IMPACT OF WAR AND INTEREST RATES
14 Apr 2026| Posted by: Dave Tidbold
The property market is very easily influenced. It reflects what’s happening across the broader economy and the world at large. Two of the most powerful external forces that can impact the property market are interest rates and geopolitical events, like war. While completely different topics, both can have a significant impact on how confident people feel about spending, how much money they can borrow, and how attractive property is compared to other investments.
In simple terms, interest rates control how expensive it is to borrow money. So, when central banks raise the rates to control inflation, borrowing becomes more expensive - almost immediately. The flow-on effect from this reduces buyers’ budgets, slows demand, and often lowers price growth. When interest rates drop, the opposite happens—credit becomes cheaper, demand increases, and property prices tend to rise. Most property purchases rely on debt, and so even small rate changes can have a huge ripple effect across the market.
The impact of war isn’t quite as direct, but it’s still significant. War (or even just the threat of war) creates uncertainty, and the property market does not like uncertainty. It makes it harder to get building materials and can impact population numbers. This can lead to higher building costs, fewer homes being built, and changes in how people invest and rent.
Countries seen as ‘safe’, like Australia for example, can sometimes see more demand though, because people want to live and invest somewhere more stable.
Unfortunately, it’s usually the case that these two forces often occur at the same time. For example, a war can push up inflation (through higher energy and commodity prices), which then leads central banks to raise interest rates. This creates a push-and-pull effect on the property market: higher rates reduce demand, while supply constraints and population growth can keep prices from falling sharply.
Understanding how these two factors interact is key to making sense of current market trends. Rather than causing property booms or crashes, they tend to reshape the balance between supply, demand, and affordability. This leads to slower growth, regional differences, and significant changes in rental markets.
