In simple terms, the answer is … both indirectly and indirectly.
The RBA’s Dilemma
General consensus is that our dollar should ideally be trading at around US85 cents. And that would provide a balance between encouraging non-resource export businesses, while not adding unwanted inflationary pressure.
The RBA could achieve this simply by lowering the official interest rate. However, that would then fuel even more local borrowing — especially within the residential property market.
Ideally, the RBA would like to raise interest rates. And yet, that will only encourage more overseas funds into the country … chasing attractive higher returns.
And, without a lower dollar exchange rate, that would put even more pressure on our export industries.
However, with the Aussie dollar falling to around US90 cents recently (and slipping slightly below that since) … maybe the RBA will have its wish fulfilled.
The Impact of a Permanently Lower Dollar
Immediately, this would discourage overseas funds chasing higher returns; and also temper the demand by investors, for both residential and commercial property.
Furthermore, the banks would begin losing their source of cheap funds; and therefore, have less money available to lend.
Both these events would help cool the present frenetic market — where funds are often merely “seeking a home”, with scant regard to value fundamentals — be it for residential or commercial property.
Bottom Line: Make sure you stick to the basics, when assessing commercial property.
And always set out to look for:
- Well-designed, well-located properties;
- Solid tenants on a good leases; and
- The ability to “add value”, where possible.
Make sure you remain an Investor in Quality … not merely an accumulator of Commercial property.
If you cannot find exactly what you want on realistic terms … perhaps you need to wait for the dust to settle. And simply let these over-eager “amateurs” discover the importance of basing decisions upon underlying value.