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Will Trump's Tariffs Sink The Australian Property Market? · The Follio Property Podcast

• 0:05
  Welcome to I Call Bullshit, a property podcast where we separate real estate fact from fiction. I'm Rhys Bettle and in every episode we uncover the truth behind the property market's biggest claims and trends. Joining me is our resident expert, Lachlan Delahunty. He's seen it all and isn't afraid to call out the bullshit when he sees it. Lachlan, welcome. Damn right, Rhys. All right, let's jump into a very topical first topic today. Trump's tariffs are going to sink the property market.
• 0:35
  Now, I'll just reference a couple of articles that have come out on Tuesday the 8th of April. Daily Telegraph actually goes the other way. Why Trump tariffs will give Aussie homeowners a surprise boost. So, I guess singling out the property market, which is what we're here to talk about.
• 0:51
  News.com.au also came out saying extraordinary news for Aussie homeowners amid tariff chaos. So I thought today's episode would be good to unpack some of those articles. Also the statement, which is the opposite. Trump's tariffs are going to sink the property market. How does Australia's tariffs compare to the rest of the world?
• 1:07
  Yeah, well, obviously the US has imposed, what, 34% tariffs on the goods coming from China. Australia looks like for beef and certain things it's going to be around 10%. Could be as high as 50% for China if Trump goes full scale with this thing. So essentially, you know, Australia's not going to be as significantly impacted as Asia or even Europe. Europe's at about 20%, I think Harry in the studio was telling us before.
• 1:35
  So what does that mean? I think we export what 2% of our produce is to the US. Like it's mild in comparison to... It feels like we've got off, we've got that off lightly compared to some of our... I think we don't want to get into everything outside of property, but I think it could have a, it could lower the cost of goods in Australia, right? So who's China going to trade to now? Australia's one of the few markets that may come into this far better than the rest of the world.
• 2:03
  But regarding to property, the key play here is interest rates. And that's where I've had a lot of clients come in and are nervous to invest. Right. The same thing happened in COVID. You know, literally had a message Monday morning saying, a client had a deal on the card saying, you know, should we pull out? And it just, it just reminded me, took me straight back to COVID. Fear mongering. It's fear, like you look in the articles ever since, uh,
• 2:30
  The announcement came out and obviously the Australian dollar did take a hit. People like Harry's got a lot of money in the UK, want him to send some money back. Now's a good time for him to be sending some money back. A lot of sentiment around superannuation as well. But I think as we've sort of progressed over the last couple of days, I've just referenced the two articles we've seen on Tuesday, the 8th of April, where some positive connotations to do what some of these tariffs could do.
• 3:00
  It went on a bit of a roll. So a bit of fear mongering. Everyone's kind of panicking. Sentiment. And it can impact sentiment, right? And that's what I said. Sentiment can drive markets. But it just reminded me, that just took me straight back to COVID times where everyone shit the bed. As soon as it comes out, the world's falling apart. He's literally, his statement on the text message, I can get it up. And it was literally, should we pull out of this contract? And I was like, on what basis? He's like, what Trump's doing over there, it's going to cause chaos. We could see price falls. I was like.
• 3:29
  this is just like, yeah, we've forgotten what happened during COVID so quickly. So what's going to happen? Let's just replay what happened during COVID. Stock market fell by 34%, by the way, because I compared it in that conversation. I said, this is, you guys like, the stock market's down 12%. I said, it went down 34% in COVID. Yeah, but this is different. Like, yeah, it's nowhere near significant. But what happens during COVID? Soon as the markets start to falter, there's such, you know, economic disruption across the world. It's,
• 3:58
  What happens? The cost of money comes down. And there's a lot of speculation into why Trump's trying to do this. One of the key sources is the fact that America's got so much debt. So the first thing he wants to do is to come in is to lower the interest rate on that debt. It's a theory, but it makes sense.
• 4:16
  So what are we going to see? All of a sudden ANZ released out a statement today that they've forecasted the only bank to do it is there's going to be a 50 basis point cut, not a 25 basis point cut. They're going to go the full hog and drop it by 50 basis points in their May meeting. So straight away, cost of money is going to be coming down. So fast track, we had a podcast three weeks ago. We were talking maybe two 25% basis cuts for the remainder of the year. We're talking banks are all factored in there will absolutely be
• 4:45
  Four. So all of a sudden, what happens when the cost of money goes down? Harry, what happened when the cost of money went down during COVID? Prices went on a run. Property prices around Australia went up between 30 and 55%. I'm not saying the same scenario is going to happen again, because like I said to this client, it's not COVID. This is modest in comparison. But when rates come
• 5:07
  Typically property prices rise. Yeah. So it's feeling like Groundhog Day for you again from COVID. It almost annoys me how quickly people forget. I was like, and I had to explain, I was going through the data. And then at times when you hear it from enough people, you nearly start to question yourself. And then I was like, okay, let's go back to the fundamentals of what happened in COVID. What is policy? What do governments do?
• 5:26
  Well, to avoid a GFC or to avoid a massive recession, they need to stimulate the economy. How do they do that? What's one of the only levers they can pull besides just printing money, which we may not see, but we may, is, okay, we need to get the cash rate down.
• 5:45
  Nice. We can finish the podcast there. It's really, it sums it up. If we're gonna summarize it, we're gonna see rates drop. And you just come out and said 50 bips the next car. Which is massive, I don't think. Yeah, that sounds crazy. Any of the other majors come out and support that decision? Like I saw a quote,
• 6:06
  as we're recording this today from Jim Chalmers, the treasurer, saying there's going to be four cuts this year. Yep. And the average Aussie saves you about $5,000 a year in your pocket, which is – and that's an average Aussie. So, you know, especially when you're looking at some of the higher property prices that you're looking in, Sydney, Melbourne –
• 6:24
  and getting there to a certain extent, that's even more savings. So Treasurer's come out saying four cuts minimum. Any other sentiment from any of the other majors out there? I think they've just firmed that up, right? Four cuts is now the, so your future rates start to come down. And so that brings sentiment into the market. But yeah, that's a full percent. And like, as I said on other podcasts, that increases serviceability between 15 and 20%.
• 6:48
  So on a million-dollar mortgage, all of a sudden, I'm no mathematician, it's $200,000 that's going to go straight to the market. And as I've said, and I'll repeat myself, when demand outweighs supply, which in Australia, across the board, not just Perth, that is the equation because we can't build enough bedrooms. Because post-COVID, there's a huge undersupply of property because either developers have gone broke or the cost to build apartments, homes have gone up by 50%, making it not viable. Yeah.
• 7:14
  So there's a national shortage of properties and bedrooms. So you overlay that with a falling cash rate and increased serviceability and a reduced, you love it, the buffer, the serviceability buffer coming down from 3% to 2.5%. And now running into an election, there's some pretty sort of sensational policies that may come into place.
• 7:39
  I can see prices going on on a serious run. We did podcasts earlier when we had the Feb cash rate decrease, and the overall feedback was the sentiment in the market and the lead up to that was already strong, and we saw growth in, I think, Melbourne. Look at the CoreLogic data in February had its first month-on-month increase in the last nine, ten months off the back of some of the sentiment on that cash rate.
• 8:06
  Think about you just come out and said ANZ has said it might be 50 bips. The treasurer has come out and says definitely going to be four cuts this year. What do you think that's going to do to the sentiment? How quickly are we going to see property prices go up or how quickly are we going to see people trying to reenter the market that maybe missed out on some opportunities over the last couple of months?
• 8:26
  Yeah, I think we'll see similar traits to what we saw in COVID. We saw a falling cash rate, which resulted in inflated house prices. In other states and other markets, we'll benefit better than others. One of the issues at the moment, and this sort of is counterproductive, what we're talking about. I could see Perth for the month of February having its first negative month since 2019 in terms of growth.
• 8:55
  and that's because there's so much uncertainty. So don't be surprised in the lead up to this election, as I've said previously, leading up to any election typically markets stagnate, overlay that, you know, Trump's shooting from the hips everywhere and share markets falling, so much uncertainty may result in actually a negative median house price fall for the month of April in Perth. I'm gonna come out and say that's exactly what's gonna happen. And if I'm wrong, we can just delete this podcast.
• 9:22
  post that, we come into absolute certainty. When I say absolute certainty, there's going to be a federal election and there's going to be a result one way or the other. So regardless of which way it is, and although there is more favourable policies, typically for Liberal than there is Labor at the moment, regarding property,
• 9:38
  there's going to be certainty. That's what the market craves. Doesn't like uncertainty, loves certainty. And then there's most certainly going to be some rate cutting. So all of a sudden the tailwinds, you know, you start to spur into the market. So albeit April I see nationally being a slow period, I don't think, I think Melbourne's probably going to have a bit of a...
• 9:57
  a bit of a run on just because of the affordability and the sentiment in that market at the moment. But a market like Perth may have a first negative, so just be mindful of that. But once we get over this hill, I think we're going to see some real tailwinds, making it potentially a real good buy-in in April, in my opinion. Do you see any particular areas or asset types benefiting from Perth?
• 10:20
  maybe these aggressive cash rate moves. And when I say aggressive, let's just say what we were saying earlier on ANZ predicting 50 bips, if that comes to fruition or even if we see consecutive cash rate drops, do you see any particular areas or asset types that are really going to benefit from this? And I guess the next bit is, do you see any of those areas going on a run in terms of a property?
• 10:45
  The more affluent suburbs at the higher price points will benefit most from a falling cash rate. That's exactly what we saw in COVID. The first markets to go were the likes of the Western suburbs. The more aspirational suburbs will typically move the first and the most aggressive. And then you'll see a flow-on effect for the feeder suburbs and the out-of-burbian suburbs. So I think we'll see that play out again in this period of time. How quickly do you see that happening?
• 11:15
  pretty well instantaneously from the RBA meeting in May. If we'll see 50 bips cut from that meeting, I think that home open activity that following weekend is going to look very, very different to what it looks like the week before the election. And so be mindful of that. You're going to see some headline media over the next three to four weeks, saying the market's calling. You're going to see a lot of headlines, and that's the point of this podcast, right, is to call bullshit on some of this information that gets spread out.
• 11:42
  throughout media outlets or Instagram, Facebook, podcasts. You're going to see and read a lot. It's going to make you very, very uncertain. But look back on history and even as short as COVID times, the best buying typically is in those times of uncertainty. And that's the period that I think we're in at the moment.
• 12:01
  So if I had any ounce of serviceability, which I don't, debt to income at six, mine's about 16, I'm trying to buy some properties at the moment. Yeah. What about asset types? I know you mentioned more affluent areas are going to be the first to go on a run. That's what you saw. So your primary place of residence is going to really benefit. That upgraded property is probably the time to be doing it.
• 12:21
  Yeah. What about going back to the tariffs? And as you said, we're not experts on this. There's podcasts that have done this to death and they're more skilled in those areas to talk about it. But will the tariffs affect, say, construction costs in terms of if you offer a new build, like do you foresee off the back of these tariffs established markets, established houses going on more of a run because the construction costs will be unaffordable or...
• 12:50
  Or I'm off the page. The opposite, to be honest. It will take some time. And who knows what he's going to do next, right? So you don't want to put bets on the table on the word of Donald Trump at the moment because it might change in the blink of an eye. But in theory, if this was to stay where it is in terms of, you know, Asia getting absolutely crippled by these tariffs in the US, Australia not really impacting too significantly, then we should see the cost of goods across the board come down in reality. Yeah.
• 13:19
  And that would mean that all the supplies when it comes to building materials that we import from China, which will surprise a lot of people because it's pretty much everything now, arguably should come down and could be quite aggressively.
• 13:35
  So that would then stabilise. I don't want to go out and say that building costs are going to come down because it's just hard to see that happening at scale, but in reality it should. And if building prices were to come off 10% or 20%, I would then see the land market and potentially for the first time in seven or eight years the apartment market start to take shape and take form because of an affordability price point.
• 14:00
  And that's when you see the land markets and the apartment markets go on runs is when established properties are significantly higher than what it is to buy land and build. And the opposite occurs when, you know, building prices go up and the cost of build is significantly more than established properties. So we may see a period over the next, you know,
• 14:21
  two to three years if this is the new normal where we see a stabilisation in building cost, potentially a fall in the cost of materials which would result in lower building cost, which would then result in a bit of a run in the land market, house and land package you have sort of a market, and or higher density market, be that apartments, units, those sorts of asset types.
• 14:48
  They're the two things to sort of consider throughout this cycle. I think short term, interest rates fall, affluent, blue chip, established property is going to go on the first run and everything sort of follows suit. Secondary, medium term, two to three years, building costs, stabilise, potentially fall, making the land and development market go on a run. Just reflecting on that sentiment we said at the start of the podcast in terms of,
• 15:15
  You know, the ASX, the share market. I'm seeing a lot of articles in the last couple of days regarding superannuation taking a hit. Yeah, mum and dad. Mum and dad. Dad can't go to the pub, he's bloody. Well, this is the thing. Baby boomers, you know, they're a hot topic of our generation and how they're ruining the housing market, which, you know, that could be another episode altogether. Do you foresee, off the back of this, you know, with a lot of...
• 15:44
  negative connotation in the press and in the news and obviously what they've seen as well from their portfolio. Do you see a lot of baby boomers freeing up the housing market off the back of the tariff news? No. Let it play out. Like I said, it's headline media at the moment.
• 15:59
  If you look at the share market through COVID, as quickly as it went down, it bounced back and then went past that five times. So don't make any knee-jerk reactions or think markets are going to, all of a sudden we're going to see a flood of stock to the market because baby boomers have lost their super they need to sell.
• 16:17
  It won't happen like that. It won't happen as quickly as that. We just need to see this period of time play out over the coming quarter. And then we can start to make some predictions on what may happen. So, no, I don't foresee. The problem with the Bay and Midburner market is they've got nowhere to go.
• 16:34
  They don't really need to sell because they've made that much money out of property by just buying and holding, which is a previous podcast. And I'm sure for a majority of them they've got plenty in the super. So a lot of them they don't need to sell. And the problem is they've got nowhere to go. We're in such a lull across the country of stock and bedrooms and available product, particularly downsizer product.
• 16:57
  And that's why we've seen developers really target that high-spec residential downsizer market, think of Blackburn, et cetera, because there's no other stock available for them because there hasn't been a lot of construction in that space. So no, I don't think we are going to see a lot of stock come out on the back of this. What needs to happen in that space is more stock to be created for them to have a
• 17:21
  a retirement home to move to before they start selling their bigger blocks in baby boomer areas. And obviously you're very bullish on where you think this announcement's going to go.
• 17:36
  And to be fair, there's some warrant to be bullish with some of the announcements we've had come out from ANZ and even the Treasurer. But do you see, is there any other, so we've obviously mentioned Perth here in terms of some areas, but in terms of a national basis, do you see every sort of state or capital city going on a run? Or are there other metrics we should be looking at that could impact a potential price curve, whether that's unemployment or...
• 18:01
  Yep, so affordability comes into play. Like I said, other markets are going to benefit better than some. I think the market we've been speaking about for the last three to six months has been Victoria and specifically Melbourne. I think we're going to see that market that's already showing grain shoots and it was a pretty soft market of 2024. 2025 it's tainted potentially as the...
• 18:29
  the highest capital growth market in Australia. So the sentiment's already in that market. It's coming off a very low base of affordability in comparison to other states, when I reference that, particularly Brisbane, Queensland and Adelaide. And understand that particular market now, post-COVID, talking five years post-COVID,
• 18:47
  All the market that's exited Victoria and Melbourne during COVID because the state government did such a bad job, everyone left, pretty much went to Queensland, Adelaide or Western Australia, are now coming back and coming back in droves. It's got the highest migration in the rest of the country, particularly interstate migration. It always gets more overseas migration than any other state, including New South Wales. So overlay that with already strong investment activity, overlaid with a falling cash rate. I think Victoria will be the huge beneficial...
• 19:17
  Yeah. You've obviously mentioned in April, you'll see a lot of potential buyers and investors kind of sitting back waiting for the RBA announcement. Post April, so looking from May to May 2026, what do you see the Perth market doing?
• 19:33
  Yeah. Let's forward that to May, post-announcement. From the 12 months from May 2025 to May 2026, I see the Melbourne market doing double-digit growth. I also see the Perth market doing double-digit growth based on the fundamentals. They're the two highest migration states in Australia, population growth in Australia, overlaid with a falling cash rate, will result in double-digit growth.
• 20:00
  Beautiful. So Lachlan, what's the verdict? Trump's tariffs are going to sink the property market. Fact or fiction? Do you call bullshit? Couldn't be more fictional. So I'm calling bullshit, mate. It's going to have the opposite effect as we saw in COVID. So bullshit to that. Look forward to the next topic. Let's move on from this. I'm sick of talking about Trump and tariffs. Nice one. I think that's a pretty predictable answer where we're going to go with that episode. Make sure to join us next episode. Stay informed, stay curious, and keep calling up bullshit.