May. Such reductions would benefit mortgage holders significantly and will almost certainly direct more money into the housing market, supporting both housing supply and price growth.

The broader economic outlook remains exceptionally complex. While interest rate cuts typically strengthen property markets, the impending US recession threatens to constrain global economic growth, potentially increasing unemployment in Australia. The impact of tariffs introduces additional complexity—although Australia isn’t implementing reciprocal tariffs, the global trade conflict could drive price increases across numerous products.

This creates a challenging scenario where the RBA might eventually find itself unable to reduce rates despite a slowing economy if inflation remains elevated. Interest rates are set to be cut but the inflation outlook may reduce their ability to cut a lot.

Despite these complications, housing presents several advantages over the share market in the current environment:

• Greater price stability: Unlike shares which can lose significant value in a single trading session, property values tend to adjust more gradually over time, providing investors with a less volatile asset class and time to make considered decisions rather than panic-selling.
• Tangible asset security: Property is a real, physical asset that always has practical value, no matter what’s happening in the economy. You can see and touch your investment, which provides security during uncertain economic times
• Fundamental demand drivers: People always need somewhere to live, creating a baseline of demand that persists even during economic downturns. This essential human requirement underpins property value in ways that many share market investments simply cannot match.
• Direct benefits from interest rate cuts: The anticipated RBA rate reductions will immediately benefit property investors through lower mortgage repayments, potentially improving cash flow and rental yields while freeing up capital for further investment.
• Supply constraints driving value: While tariffs may increase building material costs and potentially slow new construction, this supply constraint can actually support existing property values by limiting new housing stock entering the market. This dynamic can partially shield established properties from economic downturns, particularly in areas with strong population growth.
• Geographical diversification opportunities: Property investors can strategically select locations or property types with favourable local economic conditions, targeting areas less impacted by economic downturn.
• Inflation hedging capabilities: As a hard asset, property has historically performed well during inflationary periods. If tariffs drive price increases across consumer goods, property’s inflation-hedging characteristics become increasingly valuable.
• Potential for both income and capital growth: Property offers dual return potential through both rental income and capital appreciation, providing multiple pathways to financial benefit even when economic conditions impact one aspect of returns.

The months ahead will bring continued economic uncertainty as markets adjust to new tariffs and shifting monetary policy. While residential property may or may not replicate the exceptional growth rates of the past five years, it remains fundamentally more stable than many alternative investment options.