The UK’s decision to exist the European Union could place upward pressure on residential property prices in Australia, new analysis shows.
Research from Macquarie economic analyst James McIntyre reveals that Brexit is likely to prompt more expatriates to return home and deter locals from heading abroad helping to drive up domestic demand for property in Australia, which in turn would almost certainly push up house prices.
Macquarie analysts predicted last year that Australian property prices would fall by an average of 7.5% from March this year, citing weaker population growth and a ‘bulging’ pipeline of new homes being supplied. But with higher net migration, caused in part by Brexit, expected to lift demand for housing, McIntyre believes that there is now the “potential for a less negative house price outlook” across Australia.
There are more than 100,000 Australians living in the UK, a popular destination for expats given the strong cultural links. But the significant decline in the UK pound, which is about 10% below its pre-Brexit exchange rate with the Australian dollar, now makes working in the UK less attractive to Australian expats who plan to save and bring the money home with them.
“There's still a very large supply pipeline coming into the housing market. However, a potential firmer migration backdrop and additional stimulus from the RBA are not factors which could help ease any potential indigestion,” said McIntyre.