A friend of mine, a high-income executive, and her husband, also on a good income, want to buy a bigger home on Sydney's north shore. They've had another child and need more room. But the search is dragging on as they have trouble finding something they can afford. When they see Chinese buyers turn up, their hearts sink. It usually means doom.

''When we encounter more than one Chinese buyer interested in a house, we know we are not going to get it,'' she said. ''We get priced out.''

Illustration: michaelmucci.com

A Sydney property developer who is working with Chinese investors told me that if Chinese stopped buying in areas that are popular with Chinese home buyers, the value of these local markets would fall by about 25 per cent. These local bubbles are having a ripple effect, pushing buyers into other areas of the Sydney market.

The same is happening in parts of Melbourne, where segments of the market are booming thanks to Chinese demand.