So far there is no evidence Sydney and Melbourne property prices...

So far there is no evidence Sydney and Melbourne property prices will collapse.  What I can see is the trend of snail pace transaction volume and greyhound speed of listing - record auction this Saturday and long list in realestate.com.au - week after week.  Last few months I can’t see any actual sale transaction or advertised properties in popular suburb for less than 1 million dollars. Now I begin to see some appearing.  Of course if this trend continues the fortress will fall.

For property price to collapse one or more of the following events must occur:

• 1) Currently China is cracking down on corrupt officials and Australia must respond to Chinese request to hand over the corrupt officials. Many of this corrupt money went into properties.
• 2) Many of the current loans are interest only – Australia non doc loan. If the banks are forced by the regulator to act, many of the mortgage holders will be forced to sell the property.
• 3) The recent boom in property seems to coincide with Chinese Share Market boom. When you can make 600 percent in just 6 months, a million dollar property looks like a small change. The current trend is reversing and many of the known movie stars have lost billions of dollars who happened to hold many properties in Australia. If those burnt in share market were to force to repay the margin loan, then there will have to sell their properties here.
• 4) China crackdown on money transfer has the effect of many cancellations of existing contract according to one newspaper report. If Chinese money is not coming, that spells doom for property market as unofficially 50 percent of existing and new properties were bought by the Chinese.
• 5) If Chinese economy turns pear shape, they might force the Chinese to repatriate the money back home as China has a currency control law and technically buying properties in Australia is illegal.
• 6) So far only Perth recorded significant price fall. You need more towns or cities to fall as property speculators usually hold properties in more than 1 city. I spoke to a number of accountants and they said property speculators usually mortgaged all their properties and just one single lost will collapse the whole portfolio like a deck of card.
• 7) If bank shares fall to GFC level that will pose a significant risk to the funders and they might demand higher interest rate.

For property millionaires they believe that Australia economy will never turn pear shape as they have “Sugar Daddy” who would forever buy our iron ore and other minerals. Look at last GFC when property listings were at its high, Chinese Goddess would clean up all the backlogs.  Well, Australia will be second time lucky as the Sale listings getting longer, there is no reason Chinese Goddess will not come again. For those who were brave enough, they would make significant gain. Buy when everyone is selling. Their advice is to turn the goose egg into gold.

To me goose egg seems fragile. Why not turn into solid gold by investing in real gold or gold shares.