There was a really interesting article on 60 Minutes tonight covering the sub-prime crisis in America and the possibility of a similar situation taking place here in Australia en masse. If you missed it, here’s the full transcript for the 60 Minutes piece, “House of cards”.
There were some pretty big claims made in the article, primarily by Professor Steve Keen from the University of Western Sydney.
PETER OVERTON: Economist Steve Keen has brought us to Seymour Way, Kellyville, in Sydney’s north-west. In this one street, four houses have already been foreclosed and resold at nearly half-price. Is what we’re seeing happening in America, coming our way?
PROF. STEVE KEEN: It has to because we’ve got ourselves in the same level of household debt as America as. It simply has to squeeze us the same way it has squeezed the Americans at some point, and if we think we’re going to evade it I think we’re living in a fool’s paradise.
PETER OVERTON: What’s your time frame?
PROF. STEVE KEEN: It certainly has to happen within the next two years. That, I would be willing to put, well, my house on.
So according to Professor Steve Keen, sometime between now and 2010 a whole lot of Australians are going to lose their homes. It is happening already, particularly in Sydney, but will it spread across Australia? How big will this mortgage crisis get?
PROF. STEVE KEEN: I’d say our housing prices could be overvalued by 50%. So people won’t be as wealthy as they expected, they won’t be getting the superannuation returns they thought they were going to have …
That’s massive. If prices are overvalued by 50%, does that mean that one day they’ll drop by 50%? Real estate agents and current home owners won’t like that, but renters and first home buyers will. It would at least enable property prices to get back to a point where they match up with wages, but on the other hand, the devastating repurcussions would be huge, and will impact upon every Australian.
Will property prices go backwards by a significant amount, as Steve Keen seems to suggest? What do you think will happen?