Weakening currency means strengthening demand?

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Malaysian developers do not only build in Malaysia. They build everywhere, especially in a country favoured by many Malaysians who wish to find a new home; Australia. Here’s a good news and bad news, depending on ones perspective. The Australian Dollar (AUD) is actually weakening. It hit a 10-year low just recently even though it’s rebounding currently. So, when the AUD weakens and the developers are building in Australia, does it mean lower profits?

Article in Edgeprop.my here. Briefly, the answer is no. A few developers were mentioned. Mulpha International Bhd has 97.92% of all its revenue coming from Australia. UEM Sunrise Bhd has 33.2% from its Australia’s developments. There are also S P Setia Bhd, Gamuda Bhd and Sime Darby Property Bhd though the contributions from their Australian developments are minimal. This was what was shared by Kenanga Investment head of equity research Sarah Lim. She saidthat with the weakening Australian dollar, Malaysians could probably also consider buying properties there. This, she said, will boost the sales of Malaysian companies with projects in Australia, enabling them to clear their unsold units faster.

Affin Hwang Capital Research senior associate director Loong Chee Wei said that the weakening Australian dollar will not be a concern to the property developers because they will focus on selling the remaining unsold units. He said, “They will be less aggressive in terms of launching new projects at this stage and will be focusing more on clearing the unsold inventory.” As for earnings, it will be lower when translated into ringgit due to the weaker Australian currency. More importantly would be whether the developers could sell because this is where profits come. Below would be a chart showing the developers’ revenues from Australia. Article in Edgeprop.my here.

I enjoyed all my visits to Australian cities thus far. Twice to Perth and then to Sydney and Melbourne. If the exchange rate is favourable to ringgit, then perhaps I could visit Brisbane next. I heard it’s the next property market to watch out for besides the usual favourites; Sydney and Melbourne. Weakening currency is a chance for strengthening of property demand? Well, it depends on what the country has to offer as well because there are many countries where the currency is much weaker and it does not attract much attention where property is concerned. Happy following.

written on 14 Jan 2019

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