I'm not worried about china buying pushing the prices up, what worries me is what happens after since they have been banking Australian property for years now, and in great volumes.
If china does have a US Style credit crisis then there is a credit crunch. In a credit crunch all their banks want their money back, liquidity leaves the market, people cant pay each other, so people start selling assets to free up cash. As well as interest rates going up so people sell investments to get out of the debts.
My concern is the size of the defaults to come, as the risk of the lending was hidden in WMP's just like how it was sold in USA as derivatives. But actually it was worse because China also lowered peoples interest on deposits to encourage them to buy WMP's in the shadow banking system.
So when this crunch hits what is the damage to Australia going to be when everyone in china find out they are going broke?
With America they were just buying locally, but China has been buying a good sized margin in Australia, having this stock all hit the market at the same time is going to create a massive over supply of brand new unlived in homes and brand new unlived in apartments. As well as the drop in buyers as the Chinese vanish.
It wont be a good time for people working in the building industry with all the new homes about.
