The Australian dollar has climbed to its highest level against the US currency in almost three years and has remained relatively stable against other major currencies. This shift is prompting investors to reassess what it means for the country’s commercial property market.
According to CBRE’s head of research, Sameer Chopra, the rise to around 70 US cents — roughly 11% higher than this time last year — isn’t as significant in itself as what’s driving it.
Rather than focusing on political developments in the United States or international headlines, Chopra suggests investors should pay attention to two underlying trends.
First, Australia’s interest rates are expected to remain higher than those in the US. Since currency values are closely tied to interest rate differences, this factor plays a major role in supporting the Aussie dollar.
Second, Australia’s economy has shown stronger momentum than forecast last year, largely due to continued population growth — a key driver of demand across the property sector.
The Reserve Bank of Australia is due to announce its next rate decision in early February. Market speculation has grown following recent data showing falling unemployment and inflation levels remaining above the central bank’s target range.
While stable or higher interest rates can slow property price growth, strong population gains continue to support leasing demand and long-term returns, according to Chopra.
REA Group senior economist Anne Flaherty adds that for overseas buyers, currency movements often take a back seat to broader fundamentals such as rental yields, economic performance, and population trends.
Chopra also notes that income growth is likely to matter more than asset price appreciation in the year ahead.
Market Sensitivity and Investment Behavior
A rapidly rising Australian dollar can introduce uncertainty into the market. Chopra explains that sharp changes in interest rates or bond yields can cause investors to pause as they reassess risk and valuation benchmarks, particularly capitalisation rates, which are used to estimate expected returns on commercial assets.
Periods of volatility tend to slow transaction activity, as buyers and sellers wait for greater clarity around pricing and future returns.
Property Sectors Seeing the Most Benefit
Flaherty explains that international investors typically remain active during periods of a strong dollar, but they become more selective, often targeting high-quality, long-term assets such as premium office buildings and major industrial properties.
In contrast, sectors driven mainly by local demand are less affected by currency shifts.
With population growth supporting the broader economy, analysts highlight three areas seeing the most benefit:
Retail Property
Rising population levels boost consumer spending and foot traffic, supporting shopping centres and neighborhood retail assets. Supermarket-anchored centres in growing suburbs have attracted particularly strong investor interest.
Childcare Facilities
As more families settle in Australia, demand for early learning centres continues to rise. The sector is also supported by government policy and is often seen as a stable, lower-risk investment category.
Hotels and Accommodation
Tourism and migration both contribute to strong occupancy levels. Limited new supply in some regions, especially in Queensland ahead of major international events, has increased buyer interest in hotel assets across both city and regional markets.
Transaction Trends Across the Market
Recent research from Ray White shows that retail property recorded one of the strongest increases in transaction volume, accounting for a significant share of total commercial sales nationwide. Queensland stood out as a particularly active market, driven by strong population inflows and development activity.
Hotel transactions also rose sharply, supported by solid tourism performance and high occupancy rates.
The category that includes childcare and similar alternative assets experienced some of the fastest growth, reflecting strong investor demand for sectors underpinned by long-term demographic trends.
Policy and Market Outlook
Chopra cautions against policy decisions that could discourage investment, such as higher land taxes or increased costs for overseas buyers. He emphasizes the importance of regulatory stability, continued infrastructure investment, and sustained migration levels.
Ray White’s research suggests that if interest rates ease as expected, development activity could accelerate in 2026. Until then, investors are likely to focus on existing high-quality assets that offer reliable income and limited supply.
While a strong Australian dollar may reduce travel spending by international visitors, it can also help lower construction costs by making imported materials more affordable — offering a potential upside for future development projects.
