Australia’s property prices are likely to keep rising this year before slowly losing momentum and declining — but the slowdown won’t translate into a housing crash or property bubble burst.
That’s the consensus among the 27 academics, economists, consultants, and money managers polled for the BusinessDayScope economic survey.
The panel’s average forecasts include a modest increase of 4.9% in the Sydney property market and 4.3% in the Melbourne property market. Growth was 15.5% in Sydney and 13.7% in Melbourne last year, according to CoreLogic.
Interest rates will stay low enough to support buyers’ demand, the panelists predicted. “We are expecting further growth in house prices this year ... but at a modest pace,” said Besa Deda, chief economist at the Bank of Melbourne.
There is one exception to the panel’s consensus, however: Steve Keen, an economist and professor now based in Kingston University in London, believes the property bubble will burst.
Though Keen is a noted academic and published author, he has been wrong before. In 2010, he lost a wager that house prices would plunge 40% in the wake of the global financial crisis. Determined to honour his word, Keen undertook a well-publicised 224-km trek from Canberra to Mount Kosciuszko.
Losing such a huge bet hasn’t tempered his view on the dangers of Australia’s fixation on high-growth property markets.
“Mortgage debt in Australia has gone from 80 per cent of GDP at the time of the GFC to 95 per cent today — one of the three highest levels in the OECD,” he told The Sydney Morning Herald.
He believes house price growth in the nation’s property markets is primarily being driven by mortgage credit growth.
“This gambit failed in every other country that has tried it,” he said.
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