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“Doomsday” economist predicts national home prices to fall by up to 10% in 2018

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Economist Steve Keen predicts that the nation’s housing prices will fall by as much as 10% in 2018.

Keen is best known for a famous bet, in which he wagered that housing prices in Australia would suffer a catastrophic crash of 40%, after the Global Financial Crisis.

They didn’t, and Keen ended up having to walk from Canberra to Mount Kosciusko for losing the bet.

Now Keen is back with a fresh doomsday prediction, telling ABC News that there will be a 5-10% national fall in 2018, with the majority of losses taking place in the speculative Sydney and Melbourne markets.

Keen believes that growing household debt, rather than supply-demand issues, are the driving force behind rising prices.

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A chunk of that debt consists of interest-only mortgages, which Keen expects to contribute to falls in home prices.

But some analysts remain more upbeat.

Managing Director Louis Christopher, of property analysis firm SQM, told ABC News that he predicts a 4-8% rise in national property prices this year.

“The market will pick up a bit in the second half of 2018 and that will be on the back of the banks being able to expand their lending books once again,” he said.

Although Christopher believes that Sydney and Melbourne are overvalued, he doesn’t think this will necessarily lead to an immediate correction.

He also noted the recent success of Hobart, and the boost to struggling Perth and Darwin.

Source: ABC News