When Global Conflict Hits Local Feasibility : Immediate impacts of the Conflict in Iran.
A potential conflict involving Iran may feel a long way from Australia, but its impact on property development can arrive quickly and with real force.
In markets like Victoria, where feasibility is already tight, global shocks do not need to be large to have meaningful consequences. What matters is how they flow through the system. In this case, the transmission is relatively clear. Energy prices rise, costs increase, inflation lingers and confidence softens. Each of these on its own is manageable. Together, they begin to reshape decision making.
Costs, Rates and Confidence Move Together
We have witnessed immediate higher oil prices which push up the cost of producing and transporting materials like steel, cement and glass. Builders feel this soon after, and it works its way into project pricing and feasibility. Due to lessons from the Pandemic, we are seeing builders more likely to move pricing up early so they don’t get caught on the wrong side of cost inflation.
For developers, this rarely shows up as a single line item. It appears as pressure across the board. At the same time, rising energy costs tend to keep inflation elevated. That leaves the Reserve Bank of Australia with limited flexibility. Interest rates stay higher for longer, or at the very least any expected easing is delayed.
This is where the second layer of impact comes through and buyers feel it directly. Borrowing capacity of buyers starts to be squeezed, mortgage costs increase and pre-sales become harder to achieve. In Victoria, this compounds an already fragile demand environment, particularly for apartments and to a lesser extent townhouses.
The third layer is confidence, which is often the most important. When uncertainty rises, activity slows. Buyers take more time, developers delay launches and capital becomes more selective. It is not always a collapse in demand, but it is a clear pause in momentum. We saw this during COVID and the same behavioural patterns can emerge again in periods of global instability.
A Slower Pipeline and a Growing Imbalance
As costs rise and confidence softens, fewer projects move forward in the near term. This is a rational response at an individual project level, but it has broader consequences.
Australia is already dealing with a structural housing shortage. When fewer projects commence, that shortage deepens. The market begins to tighten beneath the surface, even while activity appears subdued.
The duration of any conflict will shape how this plays out and a short disruption may create temporary volatility, with confidence returning once conditions stabilise. A more prolonged period of uncertainty is different as costs remain elevated, demand stays under pressure and project timelines stretch further.
For developers, this becomes a question of timing rather than direction. Waiting for clarity can feel like the safe option, but it often means entering the market later with higher costs and longer delivery periods. Acting earlier, where feasibility allows, can reduce exposure to prolonged uncertainty and position projects ahead of the next phase of the cycle. Those who moved early during the Pandemic received the most rewards, it will be interesting to see if this scenario plays out the same way.
The Hub View
At Hub Property Group, we see markets like this defined by the interaction of cost, capital and confidence.
When all three are moving at once, the margin for error narrows. The developers who navigate these periods well are not necessarily the most aggressive, but they are decisive. They understand their numbers, test them under different scenarios and move when the fundamentals hold.
Uncertainty is part of every cycle. The difference is how it is managed. In our experience, the greatest risk is not always in moving forward, but in waiting too long and losing control of timing altogether.
Words by Michael Hermans