Is Brexit going to affect the Australian property market?

What does Brexit mean for the Australian property market?

On June 24, the UK held a referendum on the nation's membership of the European Union (EU). If the majority voted to leave, they would do so, effectively ending their financial, trade and economic ties with the other member countries as they currently know it.

The results of the referendum came through, and it showed that 52 per cent of people voted to leave – early estimates on the day actually said more than 16 million people had voted to leave the EU. What many voters didn't know, however, is what would happen in the country when that membership ended. After the Sterling dropped when the results came in, people began to panic, and there is now a petition to hold a second referendum that has garnered over three million signatures.

How could Brexit affect the Australian property market and make it necessary to enlist the services of a buyer's agent?

Regardless of the situation overseas, the British Exit, or Brexit, is rippling all the way around the globe. How could it affect the Australian property market and make it even more necessary than ever to enlist the services of a buyer's agent?

Financial instability on the horizon

While the global economy has been unstable for quite some time already, the fact that a reasonably major player on the EU trading landscape has just voted to end its membership has already thrown a spanner in the works.

Before the vote even came through, a US investor speaking to Smart Company predicted that the Sterling could depreciate by as much as 15 per cent. Over the course of the year so far, the Sterling had declined 6.5 per cent, and is now set to plummet even further.

One of the biggest factors at risk in Australia is trade – as businesses in the UK see less certainty in their trading ability with EU counterparts, they won't have as much freedom to import from down under. Furthermore, many residents of Australia who have bonds, shares and other assets in the UK could lose a portion of their wealth as it depreciates as a direct result of the Brexit. With UK assets falling from grace, Australian assets could become much more valuable.

As housing in the UK declines, as it is likely to do, the ripple effect in Australia could be similar. Domain Group suggests that in the long run, rents could drop as a result of people evacuating to escape the financial uncertainty. Property is not an unstable investment, and so won't be as affected by the volatility that Brexit will bring with it.

What does Brexit mean for the Australian property market?What does Brexit mean for the Australian property market?

"My feeling, and the consensus, is that staying feels secure and thus gives some confidence to the economy, and leaving breeds uncertainty and wobbles," said Xavier Wiggins, the director of Europe for Investorist.

According to realestate.com.au, London is one of the primary markets for property investors from Asia, so with that market essentially closed off as unstable, it will shine a golden light on Australia as a far more concrete destination for property buying.

This increase in competition for residential property will only serve to drive property prices higher.

What does this all mean for the market?

If investors do turn to Australia as the next main target for their purchases, many people who are already struggling to get into a home will face more demand from opposition buyers than ever.

When sellers see this occurring, they will look to take advantage of it and push prices higher. CoreLogic RP Data monthly indices already shows that the median dwelling value in Sydney is $984,790, and in Melbourne it's not much better with a figure of $797,150 for the month of June. These values have increased by 13.05 per cent and 13.9 per cent respectively in the past 12 months, so any external factors driving that growth even higher would be bad news for current hunters.

With market experience and great relationships, they'll know where to look for your dream home.

It might be excellent news for existing home owners, but buying is going to become more of a struggle. That's why a buyer's agent can come in so handy. With market experience and great relationships with other property professionals around the scene, they'll know where to look to get you into your dream home – they'll even be able to get you the best price possible for it.

A buyer's agent can work in your favour heading into auction too, so if you're unsure of what to do under the pressure of the hammer, Cohen Handler has you covered.

Shayne Elliott, ANZ CEO said Brexit was "certainly a surprise and while it was always tipped to be close, I think most in markets globally expected a vote in favour of remaining.

"[It has] caused significant volatility and dislocation in markets that will impact funding costs in at least the short term."

While Brexit looks to be having dire effects on the British economy, it could also prove negative for the Australian property market. Buyers will struggle to make any headway toward buying their home while more and more investors potentially look south for their own next purchase.

Make sure you aren't left behind by Brexit and get in touch with Cohen Handler today.

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