Is buying property around the world a good idea right now?

Two years ago this correspondent was sleepless in Detroit due to jetlag and tuned into rather too much American television. It seemed like every second program or commercial was about how to flip real estate for big profits.

Everyone was doing it, just as everyone was buying dot-com stocks in 1999 and could not fail to make a fortune. The problem is that by the time crowd psychology has switched to buy mode then it is usually the moment to be a seller. It is a classic top of the market signal.

That will not trouble the stand holders at this week's Dubai International Property Show. Indeed, they will be keener to sell than ever if the top of the global real estate market is approaching as they will see their business collapse when it does. Two major UK estate agents have recently sold up, one wonders why?

Maxed-out valuations

Many global property markets, such as the UK, Spain and Australia, are looking maxed-out in terms of valuations. When you look at the price tag for a small central London flat and it is approaching a million dollars and is up five hundred per cent since the market last bottomed in 1993, the evidence is so obvious it is hardly necessary to say anymore.

For salaries over the same period have gone up, what 50 or 100 per cent? Clearly property value to income ratios are way, way out of line with their long term average, and remember when markets correct they generally go below the long term average.

What would trigger a serious real estate correction? Well, look at what has happened in America. Prices can simply get bid too high, and be supported by lending to people who should not get mortgages. And when banks pull the plug on these folk for failing to pay their mortgages, the banks themselves can and do go bust.

Over-stretched markets

For the over-mortgaged, heavily indebted and over priced global real estate markets the writing just has to be on the wall.

Anything could be the last straw that breaks this camel's back: a stock market correction, a further rise in interest rates, a tightening of lending criteria or just a lot of negative publicity about what is happening now in the US. They might all happen together.

The trouble is that people have become too over confident about property ownership after bull real estate markets of unparalleled length, 14 years exactly in the case of the UK for example. But the higher you go the harder you fall in markets, and many global real estate markets are an accident waiting to happen.

UK home owners should recall the worst post-war recession in the early 1990s when house repossessions soared and many struggled to pay their mortgages. It might be different this time but would you bet your house on it?