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 Funny: Keen's long march to lower house prices

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Funny: Keen's long march to lower house prices Vide
PostSubject: Funny: Keen's long march to lower house prices   Funny: Keen's long march to lower house prices Icon_minitimeFri Apr 16, 2010 4:02 am

Debt doom prophet Steve Keen will embark on his 225-kilometre trek to Mount Kosciuszko today, showing the debate over Australian house prices really does have legs.

The trip, which he will walk and jog in parts over the course of nine days with a group of fellow travellers, comes as Keen honours his part of the bet he famously lost about the direction of Australian house prices.

Dr Keen, however, intends to have the last laugh.

Funny: Keen's long march to lower house prices St_keen-420x0

As one of the conditions of the wager made in September 2008 with Macquarie interest rate strategist Rory Robertson, Keen will be wearing a T-shirt silkscreened with the words, ''I was hopelessly wrong on house prices – ask me how”.

Dr Keen has superimposed those words over a chart comparing falling houses prices in Japan and the US over the past 23 years with Australia’s which remain elevated. Both Japan and the US have seen their real estate bubbles pop in that period.

“To me the irony is I’m marching uphill and house prices will start marching down because as you’ve seen in the lending figures the trend seems to be very strong,” he says.

The professor of economics and finance at the University of Western Sydney warns that the second part of the bet made with Robertson - that home prices will sink by 40 per cent within 15 years - remains live.

Winner's view

The bet's winner Mr Robertson dismissed Dr Keen's understanding of the fundamental economics behind Australian house prices, saying Dr Keen is "often wrong, yet infrequently unsure".

Mr Robertson also disputed that there is a second part to bet, reiterating that he was only humouring Dr Keen when he said he would make the same trek if Australian house prices fall by 40 per cent from any peak in Mr Robertson's lifetime.

Signs of the strength of the housing market remain mixed. While prices rose last year by more than 10 per cent in capital cities - and are some tipping similar gains this year - homes loans slumped for the fifth consecutive month in February, dropping 1.8 per cent.

“Mortgage debt is now falling. And with falling mortgage debt ultimately you’ll get falling house prices,” Dr Keen said.

The continued decline in home loans has prompted some analysts to speculate Australian house prices could level off or even fall later this year.

Fellow marchers

Joining Dr Keen on the trip, which leaves from Parliament House in Canberra, are about 12 people who have signed up to join him for the entire journey, along with a group of equal size that will rotate on a daily basis.

Dr Keen says the group joining him includes a number of engineers, doctors and “lots of people who have been quiet critics of the system”.

He plans to jog half of each day's stretch and walk the rest.

Dr Keen is unwilling to give a time frame for his prediction of a fall in Australia’s home prices, but says, based on falling home loans, some evidence of local price drops should appear by September.

The only factor that could mitigate the falls is a surge in overseas investment from China, which itself has become a contentious issue.

But Dr Keen doesn’t believe it will be enough to stave off price falls. He notes even Chinese investors are likely to get nervous about the shape of Australia’s housing price market, as he was told when interviewed by a local Chinese-language newspaper.

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