Interest rate cuts: real estate experts disagree over impact on foreign investment

Posted by on August 5, 2016 in Latest News, Featured | 0 comments

Interest rate cuts: real estate experts disagree over impact on foreign investment
中国买家 悉尼房产

Some experts are predicting the rate cuts could result in higher demand for Australian property from overseas. Picture: Carly Earl

Real estate experts has questioned claims that foreign demand for Australian property will be impacted by the Reserve Bank’s latest rate cut to an unprecedented low of 1.5 per cent.

Chief executive officer of major Chinese international property portal Juwai.com Charles Pittar said the decision would weaken the value of the Australian dollar in the long term, reigniting interest from offshore buyers who might have been deterred by the 4 per cent stamp duty surcharge in NSW.

“The rate cut is likely to drive the dollar down further, making property more appealing to offshore buyers,” he said.

“In NSW, a falling dollar could help ameliorate any impact the new buyer tax might have on offshore property demand.”

中国买家 悉尼房产

Australian property is still hugely popular among foreign Chinese buyers, despite the new taxes and loan restrictions. Picture: Carly Earl

Mr Pittar observed a 25 per cent jump in Chinese buyer enquiries for Australian property on Juwai.com in the first half of 2016, compared to the second half of 2015.

“We see demand accelerating, even if capital controls make the process longer for buyers who don’t yet have funds overseas.”

But chief economist of REA Group Nerida Conisbee disagreed.

“The rate cut should push the dollar down however the impact is likely to be relatively muted given monetary policy easing in UK and Japan and only slight increases in interest rates in the US.”

She noted that Chinese buyer activity on REA Group’s realestate.com.au has been lower in the first half of this year, attributing this to additional taxes for foreign buyers in NSW, Victoria and Queensland, difficulties in accessing finance and capital restrictions in China.

“A depreciation of the Australian dollar as a result of an interest rate cut is unlikely to be able to counteract the impact of these,” she said.

Managing director of Basis Point, a financial consultancy firm which deals with Australian and Asian markets, David Chin said there were other factors involved in the dollar value, including higher commodity prices and reduced concerns about China’s economy.

“However, the Australian dollar is still lower compared to pre-2014, suggesting that from a longer term perspective, Chinese investors still find Australia an attractive place to invest from a currency view point,” he said.

“The stamp duty will make the investment proposition less attractive than before, but won’t be a game changer in the longer term as long as the fundamentals [like] Australia’s economy and education remain the same.”

 

By: Alison Cheung

Published: August 4, 2016

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