Friday, July 5, 2013

USA Real Estate and Australia

The USA real estate market is currently going through the exact opposite of what's happening in Australia. Although both countries are experiencing tighter lending requirements for property, the USA property market continues to stare at declines in values as the financial climate of the country remains unstable.

Some say this is the adjustment that was needed to halt the US real estate market bubble that was hurtling out of control prior to the GFC. More and more Americans were being forced out of the US property market as prices escalated beyond the affordability of many. The sub-prime mortgage situation was destined for disaster as increasing numbers of home-owners were unable to meet their monthly repayments. As the supply/demand equation goes, the balance was tipped in the favour of an oversupply of US property and US real estate values rapidly began to go south.

There are many indicators coming out showing that the USA real estate market may have some way to go yet before it begins its recovery. Unemployment continues to remain at precarious levels with no real signs of recovery. If people can't get work, they aren't in a position to invest in US property. A situation is occurring where the supply of housing outweighs the number of property buyers, driving values of US real estate down. This is evident by the statistics on new house sales, which dropped in May 2010 to the lowest levels ever recorded (since tracking began in 1963). Just 300,000 new house sales were recorded for the month against the 'normal' level of about 800.000.

Despite a number of doomsayers claiming the end of the US financial system is nigh, along with the recovery of the USA real estate market, the country's population of 280 million people will continue to grow and go about its business, which includes needing a roof over its head. Now is a once in a lifetime opportunity for Australian investors to create wealth in the medium to long term. By looking at the US real estate market with a clear and cautious head, there is a huge amount of opportunity available to market ready property investors, including Australian investors. USA real estate offers something that Australians are not used to - positive cash flow and low entry prices.

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