Brexit impact on Australian property: Paul Osborne
GUEST OBSERVER
The departure of Britain from the Eurozone took most pundits by surprise.
Reviewing past events, we know that markets do not like surprises. The bookmakers expected the occurrence of this event to be rare and global markets are now feeling the immediate aftermath of the result.
The local property market will not be immune to this. BREXIT has been resisted by the wealthy and educated as these graphs from The Guardian show.
Secret Agent feels that BREXIT could create a bigger hit to the high end property market in Australia than other sections of the market in the short term.
While auction results after BREXIT were generally robust, we are likely to witness:
Subdued auction results at the higher end of the property market as participants sit on their hands to see what happens. * The commercial market tighten as sophisticated investors try to interpret how this might impact their investments.
Tighter credit conditions (lending) could result if major banks see an increase in offshore funding costs. The major banks each experienced a 3 - 5% decline on the day of BREXIT.
A further rate cut by the RTBA will become more likely. The yield curve, which is perhaps the best predictor of interest rates indicates further cuts in the short term (see Figure 1).
One counterintuitive aspect could be an increase in foreign capital to Australia's property market as Australia retains its safe haven status. This could be a medium term by-product, especially if our federal election delivers a clear outcome.
PAUL OSBORNE is managing director of buyers' advocate Secret Agent.
