The Low Australian Dollar is Likely to Further Increase Australian Property PricesThe Australian dollar has now decreased to new lows against the US dollar, Great Britain Pound, Chinese Yuan and a host of other currencies. The Australian dollar has not been this low since the Global Financial Crisis (GFC) also know in some circles as Good For Chinese (GFC) because they kept buying when other were worries and held back.
What does the low Aussies dollar mean for Australian property prices?Well, nothing is certain but it would appear that the low Australian dollar will further increase demand from overseas buyers for Australian property. The low Australian dollar makes our exports comparatively cheaper, it also makes our real estate comparatively cheaper for foreigners. Hey, who does not like a bargain.
Are there other factors at play that may impact on the property market?Yes, there is lot going on that can influence the property market in Australia. For example:
- recent capital gains in the property markets on Sydney and Melbourne;
- the Government regulator (Australian Prudential Regulatory Authority – APRA) crack down on investment loans resulting in the major banks having differential pricing for investor loans and owner occupier loans;
- a crash in the Chinese stock market, economic contraction in the Chinese economy and devaluation of the Chinese currency;
- instability in the stock markets around the world;
- below trend growth in the Australian economy.
Recent capital gains in Sydney and Melbourne propertyThe recent capital gains in Sydney and Melbourne can act in two ways.
- encourage more investors into the market and raise prices expectations for buyers and sellers regardless of if they are investors or not; or
- where prices rise to very high levels, they can impact on affordability where buyers simply cannot afford to purchase or fail to see value in such high prices.
Government crackdown on investor loansThe Government Banking Regulator’s crackdown on investment lending is likely to to reduce investor demand for properties in Australia. However, only if they borrowing to buy. Rich investors especially those who do not need to borrow will not be deterred by the changes to investment loans. If they are from overseas even if they do need to borrow to invest the low Aussie dollar has just made Australian property and any loan repayments a lot cheaper. This may mean that locals (especially investors) are at a competitive disadvantage (due to the low Australian dollar) to foreigners or people with foreign incomes.
Crash in the Chinese stock market and economic slowdown in the Chinese economyThis is likely to make Chinese investors shy away from stocks and head to asset classes that are considered as lower risk. Property and Australian property is seen as a safe asset class and it is likely that there will be more interest in Australian property from foreign Chinese investors and local permanent residents that have income and assets back in China.
Instability in the stock markets around the worldSimilar to the issue of the Chinese stock market crash, the instability in stock markets around the world makes people wary to invest in these assets. Some stock market speculators will continue to play the market and perhaps even make more money if they know what they are doing. The average mom and pop investor is less likely to invest but will not necessarily opt to change to property investment.
Below trend growth in the Australian economyThere appears to be an overstatement about the economy. It is not going as great as it was during the mining boom but in the great scheme the situation is not bad. Had the economy been really in trouble the Reserve Bank of Australia would have cut interest rates and there would have been another response from the Government e.g. stimulus package. We did not see this happen infact the less than trend growth in the economy is likely to keep interest rates low and the property prices heading up.
Who are the winners?Australian expatriates (Aussie Expats) who have foreign income and find that now Australian property is comparatively cheaper.
Foreign investors that due to the currency find that Australian property is “ON SALE” at discounted prices.
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