Experts are warning house prices in some parts of Australia could fall by up to 50 per cent, with a massive economic downturn to hit most of the world.
Financial commentator and US author Harry Dent predicts the coronavirus pandemic will trigger a debt bubble to burst.
The crash will have significant effects on the property market in Australia.
“It’s the crash of a lifetime,” Dent said in a YouTube interview with Digital Finance Analytics Principal, Martin North.
“And conversely, if you play it right, it’s the investment or the sale of financial assets of a lifetime.”
Dent says people with investments will lose when the bubble bursts.
There is a silver lining to house prices falling, experts say
“After a bubble like this crashes, you will never see a bubble come right back, people will be sobered,” he said.
“This is really a good time to get out of long-term real estate that you don’t want to live in for the rest of your life.
“You can go wrong buying real estate.
“We live in unique times and those unique times are over.”
House prices to tumble
Dent added Australian banks, which are significantly exposed to domestic real estate, are going to hurt when real estate prices go down even 20 per cent.
“And I think it’s going to be 30 to 50 (per cent),” he said.
In Sydney and Melbourne, the country’s biggest property markets, prices could fall by up to 50 per cent, Dent said.
Brisbane’s market will fall by up to 40 per cent, and Adelaide could fall by 30 per cent.
“That is going to be a shock,” Dent said.
“That’ll probably be the biggest shock Australia’s had.”
Despite the burst, Dent said the long term impacts could be positive for the country.
“It’s going to be good for your country and extra good for your children and grandchildren that real estate comes down to maybe just four or five times income – instead of eight, 10, 11, 12 – when really three is more normal,” he said.
Martin North agreed, saying from a strategic point of view, bringing real estate back to a normal level will be beneficial.
“Currently, affordability is just stupid and it’s killing the rest of the economy,” North said.
“So, it’s a fall I think we have to have.
“Unfortunately, it’s going to hurt people on the way down.”