15-11-2014, 05:54 PM
Falling $A gives offshore investors more to spend
Larry Schlesinger
470 words
11 Nov 2014
The Australian Financial Review
AFNR
English
Copyright 2014. Fairfax Media Management Pty Limited.
The weakening Australian dollar is mainly a positive and should encourage more institutional investment in Australian commercial real estate, say economists.
Since September, the Aussie has fallen from 94¢ against the US dollar to under 87¢ – a 7 per cent decline.
It has also declined by similar amounts against the Singapore dollar and Chinese yuan, and by lesser amounts against the British pound, the euro and Canadian dollar, the key offshore investor markets.
Logically, the weaker Aussie gives overseas investors a higher allocation of Australian dollars to spend on office towers, development sites, malls, hotels and warehouses. For local superannuation funds, a weaker Aussie makes overseas acquisitions more expensive.
However, economists told The Australian Financial Review most of the impact would be indirect with a weaker Aussie helping to strengthen the services-led economies of NSW and Victoria and speeding up investment in sectors such as tourism and higher education.
" A lower dollar supports the growth of the east coast economies. From an investor's perspective, it gives them more certainty and decreases the risk," said Stephen McNabb, CBRE head of research.
Stronger economic growth will generate demand for services and in turn drive up demand for things such as office space as businesses expand, he added.
AMP Capital Investors chief economist Shane Oliver said as the Aussie fell towards US80¢, investors would view it as nearer fair value and a sign the economy had rebalanced away from mining.
"Many Asian investors have their home currency tied to the US dollar, so their purchasing power has gone up.
"They will start to think they can buy into the market much more cheaply and also get the yield pick-up. Over time it will be a positive. It will only add to demand for commercial property," Dr Oliver said.
James Kaufman, director of sales and investments at JLL, said investors choose Australian commercial property for yield, stability and the transparency of the market relative to other Asian markets such as China.
"Nothing has changed in that regard to make Australia a less attractive market," he said.
There could be some negative impacts Mr Kaufman said. Those were rising hedging costs due to the volatility in the dollar, and that those offshore investors already invested in Australia would get less rental income flowing back to them.
"But these do not seem to be impacting on institutional investors at present," he said.
BIS Shrapnel chief economist Frank Gelber said the falling dollar would have the biggest impact on the domestic economy and was "tremendous" for trade-exposed industries.
"The lower dollar will stimulate those industries that need investment. It brings the process forward," he said.
Dr Gelber tipped the dollar to fall over the next three years to between US70¢ and US75¢.
Fairfax Media Management Pty Limited
Document AFNR000020141110eabb00019
Larry Schlesinger
470 words
11 Nov 2014
The Australian Financial Review
AFNR
English
Copyright 2014. Fairfax Media Management Pty Limited.
The weakening Australian dollar is mainly a positive and should encourage more institutional investment in Australian commercial real estate, say economists.
Since September, the Aussie has fallen from 94¢ against the US dollar to under 87¢ – a 7 per cent decline.
It has also declined by similar amounts against the Singapore dollar and Chinese yuan, and by lesser amounts against the British pound, the euro and Canadian dollar, the key offshore investor markets.
Logically, the weaker Aussie gives overseas investors a higher allocation of Australian dollars to spend on office towers, development sites, malls, hotels and warehouses. For local superannuation funds, a weaker Aussie makes overseas acquisitions more expensive.
However, economists told The Australian Financial Review most of the impact would be indirect with a weaker Aussie helping to strengthen the services-led economies of NSW and Victoria and speeding up investment in sectors such as tourism and higher education.
" A lower dollar supports the growth of the east coast economies. From an investor's perspective, it gives them more certainty and decreases the risk," said Stephen McNabb, CBRE head of research.
Stronger economic growth will generate demand for services and in turn drive up demand for things such as office space as businesses expand, he added.
AMP Capital Investors chief economist Shane Oliver said as the Aussie fell towards US80¢, investors would view it as nearer fair value and a sign the economy had rebalanced away from mining.
"Many Asian investors have their home currency tied to the US dollar, so their purchasing power has gone up.
"They will start to think they can buy into the market much more cheaply and also get the yield pick-up. Over time it will be a positive. It will only add to demand for commercial property," Dr Oliver said.
James Kaufman, director of sales and investments at JLL, said investors choose Australian commercial property for yield, stability and the transparency of the market relative to other Asian markets such as China.
"Nothing has changed in that regard to make Australia a less attractive market," he said.
There could be some negative impacts Mr Kaufman said. Those were rising hedging costs due to the volatility in the dollar, and that those offshore investors already invested in Australia would get less rental income flowing back to them.
"But these do not seem to be impacting on institutional investors at present," he said.
BIS Shrapnel chief economist Frank Gelber said the falling dollar would have the biggest impact on the domestic economy and was "tremendous" for trade-exposed industries.
"The lower dollar will stimulate those industries that need investment. It brings the process forward," he said.
Dr Gelber tipped the dollar to fall over the next three years to between US70¢ and US75¢.
Fairfax Media Management Pty Limited
Document AFNR000020141110eabb00019
(10-11-2014, 11:30 AM)greengiraffe Wrote: [ -> ]$A drop attracts Chinese property buyers
PUBLISHED: 0 HOUR 25 MINUTE AGO | UPDATE: 0 HOUR 0 MINUTE AGO
$A drop attracts Chinese property buyers
Many Chinese buyers are capitalising on foreign currency moves to buy higher quality apartments than what they originally set out to buy, CBRE project marketing director Peter Li said. Photo: Arsineh Houspian
SAMANTHA HUTCHINSON
Investors drive home lending growth
Apartment approval run slows
The sliding Aussie dollar has triggered a new wave of interest from Chinese property buyers, with the recent 9 per cent fall in the currency making Australian property up to one-third cheaper.
Compass Global Markets chief executive officer Andrew Su said in recent weeks he has received higher levels of inquiry from Chinese clients looking to make foreign exchange transactions in a bid to buy property.
“For many of these overseas buyers, currency moves in the past six months have made home purchases about one-third cheaper,” he said.
“And it’s not like property here is cheap, so it makes a significant difference to their buying plans.”
Around 18 months ago, Mr Su reported an element of “urgency” in the currency conversion plans of Chinese buyers which has eased during the year, as a fluctuating currency made buyers more choosy about when they wanted to make the exchange.
But a near 9 per cent slide in the Australian currency since the middle of September has again ratcheted up a sense of immediacy in the forward buying plans for a number of investors, Mr Su said.
“They’re in touch, and they tell me property is looking a lot more affordable now.”
The Australian dollar has weakened almost 9 per cent against the US dollar since September as the US economy strengthens.
The Aussie dollar sank to a four and a half year low in early November, almost touching US85.5¢. On Monday, it was trading stronger at US86.7¢.
Many Chinese are capitalising on foreign currency moves to buy higher quality apartments than what they originally set out to buy, CBRE project marketing director Peter Li said.
“I think the number of people in the market will stay the same, but they can now afford a higher-end product,” Mr Li said. “Before they were looking at homes that cost around $600,000, but now we’re getting more demand for homes and apartments that start around $2 million.”
Overseas purchasers buying property in the past three months have been particularly fortunate with their timing, Mr Li said, because the currency has fallen faster than prices have appreciated.
“If you’re looking at currency movements, apartments are actually a lot cheaper this year than they were last year,” he said.
Dealers at foreign exchange group OzForex have observed similar trends, according to chief currency and payment strategist Jim Vrondas.
“People wanting to bring money in for offshore have been waiting for the right time to bring it here, and for the exchange rate to get better has allowed people to pay more for property,” Mr Vrondas said.
“They’re picking up an extra five per cent on the exchange rate, and its another five per cent to spend on a property.”
Property transactions account for the bulk of the foreign exchange deals OzForex makes every day. In Australia, the group’s turnover on property-related transactions is six times the size of the second-most popular reason.
Melbourne-based agent Jock Langley believes the latest currency movements have been more influential in stoking demand from expats looking to return to Australia than for Chinese buyers looking for a first home.
Mr Langley heads up Abercromby’s, a boutique agency dealing in prestige property in and around Melbourne’s eastern suburbs or Toorak and Hawthorn and bayside areas, including Brighton and Sandringham.
Expats now make up more than 25 per cent of Abercromby’s client book, which is a 15 per cent increase in the past three months, Mr Langley said.
Chinese buyers account for around 10 per cent of the transactions made by the group, a figure that has been stable for the past 12 months.
“When it comes to Chinese buyers, I wouldn’t say there has been any rapid increase, its just a growing presence in the market that started more than 12 months ago,” Mr Langley said.
“But to be sure, the latest falls have helped them a lot. And the free trade agreement will also help, because it will expedite the transaction process from these really long-winded deals that can longer than the usual 60-day settlement.”
The Australian Financial Review
