A popular U.S. financial doomsayer has claimed that bubbles exist in the property markets in both Sydney and Melbourne, and they will soon burst as a result of economic meltdown in China.
During a promotional tour in Australia for his new book titled The Demographic Cliff, Harry Dent Jr. said that most of Australia’s major cities are suffering from property bubbles. He added that bubbles reach their peak once markets become severely unaffordable, as is currently the case with property in Melbourne and Sydney, where home prices are around ten times average incomes.
He noted Melbourne has the biggest bubble, with property markets in Sydney, Brisbane and Perth also all in parlous condition. Adelaide and other cities, however, are not quite as bad.
The veteran commentator expects the main trigger for the bursting of Australia’s property bubble to be a stock market crash related to the economic meltdown mainland China, to which the commodity-driven Australian economy is inextricably linked.
Dent sees the ‘China bubble’ bursting at some point next year and triggering dramatic chain reactions throughout the rest of the global economy.
According to Dent, Australian real estate can expect to see declines of between 30 and 50 percent, while other industrialised nations will be hit even harder, with prices falling in the U.S. by as much as 65 percent.
Some leading economists, including New York University professor Nouriel Roubini and Noble prize winner Robert Shiller lend credence to Dent’s opinions, however many Australia property experts say his predications are some way off the mark.
Peter Bushby, President of the Real Estate Institute of Australia, pointed out that Dents predictions focus disproportionately on certain hot spots and fail to provide a representative picture of the market as a whole.
Andrew Batt, International Group Editor of PropertyGuru Group, wrote this story. To contact him about this or other stories email andrew@propertyguru.com.sg
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