This week the major credit rating agency Fitch claimed that Australian house prices are set to fall another 5% this year on top of the 6.7% we have seen in recent years since the Australian housing market started to devalue, this is a major concern for clients selling Australian dollars. Furthermore the report also suggested that household debt to GDP is 121%, which means people owe more than what they will produce throughout the year, which is a major concern.
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The decline in house prices is no surprise as lower investment has been reaching Australian shores because regulators have been tightening lending standards. Next month the Royal Commission will release their final recommendations and the likelihood is that further tightening on lending will occur therefore putting pressure on the housing market. If it’s the case we see house prices continue to fall, I expect this will have a detrimental impact on Australian dollar exchange rates throughout the year.
It looks as if the Australian dollar is set to come under pressure in the months to come due to the housing market, however, I believe the ongoing Brexit saga will outweigh the problems in Australia, therefore clients that are converting GBPAUD should be keeping a closer eye on how Brexit negotiations unfold.
Last night Theresa May survived the vote of no confidence day when MPs voted in favour of keeping the Conservative and DUP coalition in power, however potential problems are on the horizon for the PM. Theresa May has until Monday to come up with a plan B, but we have no idea what she has in mind.
If she decides to go down the route of a no deal Brexit I expect MPs to try and block this, however this is still something clients buying Australian dollars should be made aware of.
The likelihood is that Article 50 will be extended and the ongoing Brexit debate will continue for the months to come. If you are converting GBP to AUD and would like further information as it unfolds get in touch today.
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