Checking in on the housing bubbles in Australia, Canada, and China…

Word came in this report this morning from The Age in Australia that Economist Steve Keen of Debt Deflation fame is garnering new respect as home prices there are set to drop by about four percent this year with even lower prices in store for 2012.

No news stories about home prices in Canada have crossed my computer screen lately, but, my guess is that, with the global economy and financial markets teetering, there are a lot of new home buyers and investors who are rethinking their purchase decision.

In China, we see shades of the U.S. housing bubble circa 2007 as the LA Times reports the natives are really getting restless, recent homebuyers now protesting outside of the offices of builders who have slashed prices to spur sluggish sales.

Home prices nationwide declined in November for the third straight month, according to an index of values in 100 major cities compiled by the China Index Academy, an independent real estate firm. Average prices in the Shanghai area are down about 40% from their peak in mid-2009, to about $176,000 for a 1,000-square-foot home.

Sales have plummeted. In Beijing, nearly two years’ worth of inventory is clogging the market, and more than 1,000 real estate agencies have closed this year. Developers who once pre-sold housing projects within hours are growing desperate. A real estate company in the eastern city of Wenzhou is offering to throw in a new BMW with a home purchase.

The swift turnaround has stunned buyers such as Shanghai resident Mark Li, who thought prices had nowhere to go but up. The software engineer closed on a $250,000, three-bedroom apartment in August, only to watch weeks later as the developer slashed prices 25% on identical units to attract buyers in a slowing market.

Outraged, Li and hundreds of others who paid full price trashed the sales office, scuffled with employees and protested for three days before police broke up the demonstration. Walking away now would mean losing the $75,000 down payment that he borrowed from his working-class parents.

“I still haven’t told them,” Li, 29, said of his home’s plummeting value. “It will just make them worry, and it’s already too late.”

This is well worth reading in its entirety to better understand two fundamental differences between the U.S. and China and how their outcome might be very different than ours.

First, this was a government-engineered slowdown that looks to be accomplishing its objective, however, the fear is that it could be too successful (in which case, the government will likely reverse course). Second, home purchases in China include hefty down payments, unlike the NINJA loans and their ilk  that were common when the U.S. bubble burst.