Monday, January 16, 2012

Busting Bubble?

According to contrarian economist Professor Steve Keen, it was accelerating debt that drove house prices up and it is decelerating debt that is causing the fall.
Keen has argued the significance of private debt in the economy - something which mainstream economists largely ignore. In a recent post on his blog,, Keen reveals the debt to disposable income ratio for Australian households has been rising until recently. Now Australians are saving and paying off debt rather than spending and this has a negative impact on house prices.
The end result, Keen argues, is that house prices will fall 40 per cent over the next 10 or so years, or 5 per cent to 10 per cent for 2012.
But see a contrary story here and story by Matusik.  Chris Joye from Rismark takes the opposite view.

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