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.
