Posted by Rapti Gupta on Jun 12, 2014 06:32 AM EDT

China’s property market crash could trigger a global economic meltdown

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As several reports on China’s dwindling property market crowd the web, the condition has sparked concerns that the downturn of the second-largest economy of the world could have a domino effect on the global economy, resulting in another great crash. (pictured: A property model) (Photo : Reuters)

As several reports on China's dwindling property market crowd the web, the condition has sparked concerns that the downturn in the second-largest economy of the world could have a domino effect on the global economy, resulting in another great crash.

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"In the past few years, predictions that the sector was about to implode at any moment have not been borne out - but now is the time for the world to pay attention. Property activity indicators have been trending lower since mid-2013, and the downturn in the sector now threatens to turn into a bust. At best, China is entering a deflationary phase at a time of global fragility," George Magnus writes for the Financial Times.

The effect is going to be felt across the globe. According to the Sydney Morning Herald, Australia could lose about 1 percent of its total domestic growth as its iron ore export to China would be heavily affected.

"The impact that a slowdown in the Chinese property sector would have on the Australian economy is quite large and meaningful," Damien Boey, an analyst at Credit Suisse, told the publication.

"If you had a serious slowdown in Chinese property, which we are sort of seeing at the moment, you could easily shave off a per cent or so from the real GDP numbers [for Australia], unless of course you had offsetting policy stimulus, which we're not really seeing at the moment," Boey adds.

Earlier last month, Chinese officials also opened up about the prevailing conditions in the country.

"I think China's property market is like the Titanic and it will soon hit an iceberg," said Pan Shiyi, chief executive of Soho China Ltd. -one of the largest real estate developers of the country - to a financial forum. "I'm not optimistic about the housing market," China Business News quoted Shiyi.

Just a day after Pan Shiyi's comments surfaced, China Vanke - the largest property developer of China - told Bloomberg that the "golden era" of the country's housing market had passed.

"The period in which everybody makes money out of property is gone," President Yu Liang told reporters.

The Guardian reports that a looming global meltdown is around the corner, in fact much closer than we expect. The publication explains that while an economic boom-bust cycle is usually a seven-year cycle, the meltdown could come at a time when the global economy is still recovering from the previous crash. It also emphasizes that China could be the originator of the crash.

However, some investors believe that if certain measures are taken at the right time, the government could ward off a harsh landing.

"The industry is now after quality and service and back to real demand...The industry was worth 8.1 trillion yuan ($1.30 trillion) last year, even growing at a single-digit rate, it's still large enough for us," Yu was quoted by the Chicago Tribune.

More recently, CBRE Global Investors told Bloomberg that they would consider investing in China as property regulations have started to loosen up.

"These corrections will continue for another six months to maybe a year, therefore the entry point now is good. We are not foreseeing a huge correction, but sufficient enough for us to take advantage for this period of time to re-enter the market," Richard van den Berg, CBRE manager for Greater China Country, told the agency.

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