AUD and Australian property facing a perfect storm

Posted on May 13th, 2016

Australia property is facing a perfect storm of an apartment glut, tight bank lending especially to buyers of apartments when they may be most needed and a close fought national election with property taxation a major policy battle-ground. It is no longer a matter of whether apartment prices will fall but what will be the fallout to financial stability and the rest of the economy. Add in a sudden reversal of fortune for commodity futures prices in China and intense scrutiny over financial stability and policy direction in China and the risks are all lining up for deeper rate cuts by the RBA and steeper fall in the already wounded AUD. The NZD looks more stable given rapid immigration underpinning its property market. But its central bank is preparing more macroprudential measures and a weaker AUD and lower RBA cash rates are likely to pressure the RBNZ towards more rapid action.