News & Updates How China Will Affect the Australian Real-Estate

24/10/2021by simplyframe

With China’s Evergrande making global headlines in the last months, we have experienced a rush of market sentiment change, uncertainty and volatility. What does this all mean for the Australian real-estate market, and what kind of volatility can we expect in the near future?

Whilst uncertainty and headlines could shift the sentiment in a powerful way, it is always important to step back and gain some context. Evergrande is a giant, with liabilities exceeding US$300b. Whilst that is a mouth-watering number that should not be discounted, China’s economy in its entirety is worth upwards of US$15t. An Evergrande collapse alone, has rippling impacts although it should not directly impact China’s economy too much. However, what is more worrying is the potential domino effects of others within the same industry following the footsteps of Evergrande, which could then impact the wider economy and cause collateral damage both within China and also outwards into the global economy.

So how would all of this impact the Australian property market? The short answer is that it isn’t likely to impact the domestic real-estate in a direct way, however considering there are a sizeable number of Chinese investors and households that hold real-estate in Australia, one cannot discount what kind of impacts that will have as their respective balance sheets experience a drastic decline due to China’s potential economic downturn. The argument would be a double-edge sword, with first-home buyers welcoming the potential decline in demand, whilst the sellers and over-leveraged brace for a slow-down in growth.

Navigating the property market has never been easy, as multiple array of factors impact its movement and direction. Everything is inextricably linked to everything. The Australian property market has been a stellar performer in the last few years, but the reality is no market keeps going in a single direction for a sustained amount of time. Is the real-estate market over-extended? Definitely. Can it continue further? For sure. As to for how much further, we will just have to monitor the fundamentals of supply and demand closely, especially as we are now on the brink of exiting lockdowns and opening borders once again to international travellers.