08.22.2018 Tax & Finance

How The Aussie Dollar Affects Real Estate

How The Aussie Dollar Affects Real Estate

Many of us get excited when the Aussie dollar rises because it makes for cheaper overseas holidays, consumer goods and online shopping.

But a falling Aussie dollar is usually better news for sellers in Sydney’s Eastern Suburbs real estate market because it encourages interest from expats and foreign investors.

What’s been happening with the Aussie Dollar lately?

The Aussie dollar buys around US$0.735 at the time of writing and it has been sitting between US$0.71 – US$0.81 over the past year. That’s it’s lowest point in around six years and about a third off the 2011 peak of more than US$1.10.

This current run of low exchange rates is fuelled by many factors, including cheaper commodity prices and historically low interest rates.

Relative prices matter more than local ones

Sydneysiders are all too aware that ours is the most expensive property market in the country. But compared to many major cities in the Asia Pacific and around the globe, your money still goes a reasonable way in the Sydney real estate market. When the Aussie dollar declines it becomes relatively cheaper and more attractive still.

This drives interest both from foreign investors and from expats who are usually comparing the price of property in Sydney compared to the price of property in the city in which they’re living. These are often places such as New York, London, Hong Kong, Singapore and Los Angeles where property prices per square metre can be astronomical.

That means homeowners looking to sell are likely to see more enquiries and interest from a larger pool of potential overseas buyers, so long as their property matches what these buyers are looking for.

Which parts of the market is the lower dollar impacting?

At the moment, we’re seeing the lower Aussie dollar encourage interest in the prestige market above $4 million. This is often the result of expat buyers looking for a special family home to move back to when they do choose to return downunder.

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If the dollar continues to weaken – as many economists believe it will – we would expect to see this flow through to the market more generally. That’s because Sydney’s real estate will look more attractive to those looking for investment properties too.

In Sydney’s East these properties are often low maintenance homes such as apartments and terraces in the $750,000 to $2 million range.

Is there a downside of a weaker dollar for Sydney’s property market?

That said, not everything is good news for homeowners when the dollar falls. Because imports become more expensive and most building materials come from overseas, this can add considerably to the cost of home renovations and building.

We’re not just talking about designer fittings and fixtures here either. The value of the dollar also affects the price of everyday necessities such as air conditioning and electrical items.

On the flipside, any additional expense should well and truly be absorbed if your property can also appeal to overseas buyers.