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An economic tsunami to hit the world says expert

American economic forecaster Harry Dent says Australia’s with property is about to crash as an “economic tsunami” looks set to hit world markets.

Mr Dent, who is in Australia to promote his latest doomsday book, predicts the world will experience a second, deeper downturn, which will arrive between the beginning and the middle of next year.

Starting in Europe, the downturn will spread to the US, China and eventually Australia, he said.

“Australia is probably the best place in the world to survive this, but we do think Australia will not escape as well as it did from the last crisis (in 2008),” Mr Dent said.

Harry Dent has set his sights on the Australian property industry once again, predicting that a crash is set to occur within the next 12 months that will bring housing prices back to realistic levels.

Housing market doomsayer Harry Dent recently told the Herald Sun that the Australian property market is looking much the same way the Japanese market did before its crash in the 1980s, when values fell by as much as 60%.

“That’s what Australia could be looking at. I think prices will go back down to where they were in mid-2000, to where young families can start affording a house again – so that could prove a good thing,” he said.

Of course these predictions have been made before. Local economist Steve Keen has famously predicted that property prices could fall as much as 40% over the next 10-15 years. (That prediction was made in 2007 when he sold his house in Sydney, just before property prices boomed for 2 years in a row).

“Australia is probably the best place in the world to survive this, but we do think Australia will not escape as well as it did from the last crisis (in 2008),” he said in an interview reported by news.com.au

“People in places like Sydney or Tokyo or Miami say, ‘Hey, real estate can never go down here, we’re a great place, everyone wants to move here, there’s not much land for development’, and what I say is that is exactly the kind of place that bubbles.”

Dent has commented that Australia has the most expensive housing in the world when compared to household income levels. Driving all these changes is simple demographics, specifically the peak of the baby boomers’ spending, Mr Dent said.

The drop-off in spending will affect everyone, even mighty China, Mr Dent said. (I’m not sure how this works with China going through it’s industrial revolution)

But he also says the global economy is set to experience a crash due to sovereign debt, and that other assets will suffer as well.

“Gold and silver are going to crash, they’re a bubble,” he said. “Once we write down all these crazy debts, we are going to destroy a lot of dollars that were created in the boom and that makes the (US) dollar a lot more valuable.”

What do I think?

I’ve been following Harry Dent’s writings for close to 20 years and was initially very impressed by his concept that you can predict economic changes ahead by studying demographics.

He seems a very intelligent man who backs his predictions with lots of data, but like most economists his predictions have been wrong more than they have been right.

He’s predicted 10 of the last 2 recessions. If you keep predictions slowdowns, recessions or depressions, eventually you will be right. But you may also miss many opportunities.

I’ve recently written my thoughts on this in a market update and I place more faith in the Chris Joye, director of Riskmark, who recently explained that our economy and our housing markets are stronger than many people think. Click here to read this article.



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About

Michael is a director of Metropole Property Strategists who help their clients grow, protect and pass on their wealth through independent, unbiased property advice and advocacy. He's once again been voted Australia's leading property investment adviser and his opinions are regularly featured in the media. Visit Metropole.com.au


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