Investors still keen in Australian property despite rising prices
One in five homebuyers in the country from abroad as interest rates remain at record lows
High property prices in Australia are failing to deter overseas investors, including those from mainland China and Hong Kong, despite the country's central bank holding interest rates at record lows.
It comes as the country's traditionally high commodity revenues continue to remain low, leaving consumer durable stocks in large houseware chains to drive its stock market.
Last week, the Reserve Bank of Australia kept the key cash rate at 2 per cent for the seventh month, despite indications the economy could be strengthening.
The central bank has cut rates 10 times since November 2011, with the last cut in May.
Partly due to the low interest rates, property prices in Sydney and Melbourne have been rising steadily since 2011.
An unprecedented number of international investors, particularly from mainland China, have also fuelled the boom, with ANZ Bank estimating one in five homebuyers are from abroad.
Commonwealth Bank chief economist Craig James said Australia's interest rates would stay low for the foreseeable future.
"The Reserve Bank believes the economy has picked up and they've got a positive outlook," he said.
James said the numbers would keep the Australian dollar at between 70 and 72 US cents for the rest of the month, although it was expected to drop if the United States Federal Reserve raised its interest rates next month.
"If they do start lifting interest rates, we'll see the aussie easing against the greenback," he said.
All these conditions have not done anything to stop foreign interest in the real estate market.
"One in five sales were from foreigners [earlier this year], which is an extraordinarily high rate," ANZ chief economist Warren Hogan said.
Hogan said while the property market was beginning to soften in Sydney and Melbourne, other leading cities and outlying areas were beginning to attract foreign interest.
"Domestic and international investors are continuing looking for value in the next tier of cities, in Brisbane, Adelaide, Perth," he said.
"I think you'll even see activity in regional centres - a great example would be places like Cairns, which has been very soft for the past 10 years."
James said while mining and commodity stocks were down as international prices remained low, domestic consumer stocks were performing strongly.
"I think a continuation of low interest rates will be good for the consumer durable area, including realtors like Harvey Norman," he said.
"Consumers will be more willing to spend rather than leave their money in the bank, particularly if activity in the housing market continues strong."
