When the World Shakes — Why Australian Property Still Stands Firm
March 2026 | MQ Realty Market Insight
The global picture right now is unsettling, to say the least. A war in Iran has triggered one of the largest oil supply disruptions in modern history. Petrol prices in Sydney have surged past $2.70 a litre — up nearly 50% since early March. The Reserve Bank of Australia has raised interest rates twice in two months. And at the weekend auction table, buyers are clearly feeling the pressure.
Yet for those who understand how property truly works — across cycles, crises, and geopolitical storms — this moment holds as much opportunity as it does uncertainty.
The Auction Market Is Talking — Are You Listening?
Sydney’s and Melbourne’s March clearance rates have fallen to their lowest levels of the year, with leading auctioneer Tom Panos declaring that “buyer depth is diminishing” and that “fear is gripping the market” amid rate rises and inflation.
The combined capital city clearance rate has now dipped to 58.5%, its second-lowest reading of the year. Sydney’s final clearance rate fell to 56.1% — its softest outcome so far this year — while Melbourne’s result came in at 58.4%, the lowest since Easter 2023.
On the surface, these numbers look like a warning sign. In reality, they’re sending a more nuanced message. Clearance rates in the low-to-mid 60s don’t signal a market in freefall — they signal a market recalibrating. Well-priced homes continue to attract genuine competition, while overpriced listings are simply stalling. Buyers haven’t disappeared; they’ve just become more selective and less forgiving of unrealistic vendor expectations.
This is, in many ways, exactly how a healthy property market self-corrects.
The Iran War and the Cost of Building Your Dream Home
Here’s the connection that most property commentators are only beginning to discuss: the war in Iran isn’t just a fuel story. It is becoming a construction cost story — and that has profound long-term implications for Australian housing.
The closure of the Strait of Hormuz has been described by the International Energy Agency as the “greatest global energy and food security challenge in history,” causing Brent crude to surge past $120 per barrel.
Australian builders are now receiving notices of steep price hikes across critical construction materials — including a 27% increase in PVC products, 36% for polyethylene, and 31% for polypropylene — set to take effect from mid-April. Builders already grappling with labour shortages and high interest rates now face another layer of pressure.
Simon Croft, chief executive at the Housing Industry Association, confirmed that HIA members have been “inundated with calls from concerned builders,” with real concerns around what the increases might mean for construction contracts already entered into.
The ripple effect goes even further. Concrete, steel, freight, and ultimately labour costs all follow energy prices upward. Westpac economists estimate that a three-month disruption to Strait of Hormuz shipping could temporarily spike Australia’s Consumer Price Index by around 1.5 percentage points, with GDP growth 0.5 percentage points lower by year’s end.
What this means in plain terms: building a new home is about to get significantly more expensive. The era of relatively affordable new construction — already tested by the post-COVID materials surge — faces a fresh wave of cost pressure that could take years to fully unwind.
Inflation, Interest Rates, and the Property Investor’s Dilemma
The RBA is now caught between two competing forces. If oil prices climb to US$100 per barrel, interest rates could settle around 0.25 percentage points higher over the longer term; at US$150 per barrel, the inflationary effect could force the RBA to hold rates at elevated levels.
Petrol prices have already increased by around 35% from their February average — a direct inflationary boost that the RBA has cited as a factor in its recent rate decisions.
This is the bind. Higher rates reduce borrowing capacity and cool buyer demand in the short term. But those same inflationary forces — driven by energy, materials, and supply chain disruption — make the underlying asset (physical property) more expensive to replace and therefore more valuable to own.
History has consistently shown that during inflationary periods, real assets — land, bricks, and mortar — outperform cash and bonds. The 1970s oil shocks ultimately benefited property holders over the medium term. The post-COVID inflation surge of 2021–2023 saw Australian property values rise sharply in most major markets despite rate increases.
Ongoing population growth, constrained housing supply, and strong rental markets continue to exert upward pressure on prices and buyer activity — a structural reality that geopolitical turbulence doesn’t erase.
What Smart Buyers and Investors Should Be Doing Right Now
A softening auction market, rising construction costs, and inflationary uncertainty create a precise window — not to panic, but to act strategically.
Properties that would have sold before the hammer fell six months ago are now passing in and available for private negotiation. Vendors, confronted with falling clearance rates, are increasingly realistic. Finance, while tighter, is still accessible for well-prepared buyers.
Meanwhile, the cost of building new — your alternative to buying existing — is rising. Every month that passes sees the gap between the price of an established property and the cost of constructing a comparable one narrow further. This dynamic historically drives increased demand back toward the established market, supporting prices even as sentiment wavers.
The property market rewards those who see past the headlines.
Questions & Answers
Q: With petrol prices soaring and interest rates rising due to the Iran conflict, should I hold off on buying property until things calm down?
The instinct to “wait for certainty” is understandable, but it carries its own significant risk. Every global crisis — from the GFC to COVID-19 to the Russia-Ukraine war — eventually passed, and those who waited for conditions to normalise often found themselves priced out of the markets they’d been watching. The current environment is already creating a rare combination: softer auction clearance rates (meaning less competition at the purchase point), rising construction costs (meaning the cost of your alternative — building — is increasing), and stubborn underlying demand from population growth and rental pressure. Waiting for calm may mean paying more. Buyers who act now, with sound financial preparation and realistic price expectations, are often the ones who look back with the most satisfaction. Speak with your mortgage broker about your borrowing position today — not after the headlines have settled.
Q: If construction costs keep rising due to oil prices, what does that mean for my investment property’s long-term value?
This is one of the most important questions long-term investors should be asking right now. Rising construction costs directly increase what economists call the “replacement cost” of a property — the price it would cost to build that same home from scratch today. When replacement costs rise, the value of existing properties tends to follow, because buyers and investors compare the two options. Historically, periods of significant construction cost escalation have been followed by strong appreciation in established property values, particularly in land-constrained urban areas. For investment property owners, this is actually a structural tailwind for capital growth over the medium to long term, provided they can service their debt through the current rate environment. The key is staying in the market — because the compounding effect of this cost escalation rewards those who hold, not those who sell into uncertainty.
This article is intended for general market education purposes and does not constitute financial, legal, or investment advice. Please consult a qualified professional before making property decisions.
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