An economic forecaster is warning that Aussie Real Estate's gains this year will be wiped out by more than a decade, with the world facing the worst economic shock since the Great Depression of the 1930s.
American economist Harry Dent, who specializes in studying markets and generational consumer spending, told Channel Nine's Today Show that the economic good times would come to a chilling end in 2024.
“Every big boom comes to an end, and this last big boom in 2009 is 100 percent the result of artificial stimulus, mainly from the United States and Europe, so that makes this even more dangerous,” Mr Dent said.
By artificial stimulus, Mr Dent means that world economies have been boosted as governments have borrowed heavily or created money to keep asset prices high, resulting in “bubbles” in the stock market and real estate.
For Australia, Mr Dent's main concern was what he said was an over-inflated property market.
“You do have one of the biggest real estate bubbles after China, and that's why I would be most concerned about real estate,” Mr Dent said.
'As an Australian I would look at my real estate and say, 'look, if I go back to 2012, what was my house or office building worth?'
“That's probably the best sign of how much you can lose, and I think it will be more than most people think.”
Mr Dent also expects the Australian stock market to halve in value this year, meaning the benchmark S&P/ASX 200 Index will rise from around 7,600 where the market is currently trading to around 3,500.
American economic forecaster Harry Dent (photo right) has gloomy predictions for the coming year
But as dire as this may seem, Mr. Dent predicts it will be much worse in America.
“We've now had two property bubbles and two in shares,” he told Today presenters Nick Coatsworth and Mia Glover.
'Both peaks at the same time.
“No one has seen such good long-term markets in real estate and equities.”
He predicted that the main US stock market in New York could lose 60 percent in value, and that the technology-oriented Nasdaq could collapse by 90 percent.
Dent said the US has inflated its bubble economy since 1995.
“The last bubble era was the 1900s, peaking at the 1929 peak and an 89 percent stock market crash,” he said, referring to the infamous Wall Crash that ushered in the Great Depression, an era of economic devastation that lasted nearly a decade.
The bursting of current economic bubbles should not be so serious because world economies were more modern and had more backstops, Mr Dent said.
However, there was good news on the horizon, especially for Australia.
Mr Dent said Australia's property bubble market is second only to China's, and he predicts it will burst in 2024.
“All you have to do is protect yourself for the year ahead,” Mr Dent said, predicting a new boom would emerge around the Asia-Pacific region in the second half of 2025.
“Australia will come back from this much better because you're on the Pacific Rim and you have much better demographic trends, which is my specialty, because of your not only high quantity but high quality immigration from Asia.”
Although Dent told the Today Show that he had been optimistic about the U.S. stock market for years, he predicted the big market crash would occur at least in 2022, when he thought it would happen.
His timing may be off, but on the plus side he has rightly mentioned the Japanese economic collapse of 1989, the dot-com bust of 2000 when tech stocks plummeted and that Donald Trump would ride a populist wave into the White House in 2016.
Other forecasters have also painted a bleak picture of the coming economic year, although not as dramatic as Mr Dent's.
The International Monetary Fund has forecast that Australia's economy will grow at a historically slow pace of 1.2 per cent.
This is well below the average GDP growth of 2 to 3 percent that Australia has experienced since the last major recession in 1990.
Asset manager Vanguard's economic and market outlook for December states that 'higher interest rates are here to stay'.
“Even after policy rates retreat from their cyclical peaks, interest rates will settle at higher levels over the next decade than we have become accustomed to since the 2008 global financial crisis,” the report said.
To tame high inflation in Australia, the Reserve Bank has raised the cash rate 13 times in the past 19 months, taking it to a 12-year high of 4.35 percent.
Vanguard Investments says the return to high interest rates will be “profound” and expects slowing demand to lead to job losses, with unemployment rising from 3.8 percent to 4.75 percent in 2024.
According to real estate analyst SQM Research, house prices may also fall, but not steeply.
SQM Research director Louis Christopher wrote in November's annual Housing Boom and Bust Report that he expects national average city prices to range between -1 and +3 percent by 2024.
However, he predicts that only two capitals will keep the national average in positive territory.
“The cities of Perth and Brisbane are the only cities expected to record price increases, with each market driven by the tailwinds of a recovering Chinese economy, which is expected to see strong demand for basic commodities such as iron ore,” Christopher wrote.
'For much of the rest of Australia, however, the sharp deterioration in housing affordability, driven by continued interest rate increases now (in SQM's view) at restrictive levels, plus an expected slower economy, will mean modest to moderate bring about a correction in the economy. house prices take place in Sydney, Melbourne, Canberra and Hobart.
'Adelaide and Darwin are expected to remain stable or show a small increase/correction.'