Keen says for house prices to rise, “the flow of new mortgages has to exceed the flow of properties onto the market, and that requires mortgage debt to not merely rise, but do so at an accelerating pace”.
And it has sustain this accelerated growth for some time – something that Keen says will be difficult with the debt burden of Australian households already so “immense”.
“Australia, with a mortgage debt to income ratio that has barely budged from its 87% of GDP peak, has precious little room to maintain accelerating mortgage debt.
“America, on the other hand, has some headroom because of the fall in mortgage debt from 86% to 68% of GDP,” he says.
Keen’s column on Business Spectator drew the usual volley of disparaging remarks about his forecasts.
But they’re unlikely to bother the thick-skinned Keen, whose international reputation is growing at a faster rate than Australians’ propensity to take on new mortgages.
Keen recently gave addresses to the US congress on the fiscal cliff and in November took part in an economics debate at Cambridge University.
This year he has also appeared on the BBC’s Question Time to discuss the impact of debt on economies along with addresses at conferences around the world.
He is currently mulling up a more permanent move overseas, telling Property Observer at the end October of his frustration at a decision by the University of Western Sydney to cut economics entirely from its curriculum.
“So we’ll soon have a university with no economics courses at all, which I think would be a very dubious first in Australia – and maybe the world,” he said.
This article first appeared on Property Observer.
