Chinese Buyers Could Spark “An Economic Catastrophe”

Fears of a looming apartment fall may be compounded by the mass failure of Chinese apartment buyers to settle their apartment contractsforeign investor property

Robert Gottliebsen, business columnist at The Australian, said recent bank-led changes to loan criteria for foreign buyers could leave many overseas property investors from China exposed.

“If the Chinese fail to settle [their property purchaes], then there will be a deep problem,” said Gottliebsen.

He even added that the problem could “develop into an economic catastrophe.”

Gottliebsen explained that most apartment developers use their collected Chinese off-the-plan deposits to gain security for a bank loan.

The bank loans can make up 40 % to 60% of the total cost of the apartment complex.

“This is an area of finance which we know very little about because it is hidden from public view. 

The banks feel they are safe in the loans to developers because there is a big difference between their loans and the cost of the buildings,” he wrote.

“But the banks are often funding other players in the apartment development.

Apart from the developer, the people at risk include unsecured suppliers and the enterprises that are providing the second mortgage funding.”

Gottliebsen said that if the apartment disaster takes place, Australia might face settlement failures of at least $1 billion a month for 12 months.

“Just as the collapse of the mining investment boom ravaged the economy, we must gird ourselves for another potential disaster,” he warned.

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'Chinese Buyers Could Spark “An Economic Catastrophe”' have 2 comments

  1. September 23, 2016 @ 7:34 am Kristen

    There is a saying, don’t throw the baby out with the bath water. That’s exactly what the new policy did. In all seriousness, Chinese buyers who bought off the plan properties are being pinelise for their early purchase in good faith. Your investors, be it Chinese or any foreigners else acted they way they did because your they trusted the Australian Financial system. How can the current policy where loans are retricted even to early investors make any sense? I hope the authorities can make it right by those foreigners who had committed before the lending criteria at least.


    • September 24, 2016 @ 11:23 am Fred

      Agreed, allow for those who had committed Apply it to future purchases.That way the decline, if it happens, will be orderly and fair.


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