Property market likely to be spared Brexit blow

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While last week’s Brexit decision resulted in immediate turmoil across global financial markets, the impact it has on property markets in the United Kingdom and across the globe could take longer to materialise.

Since the shock decision at the referendum last week, trillions of dollars have been wiped from global equity values while the strength of the British pound has plummeted to its lowest point in three decades, but it appears property markets will remain relatively stable for the time being at least.

In a statement released after the decision, major real estate franchise LJ Hooker said Australia’s property market would not see any immediate Brexit impact given that property is not an asset that can be traded quickly.

“This result will have very little effect on our property markets over the next week. Real estate is not as volatile or liquid as equity, currency or commodity markets. This means they cannot be ‘sold off’ or react at the same speed,” the LJ Hooker statement said.

“The key indicators to watch in the short term are buyer enquiry volumes and property appraisal numbers; these will tell us if market confidence has been affected.”

Over the longer term, LJ Hooker said the economic impact Brexit has in Australia will likely be minimal, however economic turmoil offshore could see buyer confidence in Australia fall, which could have an impact on the market.

“For Australia, the Brexit result is all about confidence and sentiment. Buying, selling, investing and consuming are all driven by confidence.

“The more confident you are with the security of your own income and the destination into which you want to invest, the more you are likely to do so.”

But an extended period of global economic woes could also have somewhat of a positive for Australian property as poor performance across financial markets could see our real estate become a safe haven for investors, especially Chinese buyers looking for a stable destination for their funds.

“London is close to top of the list for Chinese real estate buyers, so the referendum result will make Australian property look more stable and less risky to those weighing up options,” the LJ Hooker statement said.

But not everyone believes conditions in the UK will result in cashed up Chinese buyers deserting the market there and moving their attention to countries such as Australia.

Gavin Norris, head of Australia for Juwai.com, an online portal that markets real estate to Chinese buyers, told Your Investment Property that the weakening British pound could make UK real estate more attractive to the Chinese and that early signs point to Chinese buyers showing faith in UK property.

“Australia competes directly with other nations for Chinese investment, but it is too early to tell if Brexit will help the UK attract buyers that otherwise may have come here — or allow us to attract investors from there,” he told Your Investment Property.              

“So far, it seems that most investors from China are confident that the UK remains good long-term value, regardless of market fluctuations caused by Brexit in the shorter term.”

While there may not be an immediate uptick in the flow of Chinese capital into Australian property following the Brexit decision, Norris said with the right policy settings the Australian market still has the potential to attract more Chinese investors.

“What Australia should focus on is maximizing its own value offering, with persistent marketing and good public policy,” he told Your Investment Property.

“Our proximity to China, good schools and accessible property prices make Australia attractive in its own right. Data shows that 62% of Chinese high net worth individuals last year invested in overseas property. With the number of millionaires in China growing by 57% per year, there are more than enough investors from China to go around.”

“What Australia should focus on is maximizing its own value offering, with persistent marketing and good public policy,” he Your Investment Property.

“Our proximity to China, good schools and accessible property prices make Australia attractive in its own right. Data shows that 62% of Chinese high net worth individuals last year invested in overseas property. With the number of millionaires in China growing by 57% per year, there are more than enough investors from China to go around.”

 

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