China’s Property Crash

A Cautionary Tale for Australia’s Housing Market

China’s property woes directly impact Australia’s economy. Slumping iron ore prices, now below $US100 per tonne, are reducing national income and pushing the federal budget back into defcit. The Australian dollar has also dropped below 62 US cents, a level not seen since the early 2000s.

Economist Chris Richardson warns Australians to pay closer attention to China’s struggles. “China’s demographic shift is remarkable — it’s ageing fast, with birth rates plummeting due to unaffordable housing,” he notes, citing homeprice-to-income ratios in Beijing and Shanghai that far exceed those of London or New York. Parallels with Australia’s Market

While Australia’s property market differs in key respects, the similarities are striking.

Like China, Australia has seen skyrocketing house prices, unaffordable deposits, and soaring household debt. Housing costs have contributed to declining birth rates, with prospective buyers increasingly reliant on family wealth to enter the market.

Unlike China, Australia faces a housing undersupply, driven by strong population growth through migration. However, as the COVID-19 pandemic showed, disruptions to migration can quickly shift the supply-demand balance.

A Potential Domino Effect

China’s property crash poses a broader risk to Australia. By reducing national income, economic growth, and federal revenue, it could create conditions ripe for a housing downturn here. With high household debt and limited government debt, Australia’s ability to respond to a housing crash may be constrained if external shocks arise. Lessons to Learn China’s real estate collapse is a warning: unchecked property markets, excessive debt, and demographic shifts can destabilize economies. For Australia, maintaining a balanced housing market and managing external dependencies are critical to avoiding a similar fate. While rising prices have defned Australia’s crisis, the conditions for a potential crash are present — and China’s experience underscores how quickly fortunes can change.