Aussie John takes aim at Steve Keen in property punch-up

by Mackenzie McCarty30 Oct 2013

In a candid debate with finance and economics commentator, Professor Stephen Keen, Aussie Home Loans founder, John Symond, argued that Australia’s housing market is, in fact, in a state of healthy growth.

While Keen – whom Symond cheekily nicknamed ‘Mr Bubble’ during Citi’s annual conference in Sydney yesterday – claimed SMSFs and Asian investors are pushing first home buyers out of the Australian housing market and that government policy is missing the point, Symond said this isn’t necessarily so. He also claimed housing prices in Sydney, Australia's most rapidly-growing market, will swell by about 10% to 12% this year, but that this follows a decade of sluggish growth of about 2.5% a year and therefore needs to be taken into ‘context’ by analysts such as Keen.

“Unlike any other cycles I’ve seen, particularly when the Reserve Bank has had a succession of dropping rates, there is always a big surge, but this time, we haven’t seen it,” said Symond.

However, Keen remained adamant that Australia is in the midst of an unsustainable growth period throughout the debate.

“I think we are in a bubble and it could go on for quite some time,” he said, noting that Australia is one of just four countries in the world where house prices are now 2.4 times higher than 1985 levels in real terms.

He argued that accelerating mortgage debt is a key trigger causing unsustainable house price growth.

"This is being supported by non-residents buying so much property. I think we're in a bubble and it will go on for quite some time."

 “We’re never going to get that healthy level of growth we got in the 1950s and ’60s before this level of leverage exploded…Confidence has got bugger-all to do with it.”

Symond did criticise negative gearing, however, saying it was originally intended to encourage new dwellings, but that the outcome has not reflected those intentions.

"If I've got some expensive apartments I can negative gear them and let the taxman pay half of my million-dollar mortgage…I've never seen consumers behave the way they have (conservatively), where we've got the lowest interest rates in history and some areas of real estate coming off the lowest they've been in years," he said.

COMMENTS

  • by Tony 30/10/2013 9:55:01 AM

    At last someone takes on Keen. Keen belongs with Tim Flannery as yet another example of someone the media run to for a headline or comment. How many times in the past decade has Keen said the property market in Australia is going to crash

  • by Inner East Melbourne Broker 30/10/2013 10:03:05 AM

    Why do people continue to publish what Steve Keen has got to say.

    'Asian Buyers' - is this being taken way put of context by the media? There are strict FIRB rules that dictate that only brand new housing stock can generally be purchased by off shore investors - not exactly the bread and butter domain of FHOG buyers. A non resident investor cannot usually purchase an existing home on a block of land in inner Melbourne or Sydney.

    Maybe its the media commentators that are stereotyping somewhat by who appears to be turning up at auctions and OFI's.

  • by not so old broker 30/10/2013 10:23:30 AM

    I'm not keen on Keen. I'd like to know where he got his figure to make the statement (if quoted correctly) "claimed SMSFs and Asian investors are pushing first home buyers out of the Australian housing market". SMSFs claiming only that between 3.5 & 12% of the SMSFs invest inRetail & Commercial properties (respectively). And who actually provided him with the number of 'overseas" buyers to justify his claim. Chicken Little comes to mind.