Hi All,
An interesting topic indeed. Without getting into the "us Vs USA" debate, there are some fundamental structural differences between the two countries that will ensure some ongoing points of difference in how the two respective real estate markets function. Consider that in the USA there are non recourse loans – just walk away without consequence if you have negative equity. No such luck here, meaning that fire sales such as the type they have over there rarely occur here. Then there are the 80 million baby boomers that are weighing on the US economy as they retire. Here we have neatly sidestepped the issue through record migration in recent years and acceptance of older workers. My father is 71 and still works full time. They have a bubble in US health care that is slowly but surely bursting and they have had chronic housing oversupply to our chronic housing undersupply. Unsold inventory overhang of new homes is regularly quoted at 11 – 12 months worth of supply over the last couple of years (ie there is enough supply to satisfy demand for 11 months if no new homes are built). Finally, there is the disincentive to reduce debt over there because home mortgages are tax deductible, whereas here there is a clear incentive to reduce non- deductible debt. Lastly, in Australia, most people are not interested in living away from the seaboard for obvious reasons, which really keeps the squeeze on coastal property where 90% of our local population reside. Oh, and lets not forget that we have the attraction of negative gearing with one in seven taxpayers supposedly enjoying the benefits of a negatively geared investment property.

The other major point is difference is in the structures of the respective economies. Here there is a resources boom which places us somewhere in the same position as places like Saudi Arabia were back in the 1950s and 60s as they began to discover that they had something that the rest of the world wanted. For any doubters out there, China is building the equivalent of a Brisbane every month, and India/China combined have something in the order of 650 million aspiring middle class citizens. It will take a couple of decades for that wave of people to achieve their goals, but it will continue to happen. When you think about it this represents the combined value in population terms of Europe and the USA combined. Then we are talking domestic unemployment of under 5% compared to double that in the US. It really is a case of apples versus oranges talking about the two economies and hence the two real estate markets.

On the flipside however (and to keep the argument balanced) sentiment is the most powerful driver in any market, and one would be incredibly naive to think it could not happen. We could still see major defaults by sovereign governments that could damage sentiment sufficiently to cause a crash. The idea of the US defaulting on it's liabilities(a small but very real prospect) is one such example(any doubters please google debt clock in New York!). Locally, the banks are starting to talk about the domestic housing market in softer terms for the first time in many moons. We are seeing a rising rate environment globally as the world economy turns the corner in the post GFC era, meaning that higher rates are here to stay so get used to them. (China has food price inflation of +10%) 

However, on balance, with so many factors underpinning the domestic market it is hard to see it crashing per se, but rather, we may see long term underperformance if household disposable income falters or rates get too hefty. I think the exception to this premise is the prospect of a major catalyst such as war or major sovereign default that sufficiently damages sentiment so as to cause a loss of confidence. The old saying "cash is king" and "always keep some powder dry" comes to mind.