For those not familiar with the Australian property market, it is currently the scene of one of the world's largest asset bubbles with median home prices in Sydney more than $550,000. The Economist and other observers say Australian property is close to the most overvalued in the world. The market is starting to deflate with prices falling almost 9 per cent in Melbourne during the past year.
If what The Australian tells us is happening in the nether regions of the mortgage markets - thousands of low doc loans already defaulting amid a court battle to resolve who pays for the lies and falsehoods - is correct that's yet another reason not to buy into the Australian property bubble.
Ask yourself, what's the real risk? Risk is something that humans are rarely good at assessing. Thus, the US is seen as risky by Australian investors because ... well, because it's so foreign. So investors pass up positive cash flow (almost unheard of in the Australian market at these prices) in favour of taking out a massive mortgage to buy into a bubble that is rapidly deflating. Go figure!
We urge readers of Buying Property in the USA to be a bit smarter than that.