The sudden deflation of the Chinese yuan is throwing up all sorts of questions around asset classes and one of them is what it will do to the Chinese trade in Australia’s existing housing stock both legal and illegal.
Here is the chart of property versus currency:
And Australian property in yuan:
Consideration of the outcome rests on three questions:
- will China devalue over time and by how much?
- will the Australian dollar fall even more?
- how will Chinese investors react?
It looks like China is going to let the yuan devalue somewhat. I do not expect it to be more than 10% but we shall see. It may do so in a hurry to prevent capital outflow.
But, the Australian dollar is likely to fall even more so I do not see this as break in trend of Australian property getting cheaper for offshore investors, especially as property prices themselves slow.
But, the devaluation does raise a psychological doubt that that will not be the case. In that case one would expect those considering the purchase of an Australian property from China (that is, assuming no emigration motive) would be more likely to buy sooner than later. If they get it in their heads that the yuan is going to fall then now if the time to pounce and it could bring forward demand. Later demand would fall.
The same calculus applies to possible developments.
Of course all of this could be moot if the major reason to buy Australian property for landed Chinese is to live here.
