Today, as the world watched the US election unfold, LJ Hooker Head of Research, Mathew Tiller gave us some preliminary thoughts on the impact of a Trump win on the Australian commercial and residential property market.
Says Tilley, “Nearly all parts of the Australian economy are intrinsically linked to the performance of the US; our equity markets take their direction from the US and the Australian dollar is impacted by the strength of the US economy. Therefore it is important that there is confidence in the future policy direction of the US government and that of the president.
“The significance of US investment into Australia can be seen in the latest FIRB annual report which shows that in 2014/15 investment from the US into Australia totalled $25 billion, 28% ($7.1 billion) of which was directed into real estate.”
Tiller’s comments based on Trump’s ascendance to the White House are as follows:
- It is too early to really know exactly what the long-term impacts that the election of Trump will have on the Australian economy and property markets.
- The first thing to be affected, this week, will be our equity markets which will lose ground; to what extent will be decided by how far Wall Street falls.
- The Australian dollar should push higher as investors look for a stable alternative to the US dollar.
- From an economic perspective, Australian exporters are likely to feel the greatest effects of any potential Trump trade policy changes in addition to the negative impact the strengthen of the Australian dollar will have on our international competitiveness.
- In terms of impact on property markets, a Trump victory adds sovereign, or crown risk, to inward investment into the US, affecting the amount of capital, the type of investors and level of return expected. While not good for the US, this is a positive for Australia because it makes investment here more attractive for large foreign developers and institutions as well as high net worth private buyers looking to purchase residential property.
- New York, Los Angeles and San Francisco are top of the list for Chinese real estate buyers, so the US election result will make Australian property look more stable and less risky to those weighing up options.
- For Australia, the fallout from the election 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. Therefore, the short term may see investors hold off investing anywhere until things are more certain, however, at the end of the day, this result makes Australia a more attractive, secure and less risky destination for global capital.