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Lower Australian dollar to inflate Sydney and Melbourne house prices; Lower AUD makes property cheaper for foreigners and could increase the bubble prices being paid
Topic Started: 4 Sep 2015, 10:51 AM (3,128 Views)
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Lower Australia dollar to inflate Sydney, Melbourne property prices

by Su-Lin Tan

The lower Australian dollar makes property cheaper for foreign buyers and could increase the bubble prices being paid for apartments in areas of Sydney and Melbourne.

The dollar sank below US70¢ on Wednesday, for the first time since April 2009, and Deutsche Bank chief economist Adam Boyton​ predicts the dollar will keep falling to US60¢ by the end of 2016, and even past that into the US50¢ range.

"A lower Australian dollar would lower the cost for overseas investors to purchase new properties in Sydney which would put upward pressure on the price of new properties," says valuer Herron Todd White.

Its latest red-flag report warned some apartment buyers in Sydney and Melbourne were paying too much for properties in competition with foreign buyers, leaving owners and lenders exposed if the market suddenly turned.

The report says "two-tier" markets are starting to form in capital cities where developers of units are heavily dependent on foreign and interstate investors rather than local demand.

The valuer said unit developments in Sydney such as Zetland, Waterloo, Rosebery, Mascot, Botany, Hurstville and Wolli Creek have been heavily marketed to overseas investors, particularly those from Asia who are sold units at higher prices.

In a rising market, the value of the units at time of settlement may surpass the price paid. .But should the market peak or start to decline, then the value of these properties could dip below their purchase price.

Herron Todd White said Melbourne's inner-city apartment market is two-tiered with foreign off-the-plan prices exceeding local transactions by 10 per cent to 15 per cent in some projects. If overseas demand softens then developers will be more reliant on domestic buyers who are not prepared to pay higher prices.

Certain suburbs, such as Balwyn North and Waverley, are popular with local and foreign buyers because of their schools and have experienced "dramatic price growth beyond their neighbouring precincts".

"Non-local investors, who include foreign investors and interstate investors, are often not close enough to the market and are less informed. They could be happy to pay more than local buyers but it would be an issue if they are financed by an Australian bank," Herron Todd White chief executive Brendon Hulcombe​ said.

"If an investor who paid too much needs to exit the market quickly, or their bank seeks to sell the property in a distressed loan situation, there is the propensity for losses to be realised which could end in tears for the owner, and their lender."

"Ill-informed purchasers paying over the odds of course, also plays with the underlying property market dynamics that drive the value of individual units in a unit block. If there are sales driven from interstate or international investors at a higher price, certainly it can have an impact on the value of the local market."

Sydney property prices have risen nearly 20 per cent in the past 12 months and Melbourne about 12 per cent. Overall foreign investment makes up 2 per cent of Sydney's residential market, but certain areas have a higher concentration of foreign interests.

Read more: http://www.afr.com/real-estate/lower-australia-dollar-to-inflate-sydney-melbourne-property-prices-20150903-gje5ua
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John F. Kennedy
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Yeah, sure, supposing the foreigners were stupid enough to imagine it was a good time to buy ...
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Terry
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John F. Kennedy
4 Sep 2015, 12:09 PM
Yeah, sure, supposing the foreigners were stupid enough to imagine it was a good time to buy ...
The whole developed world, particularly in the Anglosphere, is crowing about the tidal wave of Chinese money that is about to wash up on their shores. Much like in this article, it's being heralded as a new age of prosperity.
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The Whole Truth
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Mining boom
Low interest rates
Chinese money laundering investment
Resurgence of FHB
Investors on easy finance (Transmutation)
Cheap aussie dollar?
Edited by The Whole Truth, 4 Sep 2015, 12:26 PM.
"Panics do not destroy capital; they merely reveal the extent to which it has been previously destroyed by its betrayal into hopelessly unproductive works." John Stuart Mill
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herbie
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The Whole Truth
4 Sep 2015, 12:25 PM
Mining boom
Low interest rates
Chinese money laundering investment
Resurgence of FHB
Investors on easy finance (Transmutation)
Cheap aussie dollar?
Cheap AUD - Tick in box!

Higher Aussie housing prices? :)

Though I'm not at all sure why you crossed out the "Transmutation" bit - When the likes of ThePauk (the Capitalist Consumer Economy businessman) and Saul Eslake (the Capitalist Consumer Economy banker) plus The Brotherhood of Saint Lawrence (the Socialist Welfare lobby) have all combined to very actively angle for it?

The only mob that don't sound keen that I might have expected to be just a little bit maybe are the Commies? - LOL - But hey, I guess they still have a few remaining principles and would really prefer to not actively set out to pinch Granny's house off her - Unless Granny actually IS Marie Antoinette! ... LOL again
Edited by herbie, 4 Sep 2015, 12:51 PM.
A Professional Demographer to an amateur demographer: "negative natural increase will never outweigh the positive net migration"
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John F. Kennedy
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You can't, like, just turn up at Sydney airport on a tourist visa and say 'huh, let's buy that house in Woollahra its so cheap.'
Edited by John F. Kennedy, 4 Sep 2015, 01:21 PM.
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herbie
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John F. Kennedy
4 Sep 2015, 01:21 PM
You can't, like, just turn up at Sydney airport on a tourist visa and say 'huh, let's buy that house in Woollahra its so cheap.'
You can if it's a new build though can't you? (Without even getting a tourist visa to visit and take a bo peep at the joint.)

And you can buy whatever you want if you're an Aussie expat bringing some of your OS loot home of course.

And given 24% of us weren't born here, I fully expect it's conceivable that there's plenty of us who will be happy to purchase in our names on behalf of OS family using OS family money.

And there might well be other avenues I'd guess?

That don't even begin to be, or even begin to smell of being, any sort of naughtiness ...
A Professional Demographer to an amateur demographer: "negative natural increase will never outweigh the positive net migration"
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b_b
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I think this may be true for the upper end of the market (+$4m). And expats will be more active than foreign buyers.

I remember the AUD falling to 0.47 in 2001 - and it was followed by a pretty strong surge in Sydney house prices in 2001-2003.

Much more supply this time a around. It may keep it in check.
(S – I) + (T - G) + (M - X) = 0
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newjez
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goneaway
4 Sep 2015, 12:35 PM
Cheap AUD - Tick in box!

Higher Aussie housing prices? :)

Though I'm not at all sure why you crossed out the "Transmutation" bit - When the likes of ThePauk (the Capitalist Consumer Economy businessman) and Saul Eslake (the Capitalist Consumer Economy banker) plus The Brotherhood of Saint Lawrence (the Socialist Welfare lobby) have all combined to very actively angle for it?

The only mob that don't sound keen that I might have expected to be just a little bit maybe are the Commies? - LOL - But hey, I guess they still have a few remaining principles and would really prefer to not actively set out to pinch Granny's house off her - Unless Granny actually IS Marie Antoinette! ... LOL again
Herbie?
Whenever you have an argument with someone, there comes a moment where you must ask yourself, whatever your political persuasion, 'am I the Nazi?'
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herbie
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newjez
4 Sep 2015, 02:28 PM
Herbie?
That's me Newjez - Like Chucky said: "I'm Back!" - For better or for worse.

And a bit more annoyingly so today than usual I guess - Having taken a full day off from playing "Bob the Builder" on a recently purchased IP - To have a bit of R&R at home.

Hey, did you hear the one about what they called Bob the Builder after he retired? :

"Bob"

Oh well, never mind; My niece thought it was amusing when she was nine ... :)
Edited by herbie, 4 Sep 2015, 02:53 PM.
A Professional Demographer to an amateur demographer: "negative natural increase will never outweigh the positive net migration"
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