Great write up! The market here in the United States is getting overheated as well in my opinion in several key areas. Seattle, Portland, LA, San Francisco . Phoenix is getting stupid in some areas and new builds are popping up all over the place to meet demand. Inventory is low in Tucson. Usually 30 days on market or less in key areas here. It will likely pop again within a couple of years. That is why I'm selling my property here now. When it pops I will buy all the toys that people are off loading. Boats, sports cars....etc. :-)
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Thanks Brian. Yeah that's interesting, especially with Phoenix. I wouldn't have picked that as a city that was at risk of a bubble. But I guess as long as interest rates remain low, any large city will be susceptible.
The situation that happens with Phoenix is so many people start getting priced out of the California markets and move over to Phoenix. The new builds from 2004 - 2007 were out of control and the prices were shooting throught the roof. When the market crashed people walked away from their homes and moved in with friends and family. Then there were tons of bank owned properties all vacant. The vacancy rates in Arizona were throught the roof. Now the inventory has been soaked back up and the home builders are going crazy again. Once it crashes I can imagine the same exact thing happening again. Most people have very little to no skin in the game so they just walk away.
Interesting. I never considered a ripple effect from California.
The big difference with the Aussie market is there is no such thing as a non-recourse loan. People can't just walk away like they do in the States. The lender will bankrupt you, and bankruptcy here is a lot more painful and follows you for longer. If there are mass defaults though, I suspect the government will step in and change some laws in the borrowers favour.