Outlook for Property on a Weaker Dollar

The AFR had a story on Wednesday titled "Outlook for property on a weaker dollar."

An abstract from ABIX is as follows:

"While it is pointless trying to accurately forecast the future changes in the Australian dollar's value after a decline of about a tenth during the six months to July 2013, it is worth considering the effects this has on real estate investors. Those with existing overseas assets are seeing a boost to the income streams, while those only now starting to allocate funds to the segment will have to pay more. Foreign investors looking to buy off-the-plan properties in Australia, the only option available to them, will find this easier to finance and demand should increase. However these investors account for only 3% of the market. Meanwhile local real estate buyers may feel the impact of inflation, but in general the fallout from the foreign exchange rate fluctuations will be moderate."

Some quotes from the article:

"A lower Australian dollar may increase the attraction of Australian property to overseas investors - particularly new or off-the-plan property, given that FIRB rules exclude non-residents from buying established property."

"The reality is that inward investment flows into Australian residential property are modest, and represent a very small proportion of the total market.   According to FITB, in 2011-12, around $15.5billion was invested in off-the-plan developments, either by overseas buyers or by development companies marketing to overseas buyers.  Compare this to the $500 billion in mortgage financing for property purchases recorded by the ABS in the year to November 2012 -- overseas buyers represent just 3% of the residential property market.   The most significant issue for property investors emanating from a weaker dollar is the potential flow-on for inflation and mortgage rates.

"Unless there is a precipitous decline in the Australian dollar, there is little to worry local property investors.  But large declines do happen from time to time."