Opinions differ on what may be the impact of China’s stock market crisis to Australia’s home buyers. With China’s iron ore prices plummeting to AUD $59.83 (US$ 44.59) a tonne – the lowest they have gone in six years – economists are understandably worried. Already some have dubbed the recent chaos as China’s 1962, in reference to the year the Great Depression struck the United States.But should Australian property investors be concerned?

Talking with News.com.au, Lindsay David of LF Economics said that China’s economic troubles may have two effects on the local real estate industry. According to David, the steep fall of China’s iron ore prices may drive wholesale lending communities overseas to be cautious and stop lending to Australian banks – the very banks that provide home loans to property buyers. In the event that China’s financial predicament scare away overseas lenders, David said that though a credit crunch may ensue, a good thing may also happen.“Real estate prices in Australia depend more on what some wholesale lender in New York or London is willing to lend than anything else,” David explained. “House prices in Australia are dependent on debt growth, and if there’s no credit out there, house prices will begin to fall.”

David also believes that the stock market crash will limit the purchasing power of many Chinese.

Suburbs where foreign buyers usually flock may thereby feel that business is slowing down. Not all agree with David’s forecast, however. Michael Pallier, principal of Sydney Sotheby’s International Realty, reports that he is seeing strong interest to purchase properties from young Chinese entrepreneurs who are “pulling money out of the Chinese stock market and putting it elsewhere, including property.”

Pallier told the Daily Telegraph that the volatility of China’s stock market, coupled with the falling of the Australian dollar below US $0.75, may encourage the Chinese, especially those who reside in Australia, to invest in local real estate.What will come to pass? We may not have to wait long to find out.