Australian Property and the Influence of China
We all know the story by now, too many people getting too many loans and buying too many property's. When the music stopped on this ponzi scheme and the suckers that got in last were left holding the baby, property markets around the world crashed......or did they?
Well we know that it definitely did happen in the U.S. and Europe and I know for a fact that it didn't happen in Australia as we recently had our home revalued and it came in just about where we thought it would and higher than where it was a few years ago. Whether this will continue in Australia, only time will tell but the market is definitely showing signs of stress.
They other place where it didn't crash was China. While I could throw at you a series of charts about income growth, higher disposable income, urbanization and industrialization I have instead, a very simple chart.......cement.
Source: Barry Ritholtz - The Big PIcture Blog
China is big into apartment buildings, which with a billion people is no surprise, and the key ingredient for apartments is cement. As you can see from the chart above the boom is well documented in consumption of cement which fell off a cliff in Europe (Spain specifically) and the U.S but kept powering on in China.
But the real question is whether there is a bubble in the Australian and Chinese property markets?. One thing you cannot ignore is how related these two economies are with China having a thirst for Australian resources to continue to feed their growth and therefore their property market. Australia continues to benefit from the mining boom which in turn is pushing up house prices particularly in places like Queensland and Western Australia which are the center of the current boom.
Some believe that the rising property prices in Australia simply reflect the population growth however in a previous post I wrote this theory was debunked by Professor Stephen Keen (he believes it is the banks lending practices) so it beggars the question of whether a slowing Chinese economy/property market will see a crash in Australia.