China's massive property market downturn is causing billions in losses and raising concerns about its impact on the global economy, including Australia. The article explores the scale of China's property crisis, the potential consequences for Australia, and the lessons to be learned from this situation.
Most Australians have become all too aware of how tightly our economic fortunes have become entwined with China, but perhaps we're still guilty of ignoring some key warning signs from our largest trading partner. China's gargantuan property bust has been in the headlines for several years, with some of the world's biggest developers, China's largest private developer Country Garden invested millions buying and developing prime sites in Australia.
Now, it is among several debt-laden developers selling or downsizing their portfolios. A Barclays Bank report estimates the cumulative wealth destruction from China's property price falls so far at $US18 trillion (nearly $29 trillion in Australian currency), or about $US60,000 per Chinese household. That's nearly $100,000 — which would be a significant blow even for most Australian households, which are multiple times wealthier than their average Chinese counterparts. It's also bigger than the direct loss of wealth to US households from the property bust there that sparked the global financial crisis of 2008. While developers, plagued by years of falling new home sales, have about three years' worth of apartments waiting for a buyer and that much again in land holdings awaiting development. To put a number on it, there could be as many as 80 million vacant units in China — that's more than seven times the total number of homes currently standing in Australia. Harvard professor and former IMF chief economist Kenneth Rogoff and his co-author Yuanchen Yang of the IMF argue that China has built more living space per person than many wealthier Western nations, even though much of it sits empty. 'Per capita, housing space in China now exceeds that of any major European country, even though China's per capita GDP is only a third as high,' they write. But it isn't just homes that China has overbuilt, with many gigantic infrastructure projects also under-utilised
CHINA PROPERTY MARKET AUSTRALIA ECONOMIC IMPACT GLOBAL FINANCIAL RISK
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