As Australian expats, many of us fall into a trap of becoming foreign exchange (FX) ‘traders’ and ‘experts’, creating multi-currency bank accounts and expecting that we’ll be able to generate outstanding returns by taking advantage of this FX volatility. The fact is, however, that FX markets are very difficult to predict with any accuracy, particularly when it comes to timing, so it’s important to explore how we can take advantage of movements in the Australian Dollar (AUD) when they arise.

This week we’re exploring the recent depreciation in the Australian Dollar (AUD), and what this could mean for Australian expats. Whether you’re working in Hong Kong, the United States, Singapore or elsewhere across the globe, it’s important to consider what important FX movements have on your property purchasing power in Australia.

The weakness in the Australian Dollar (AUD) remains attractive for expats and foreign buyers who are keeping a close eye on Australian property prices. The recent depreciation is particularly attractive for those looking to put down their deposit in Australian Dollars (AUD) to fund the purchase of their home or investment property.

Let’s explore some of the key currency movements

Putting this in perspective, here is a look at the key currency movements relative to the Australian Dollar (AUD) over the past year:

Australian Dollar (AUD) to Singapore Dollar (SGD)

This means that if an Australian expat were living in Singapore holding S$100,000 for a property deposit in Australia, the value of this deposit has appreciated from A$97,423 to A$103,987. While this may not sound like a lot, at just over A$6,500, on a $500,000 property, we have just picked up an extra 1.3% for nothing. This saving will help with such purchasing costs as buyer’s agents, stamp duty or otherwise.

If we take a longer-term view of the SGD: AUD exchange rate, we can see a significant decline from previous highs. In fact, the decline in the AUD relative to the SGD has been one of the more significant movements in time and may in fact provide a significant boost to the property purchasing power of Australian expats living and working in Singapore. Let’s explore the chart:

A deposit of the same S$100,000 at the end of 2012, has appreciated from A$78,761 back then, to A$103,987, which equates to a staggering 32% difference over just over 5.5 years. This is equally important for local Singaporeans and others working in Singapore earning Singapore Dollars (SGD) as it is for Australian expats in the country.

Australian Dollar (AUD) to US Dollar (USD)

This means that a deposit saved by an Australian expat in the US of US$100,000 has appreciated from A$128,797 to A$140,635. This is quite a sharp appreciation in the value of the US Dollar relative to the Australian Dollar, particularly during the volatile ‘Age of Trump’.

Australian Dollar (AUD) to Hong Kong Dollar (HKD)

For Australian property investors living in Hong Kong, a property deposit of HKD500,000 has appreciated from A$82,232 a year ago to A$89,982 today. This is just below a 10% uplift in the property purchasing power for Australian expats and those in Hong Kong looking to get into the Australian property market.

As we can see, the Australian Dollar (AUD) has depreciated quite significantly against other major currencies. Whether or not this is the bottom or the Australian Dollar (AUD) will go lower is a difficult point to determine, however if you are an expat looking to get into the market, the recent depreciation may be an opportunity worthy of consideration.

What about ongoing loan repayments?

It’s also important to bear in mind the difference this makes with regard to ongoing loan repayments and costs of holding the property. When considering your property investment strategies, it’s always important to consider the costs and benefits of foreign exchange (FX) rates. We don’t expect to see a sharp rebound in the Australian Dollar (AUD) so expect this opportunity to remain, particularly for those working abroad.

How can I lock in the rate?

If you’re not yet ready to purchase property in Australia but do want to lock in the exchange rate, you may want to consider simply transferring the funds to Australia and investing these funds in a ‘high interest’ bank account or term deposit, maintaining some liquidity for when you ready to purchase your property.

If you’d like to explore what options are available to you when it comes to locking in exchange rates, and your finance structure, please feel free to reach out to our team. As Australian expats ourselves, we have a great deal of experience in this area.

 

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