Sydney and Melbourne build ghost cities

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The irony of the Australian property market never ceases to amaze. While prices are held aloft by guaranteed banks that pump credit to rort-supported investors who pile into supply bottlenecks and all lock out our youth, inner city apartments are going up hand over fist to stand empty. Gotti today:

The inner city residential property development markets of Melbourne and Sydney are experiencing a sudden and spectacular boost. For many Asian and Chinese investors, inner-city property investment in Australia is replacing gold as a hedge against possible difficult times at home.

While this has been happening for years, few were prepared for the latest set of events. It started slowly in the early weeks of January and February this year: Chinese and other Asian investors began buying apartment development sites that had secured permission to build, and are funding those developments using Chinese rather than Australian banks. In turn, most of the apartments will be sold to Chinese and other Asian investors.

…Many Chinese investors may be happy to leave their Australian apartments empty, as they do in China.

I’ll draw comfort from the fact that when this little boom turns to bust, as it will, the glut will drive prices all the lower.

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About the author
David Llewellyn-Smith is Chief Strategist at the MB Fund and MB Super. David is the founding publisher and editor of MacroBusiness and was the founding publisher and global economy editor of The Diplomat, the Asia Pacific’s leading geo-politics and economics portal. He is also a former gold trader and economic commentator at The Sydney Morning Herald, The Age, the ABC and Business Spectator. He is the co-author of The Great Crash of 2008 with Ross Garnaut and was the editor of the second Garnaut Climate Change Review.