David McWilliams: People think because there’s a shortage of property, we will not have a property slump. They’re wrong

Collapsing Chinese property market has potential to derail global economy already reeling from widespread inflationResidential buildings under construction at Tahoe Group Co.'s Cathay Courtyard development in Shanghai, China, this summer. Photographer: Qilai Shen/BloombergThe dog days of late summer sometimes disguise nasty surprises in financial markets that dominate economic news for subsequent months or even years.

In China, people put down deposits which can in some cases be as much as 100 per cent of the cost of the apartment. In times of rapid house-price inflation, this might even seem prudent. However, the developers use this cash to buy more sites from local government only too happy to take in the revenue from land sales, leading to more and more development. While we had our ghost estates, China has it ghost cities, which it is now demolishing.

Before the crash, Irish developers were at the same game as the Chinese. They too took deposits, which were then used as collateral for the banks that lent against them for more sites to be bought. Who’s to say the same isn’t happening again?

I agree, for me its my belief the hedge cuckoo funds will exit the Irish marked. There presence is rocking our country and its Democracy. Eugene Corley.

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