While the Australian dollar remains above most estimates of its fundamental value, particularly given our significant declines in key commodity prices, it has declined noticeably against a rising US dollar over recent months.
Consequently, local property has become cheaper for many foreigners and expats as our dollar continues to fall. With recent suggestions that our dollar might be nearing the bottom of its decent, international bargain hunters are jumping to secure our comparatively cheaper real estate.
This means even more competition for property, which will have an impact, especially in cities such as Sydney, where many markets are experiencing a distinct shortage of stock and strong demand.
It's not just the relatively cheap prices and high yields available in Australia attracting foreign money. Our currency's movement has changed perceptions of ‘cheapness’, eased fears of possible foreign exchange downside and raised hopes of possible foreign exchange upside.
When the Reserve Bank decided to lower the cash rate by 25 basis points to 2.25 per cent on 4 February, it saw home loan interest rates drop to a historical low. For the past year and a half the cash rate has been stable as the RBA took time to assess the effects of the substantial easing in policy that had already been put in place and monitored developments in Australia and abroad.
