Sydney Property Bubble

[Boon]

China's 3rd and 4th tier cities are having a housing market bubble pop now. New apartments slashed by 30% and buyers outside the offices complaining. Apparently in China those guys pay for full price of apartment like 18months before its completed.

Those overleveraged greedy chinese developers some are starting to face insolvency. Big developer like US listed Sofun holdings is already trading almost half off its march high. I think singapore based i think oxley?? will be in some deep s**t soon as well as they are very very leveraged...

When crash comes it comes fast. Most property investors will not even know what hit them. Same thing will happen in Sydney/Melbourne. When fundamentals of rent vs prop price are not aligned things will eventually go to mean.

Steel and iron ore are also having major all time lows in commodity price due to glut in China as the building slows down.

This week the aussie government is increasing taxes to reign in their debt.

As the Zen master says, "We'll see"

1) You are right that Chinese properties are fully paid. And usually the LTV is about 50%. One phenomenon people forget why they are so cash rich is because 4 cash rich parents are supporting one newly married couple due to the 1 child policy. So in terms of credit risk to developers/ banks and eventual bust it will likely be more benigh, and as usual leverage will be the killer for developers. Soft landing is a highly likely scenario

2) I am negative on properties down under because of the resource cycle, but also do bear in mind that they have negative yield curve and negative rental yield for years before US QE.

there are many factors at play down under. negative gearing plays a big part on property buying behaviour there. unless u have first hand experience making a living down under and trying to minimise taxes in the process, it is very difficult for someone to understand the forces at play...

No Vested Interests

1) Soufun Holdings operates an real estate Internet portal in China which provides marketing, e-commerce, listing, and other value-added services for China's fast-growing real estate and home-related sectors – It is NOT a real estate developer.
2) In China housing market, if LTV is less than 60%, and until prices falls more than 40%, banks would be adequately covered. Buyers who bought at the peak would be sitting on negative equity. And inevitably, property developers who suffered cash flow problems would be in trouble. Overall, housing prices still holding up pretty well in most cities in China, which one could read from Soufun.com
3) In the Sydney housing market, there are many market forces at work, one could talk about resource cycle, misalignment of rental yield vs prices etc – but the most fundamental imbalance is still “undersupply” – until this “imbalance” is “balanced”, the upward pressure on housing prices in the long run would still be northwards, IMO. In short to medium term, any likely downward pressure on prices would most likely to be driven by hike in interest rates from the RBA.