After looking in strong capital gains, will Australian property investors turn to more mature markets such as the UK?
- Investment banks are predicted 7.5% loses for 2016 in the Australian property market
- Australian real estate has been undergoing a strong recent surge – especially in New South Wales
- Will Australians follow both Hong Kong and Singapore investors to the UK property market?
Australia could be the latest country in which a recent boom in property prices is going to be followed by a sharp slide.
Regional investors have enjoyed some of the world’s strongest capital growth over the past 18 months, but the majority of Australian investment banks are now forecasting price decreases of around 7.5% from March next year.
The resulting slowdown in both construction activity and mortgage lending has been called the biggest threat to the country’s economy.
Economist at Bank of America Merrill Lynch Alex Joiner explained that the high historic indebtedness, coupled with the chance of a downturn in house-building and prices, could stall property investment, especially if the Reserve Bank of Australia lifted interested rates to tackle inflation.
“We are not forecasting collapse or the bursting of any perceived bubble,” Mr Joiner wrote in a note.
“That said, it is not difficult to envisage a more hard landing scenario in the property market.”
Investors in the region have already seen previously strong-performing property markets stall over the past 12 months. Singapore is currently undergoing eight consecutive quarters of contraction, precisely so the government could avoid a hard landing following huge gains, while in Hong Kong – the most expensive market in the world – the imminent Fed interest rate rise could finally bring about the long-expected downturn.
Many investors in the Asia-Pacific region are very comfortable and familiar with the benefits that real estate can bring to a portfolio and have been looking at opportunities in more mature property markets such as the UK.
With Credit Suisse recently warning that property investment in Australia is now “riskier than the equity market”, will investors from the country be the latest to secure safehaven assets in the UK market.