“China’s Looming Property Bubble” is a well researched and very compelling account of China’s rampant real estate speculation. It clearly doesn’t bode well for the world’s most populous economy ‘going forward’, as they say.

However, having published a study (Unlocking the Riches of Oz) on Australia’s real estate bubbles since 1972, I wish Arthur Thomas had enlarged on his warning “Comparing China's property market with those of developed nations risks serious miscalculations” because, while the $2.4 trillion Australians expended on real estate between 1999 and 2009 doesn’t come close to matching China, the fact that at least 28% of our amount is within our bubble (and will have to be written off), makes Australia’s bubble as big as any in the western world.

In fact, as I ponder Arthur’s eight point closing summary, only point number 2 doesn’t apply equally to Australia. (Yes, we have our own ‘Ministry for Propaganda’. It omits to collect and collate Australia’s total real estate sales against GDP.

Nice piece Arthur.

Bryan, I think you also fail to take into account that in Australia, housing tends to be undersupplied.

In China the masses and masses of vacant apartment and properties are easy to see, even in central Beijing. In Australia however, there is a dire shortage of suitable properties.

Though I concur in regard to inflated prices.

He also failed to mention what the consequences of a failure in the Chinese economy will have to the Aussie mineral sector. We may well see some hard times ahead as sales of iron ore go down the gurgler when construction grinds to a halt..

David

TurnRightThenLeft, The deliberate under supply of housing is supporting inflated values here in Australia, But you must ask the question, Is this restriction of supply a good reason to bleed the public's scarce cash flows in effect to support green labors central planning? And what adverse issues are a result of these polices and at what loss of value and community cost? Why have a deliberate policy to squeeze the family budget?

Didn't say it's a good idea Dallas. Just said that it's a different kettle of fish to China's problem.

For a long time I would see the empty apartment blocks in Beijing and thought that this speculation was going to lead to a disaster in the imminent future. After all, with so many empty apartments, clearly it was rising prices fuelling further purchases fuelling rising prices, with a distinct lack of tenants.

Clearly this is going to lead to big problems, right? Particularly with failures being kept as state secrets via a muzzled press.

However, that was before I started thinking about this, and I mean really considering it.

The author briefly touches on the Hukou. The hukou is effectively a document that restricts people from being real residents of a city. They may work there, but their children can't attend schools there, they can't buy property, they're in effect a semi-legal squatter.

The mass migration in China has meant many migrant workers live in cities without really being a resident. Their options are limited.

So, after the imminent crash in house prices which follows every bubble, what will happen?

Seems to me, that the government has one hell of an ace up their sleeve. Relax the hukou permit rules. Suddenly, there would be mass migration and property purchases on a scale never before seen. In all likelihood, prices would rocket to their previous position, perhaps even further. Those holding properties wouldn't lose out after all, far from it. In many cases, they'll be rich and connected to the CCP.

Effectively, this could be the biggest case of, well, for lack of a better term (correct me if there is one), 'insider trading' in a property market there has ever been.

The madness in China will,sooner rather than later,come to a very bad end and it won't only be the Chinese who suffer.