Could the US and China Really Shake Up Our Property Market? Here’s What You Need to Know
Key takeaways
When we talk about Australia’s property market, most people look inward — inflation data, RBA decisions, consumer sentiment.
But increasingly, what happens overseas, particularly in the US and China, is influencing what happens here at home.
If the US enters recession and China’s economy remains weak, central banks globally, including the RBA, may be forced to cut rates to stimulate growth.
If US-China trade tensions escalate (as we’ve seen before with tariffs), this could trigger a global inflation spike.
A nightmare scenario: High inflation with weak economic growth, especially if China falters and demand for Aussie resources collapses.
When we talk about Australia’s property market, most people look inward — inflation data, RBA decisions, consumer sentiment.
But increasingly, what happens overseas, particularly in the US and China, is influencing what happens here at home.
According to Ray White Chief Economist Nerida Conisbee, there are three potential paths the Australian housing market could take in 2025.
And each is tied to how the global economy unfolds.
It’s a timely reminder that we don’t operate in a bubble, especially when our economic fortunes are tightly linked to global trade, interest rates, and capital flows.
Let’s break it down.
Scenario 1: Global slowdown, Aussie rate cuts, and rising prices
Let’s start with the most optimistic outlook for our housing markets.
If the United States enters a recession, which many economists see as increasingly likely, and China’s economy continues to underperform, central banks around the world, including the RBA, may have little choice but to stimulate growth by cutting rates.
Ms Conisbee says:
“For Australia, this could mean the three additional rate cuts markets are currently pricing in for this year become reality.”
Lower interest rates would do exactly what they always do — boost borrowing capacity.
More buyers would suddenly be able to service larger loans, and that would push more competition into an already undersupplied housing market.
Ms Conisbee explains:
“This increased purchasing power would fuel continued house price growth as more buyers compete for limited housing stock.”
But there’s a catch.
While easier credit would open the door for many first-home buyers, property prices would most likely rise faster than wages.
That means affordability, already stretched, could get even worse.
Deposits would be harder to save, and buyers would need to chase prices up the ladder.
Still, for seasoned investors, this environment offers upside capital growth, improved serviceability, and possibly more tenants entering the rental market as buying gets harder.
Scenario 2: A Trade War spike and the return of inflation
Now for a more cautious scenario.
Let’s say trade tensions between the US and China escalate, something we’ve seen before with tariffs on steel and aluminium, including those affecting Australian exports.
If protectionist policies gain traction, the cost of goods could spike, driving up inflation globally.
Ms Conisbee warns:
“If global trade wars were to intensify with higher tariffs and imported inflation increasing significantly across major economies… central banks, including the RBA, would need to increase interest rates to combat rising prices.”
That would completely reverse current expectations of falling rates.
In this case, higher interest rates would reduce borrowing capacity, temper buyer confidence, and potentially lead to softer price growth, or even price stagnation, particularly in the more affordability-sensitive markets.
She adds:
“Potential buyers would become more cautious amid broader economic uncertainty.
The market would gradually shift to favour buyers, with properties spending longer periods on the market before selling.”
For investors, this means a shift in strategy.
In a high-rate environment, cash flow becomes king.
Think: positive or neutrally geared assets in stable, high-demand areas with resilient rental markets.
Scenario 3: The Stagflation Trap — high inflation meets low growth
Now, here’s the nightmare scenario: stagflation — the worst of both worlds.
High inflation, combined with weak economic growth, can wreak havoc.
If China’s economy slows significantly, and demand for Australian resources collapses, this would hit our mining states hard.
Ms Conisbee says:
“Resource-rich states like Western Australia and Queensland would be particularly affected, potentially seeing population outflows as employment opportunities diminish.”
Add to that rising costs of living and stagnant wages, and you’ve got a recipe for household stress.
It would be much harder to save for a deposit, qualify for a home loan, or comfortably service existing debt.
She notes that in this environment:
“The property market [would divide], with premium locations in major cities maintaining their value while outer suburbs and resource-dependent regions experience price declines.”
Investors in those outer-ring areas or towns heavily reliant on mining and construction should be cautious.
These locations would be most exposed to economic headwinds.
And rental markets wouldn’t be immune either.
Ms Conisbee warns that “investors would reassess returns against rising holding costs,” which could mean reduced supply in some areas and oversupply in others.
The rental crisis might ease in some regions but worsen in others.
So, what should smart investors do?
As always, timing the market is a mug’s game — but understanding the market?
That’s where the opportunity lies.
Regardless of which global scenario plays out, your best defence is a smart, long-term strategy focused on fundamentals.
Here’s what I suggest:
- Stress-test your borrowing capacity. Make sure your portfolio can weather higher interest rates, even if the current outlook suggests cuts.
- Don’t compromise on location. In all three scenarios, quality assets in tightly held, high-demand areas perform better than outer suburbs or volatile regions.
- Plan for volatility. Now is the time to be proactive with asset reviews, cash flow analysis, and strategic refinancing if possible.
- Work with trusted advisors. Navigating these global uncertainties isn’t easy — but with the right team behind you, you can make the most of the opportunities that arise in any market.
Australia’s property market is remarkably resilient.
But that doesn’t mean it’s bulletproof, especially in a world where macroeconomic conditions are shifting faster than ever.
If you’re an investor looking to make your next move, don’t get caught reacting to headlines.
As I always say, stay informed, stay strategic, and focus on what you can control.
