The Financial Times carried a couple of interesting pieces on Australia's economy and its unsustainable property prices recently, one of them repeating the claim from Societe Generale that Australia is a commodity bubble built on a credit bubble built on an even bigger Chinese credit bubble. At first blush, the pieces were contradictory: one talking about how high property prices are a threat to the economy, the other talking about a glut of units on the Gold Coast that developers can't sell.

Dealing with the first piece first, it discusses the impact of the mining boom on Australia's broader economy, which is suffering amid an overvalued currency that makes exports too expensive and a declining manufacturing sector with job cuts in industrial enterprises and across the public service.

"Beyond the resources sector, there are other issues that present threats to the Australian economy. One is high property prices. Another is an overextended consumer. Like their Anglo-Saxon cousins in the northern hemisphere, Australians spent more than they earned over the past two decades (debt to disposable income exceeded 160 per cent) and they are now trying to pay it back.

“When you scratch the surface of the Australian ‘miracle’ you don’t just find a miraculous commodity supercycle; you also find an equally miraculous credit supercycle as well. A credit bubble built on a commodity market built on an even bigger Chinese credit bubble – Australia looks like leveraged leverage, a Collateralised Debt Obligation squared,” says (SocGen's Dylan) Grice.

High prices, of course, look set to change and in some markets they already are. Hence the other piece which lifts the lid on the true state of residential unit market in Queensland torpedoing the property spruikers' claims.

“The mining boom isn’t helping us here,” says Dom Machado, a consultant at the A$650m Salacia Waters development. Although prices have been slashed by 40 per cent, South Korea’s Lotte Engineering & Construction has sold only about 40 flats. It is a similar story at developments along the 40km coastline.

"Property is often cited by analysts and groups such as the OECD as one of the biggest threats to the Australian economy. “In some countries, such as Canada, Belgium, France, Australia, Norway and Sweden, house prices are very high relative to rents and incomes, pointing to ... further corrections in those in which real house prices are already in decline,” the Paris-based body said in its most recent economic outlook.

"Australia has one of the world’s highest ownership rates according to research company RP Data. It also has some of the least affordable property. The Demographia International Housing Survey says five of the world’s most expensive cities are Australian.

"Professor Steven Keen of the University of Western Sydney estimates nominal house prices in Australia have risen by a factor of six since 1986 – eclipsing the US, where house prices rose 3.5 times before the bubble burst in 2006. He forecasts that the market will be undone by its own success.

“Having successfully driven house prices skywards, the cost of entry is now prohibitive so that the flow of new entrants is drying up,” he says.

We wouldn't touch most Australian markets with a barge pole.

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SURE it's a bit old (2011), but this good CNBC article on foreigners piling into the US property market lists the destination countries of these investors. Not surprisingly Canadians as the most numerous. They are followed by UK investors, Australians, French and Germans. We believe that the same survey done now would should a lot more activity from Brazilians and Chinese, particularly in Florida, and some decent buying from Japanese investors too.