Australia’s housing market has been a huge beneficiary of China’s natural resource thirst. Extremely low unemployment and rising incomes have helped to boost prices dramatically, while most of the developed economies were seeing huge housing deflation. Debt to income in Australia is around 150% so any slow down in China (which we already see happening) could really cause problems. If we were big on shorting stocks I might look at doing a pair trade, where we are long Citigroup, and short some of the more heavily levered Australian banks.
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