News David McWilliams

Saturday 10 December 2016

China's crisis could be the pin to pop the property bubble in Australia

Published 29/07/2015 | 02:30

Investors react as they look at computer screens showing stock information at a brokerage house in Fuyang, Anhui province, China, yesterday. Photo: Reuters
Investors react as they look at computer screens showing stock information at a brokerage house in Fuyang, Anhui province, China, yesterday. Photo: Reuters

Last week for the first time the average house price in Sydney passed one million Aussie dollars. This is big news for us because the majority of the Irish people who have moved to Australia are employed in offshoots of the property industry. When property markets rise, there is an attendant rise in demand for almost everything. When credit fuels the property party, the demand for employment rises, so too do wages and the cost of living. Perhaps it's not surprising that friends in Australia have horror stories about the price of almost everything.

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But excessive house prices, although trumpeted by some as a sign of economic strength are usually the very opposite; they are more typically a sign of dreadful economic mismanagement.

We know all about this, when a mania takes over a housing market and the banks get in on the act by lending "hand over fist" to gain market share - driving the bank's share price yet higher.

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