Chinese money moving away

Second hand is already falling in value. Many people (myself included) have so much cash sitting around at the moment, waiting to swoop on these developers soon once they fall like dominos.

Anyone paying $30m on a land to make 15% IRR on best case scenario is an idiot anyway.

 

According to this article, the Chinese investment/speculation increased last year:

Chinese investors buy 35 percent of residential land in Australia - People's Daily Online

 

Yup that was part of the 22billion leaving the country up until December last year after the government there clamped it down to less than a billion. Don't think they'd be buying much this year, those who have bought OTP will be scrambling around trying to find buyers now.

As Omnidragon says, developers will be falling like dominos soon. Same story here in Brisbane, its already begun. Likely 2H17 we will see blood on the streets.

 

It might have a lot to do with this from AFR: "Chinese buyers of Australian property have not done too well in recent years in their local currency. Between May 2013 and March 2016 house prices in Australia in Australian dollars rose 25 per cent but when measured in renminbi prices actually fell relative to the previous five years." If you're a Chinese national hoping to make money, high Australian prices and the exchange rate are making it much less attractive. Add in the fact it's become hard to get finance and Australia's on the nose.

 

Absolutely - China has thrown a lot more at reining in capital flight.

 

I think they've lost something in the translation in that article - title says "35% of residential land in Australia" but it actually ends up being 35% of real estate development transactions for the year - so they're buying new developments like apartments disproportionately. This is from the Knight Frank report. Basically the number of Chinese buyers has jumped 17 times (not 17% - 17 times). Honestly that's a horrifying sign because that sort of investment is likely to be fickle. Many of these investors aren't putting down roots - they're just jumping on a bandwagon, buying for capital gains, often without finding tenants - and without any real connection to or knowledge of the market. They are the ultimate noob investors and just the sort who'll bail quickly if gains dry up.

 

I know they're selling heaps of home and land to the Chinese nowadays and some of these Chinese developers buying huge land parcels in the west hence wonder if the 17 new suburbs in Melb one called quan dong was indirect influence from the buying

 

Maybe - it might mean something in Chinese, though isn't a quandong an Australian native fruit or something?

 

That is true didn't realise that

 

Dont forget the two biggest projects in WA will be completed in around Q3. The final Gorgon Teams will start to wrap up around the end of June. With the next big wave from Wheatsone being demobed around August/Sept.
Between the two there will probably be around 5,000 jobs released.

I dont see resource job stability in WA for a while yet.

Blacky

 

Noted there is some more way to go, but I think that there is enough action now to offset the bulk of this. WA has around 50,000 less jobs than at its peak. This is across all sectors; in resources capex this includes construction such as Roy Hill and the first trains of Gorgon. In resources opex this includes cuts to account for the ore price falling from $180 to 40/tonne. In housing the number of dwellings under construction has fallen by a third, and government spending also took a swing as the state received its lowest gst allocation yet.

Though there are still some cuts to go, for housing construction and mining opex expenditure the only way is up and gst share also ramps up from next year.

Most importantly, the massive ramp up of eastern states jobs is also finding its peak, meaning less inventive for west aussies to migrate across. WA is at the bottom of its jobs cycle while the other states are nearing peak.

 

Yep but China just announced they are looking to slash their steel production to stop overpollution. Which means sudden drop in demand for iron ore and coking coal. So there's gonna be a glut. Iron ore futures have already started taking a hit this week.

If another massive drop occurs in those commodities, we could see miners suddenly on the brink of insolvency again lol. Big guys like BHP will be looking to cut down again and patch up their balance sheets rather than doing any expansion.

 

Well China did annouce that they are aiming for a 6.5% growth.

China aims for 6.5 per cent growth in 2017

 

Meanwhile america who are the worlds largest steel importer are about to hit a massive infrastructure spend. They get a lot of steel from japan who get their ore, coking coal and gas from australia.

Also australias ore miners are the worlds largest and lowest cost. If there are widespread insolvencies beyond what the recent $40 price cleared out, it would mean the whole industry is toast

 

China has excess steel and is dumping tho.

 

The infrastructure stimulus could be sitting on trumps wall for a while. Doubt he would have much luck getting it passed through Congress the way his own Republican party is not even supporting him much. Though they have the house and senate and could pretty much pass anything Trump wants.

Seems like whatever he is doing is getting co#$k-blocked. So I wouldn't bet too much on his infrastructure plans.


China is now reopening some mines and they have done away with the working 276d limit on mines since late November/December last year . Which was the initial trigger for iron ore and coal price going up last year.

Imho combined with steel glut and steel factory closure it will severely impact iron ore demand in the short term.

In addition, a lot of iron ore capacity is coming online and if China doesn't buy it fast enough, we'd get a glut pretty fast. Afaik, Brazil is also producing quite a bit and ramping up.

It's really hard to say with commodities though, as things are so speculative in that space. So the pendulum could swing either ways in the next couple months

 

I am speculative about the chinese mines. Their ore is typically very low grade and to refine it to australian standards put the cost right up, so when prices start to slip again im surr it will only be a matter of time before they close again. I havent read a forecast yet that puts the price under $60US, and the break even point for most aussie mines is somewhere around 45-50US. Recent falls have meant notable neglect of opex and maintenance requirements. Typically that means cutting contractors, but with a stable profitable price i dont think there will be a need to run mines into stress mode like that.

As you say though, hugely specilative market