The escalation in the Iran conflict has unsettled global markets and closer to home, it has dented confidence. Over the past month, buyer sentiment has softened as economic uncertainty, volatile oil prices, and geopolitical risk have entered the conversation again. That matters, because confidence is a key short-term driver of housing activity.
But beneath that softer sentiment, a more structural force is building. One that is likely to support Perth property prices over the medium term. That force is the rising cost of construction.
Rising Costs: Why War Impacts Housing
At first glance, a conflict in the Middle East may seem far removed from Perth’s housing market. In reality, the connection is direct.
The Iran war has pushed up global energy prices, particularly oil. Construction is heavily reliant on energy, and when fuel costs rise, the entire building process becomes more expensive.
This flows through in several ways:
We are already seeing suppliers respond with price increases across key inputs. After a period of stabilisation, building costs are beginning to rise again.
The More Important Effect: Supply Constraints
Higher costs are only part of the story. The more significant impact is what happens to supply.
When costs rise:
In short, fewer homes get built. This matters enormously in Perth, where housing supply was already running below demand before this latest disruption.
Perth’s Starting Point: An Undersupplied Market
Perth entered 2026 with a clear imbalance:
The Iran conflict does not create these conditions, it intensifies them. It does so at a critical point in the cycle.
Replacement Cost: The Hidden Support for Prices
One of the most important but often overlooked drivers of property values is replacement cost.
Put simply: The cost to build a new home sets a baseline for the value of existing homes.
If it becomes materially more expensive to build, established housing becomes relatively more valuable.
We are now seeing that dynamic re-emerge:
For buyers, the decision becomes clearer: Build new at higher cost and risk—or buy established.
That shift in relative value quietly supports prices.
A Reality Check: Why This Does Not Trigger Another Boom
It is important to take a balanced view.
There are genuine headwinds:
These factors are real, and they are already visible in the market. Buyer urgency has eased. Decision-making timelines have stretched. This is not the environment for another rapid upswing.
The Most Likely Outcome: Consolidation, Not Correction
When you combine all these forces, a clear picture emerges:
That combination typically leads to one outcome: A period of consolidation.
In practical terms:
Because the alternative, creating new supply has just become more difficult.
The Bottom Line
The Iran war is weighing on confidence and that is being felt in Perth right now. But at the same time, it is pushing up the cost of building homes and constraining future supply. In an already undersupplied market, that is a powerful offset. The result is a housing market that may pause, but is unlikely to reverse.
Andrew Huggins is Principal of Ray White Urban Springs, the top real estate agent in the City of Belmont for over 20 years. He writes about Perth property trends, WA real estate insights, Australian housing supply and demand, and long-term investment strategy.
Geopolitical conflict rarely hits economies evenly. The current instability in the Middle East is a clear example, particularly through its impact on global energy markets. For Australia, the outcome is split: resource exporters benefit, while households, construction and the housing market face increasing pressure.
A concern we have heard a couple of times recently is: “Because you’re Ray White… will our investment property just be another number?” It’s a fair question. The reality is, while we operate under the Ray White brand, we are a family-owned business, established in 2009 by Andrew & Amy Huggins, … Read more