Australian property inflation is moving in a direction most investors are not prepared for, and the cause has little to do with how much money people are spending. In this episode of the Positive Property Show, George Markoski and Christina Markoski pull apart the mechanics of an energy-driven inflation shock, how it differs from what the RBA is treating it as, and what the downstream consequences could be for anyone holding or planning to buy property in Australia.
Inflation, the energy crisis and RBA hikes
Start with the basics, because this is where most of the confusion originates.
Demand-driven inflation is the version central banks are built to handle. Too much spending, too little supply, rates go up, purchasing power cools, prices stabilise. The RBA’s standard playbook applies cleanly in that environment.
What Australia is dealing with in 2026 is different. The Strait of Hormuz, through which 20% of the world’s daily oil supply moves, has been effectively shut down by the Middle East conflict. Fertiliser shipments are disrupted alongside it. Every industry that depends on fuel to operate, which is effectively every industry, is absorbing cost increases it cannot control and cannot pass on indefinitely.
Deloitte Access Economics confirmed in March 2026 that rising energy costs are flowing directly into construction and manufacturing, compounding existing supply pressures across the Australian economy. Raising the cash rate does nothing to fix that. It simply adds mortgage pressure on top of fuel and grocery pressure, hitting the same households from three directions at once.
George’s position is that the RBA raised rates into the wrong type of inflation entirely, and the consequences will take time to fully show up in the data.
How energy costs feed directly into Australian property inflation
Pipe and fittings supplier Reiss Group circulated a pricing notice ahead of April 2026 advising increases of between 28% and 36% across plastic pipe and fittings product lines, directly linked to Middle East supply disruption. One supplier, one category, and numbers that would push already-thin builder margins into loss territory on fixed-price contracts.
This is not an isolated case. Similar notices are moving through the broader construction supply chain. Builders who locked in contracts before the conflict escalated are now staring at cost structures that have shifted significantly since signing. Some will renegotiate. Some will not make it through.
Australian consumer confidence dropped to 63.1 in the week ending March 23, 2026, the lowest reading since records began in 1972 and below the COVID-19 pandemic low of 65.3 from March 2020.
Source: ANZ-Roy Morgan
Australia’s housing construction pipeline was already under strain before any of this. The RBA’s back-to-back rate hikes combined with the Middle East energy shock pushed consumer confidence to a 54-year low, according to ANZ-Roy Morgan, with inflation expectations simultaneously hitting an all-time high. Fewer builds starting. Longer completion timelines. More insolvencies likely. Australian property inflation, in this context, is being pushed from the supply side in ways that higher interest rates cannot reverse.
Three price drivers that hold through any inflation cycle
George breaks Australian property inflation down into three separate components: land value, construction cost, and demand. All three are currently pointing in the same direction.
Land in high-demand suburbs has already moved significantly, though it has less runway than the other two. Construction costs are being pushed higher by energy prices and material supply disruption, meaning anything built today costs more to replicate tomorrow. Demand remains structurally supported by immigration running well above long-term averages and a rental vacancy rate that has not meaningfully recovered in years.
An investor who buys a well-located property today is locking in a replacement cost that will be higher in 12 months regardless of what the cash rate does. That is not a prediction. It is a function of what is already happening to construction input costs across the supply chain.
For the full data, live Q&A, and Barry’s complete story, listen to this episode of the Positive Property Show.
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