The ongoing battle between the property bulls and bears

The media and blogosphere are full of personalities with firm opinions as to what lies ahead for our property markets. While the cycle seems to be moving on there are still some waiting for the bubble to burst.

In his blog  recently economist Chris Joye took the opportunity to point out the errors and inconsistencies in the arguments of Australia’s most publicized doomsayer Prof. Steven Keen.

This is such a good blog with some interesting charts I’ve taken the liberty of reproducing it here. Joye said…

Earlier this week infamous housing commentator Steve Keen acknowledged that he “guessed wrong” on Australian house prices following the ABS’s confirmation that they were rising again. (The ABS estimates they were flat in Q1 and appreciating in Q2).

Keen had repeatedly forecast on the record that the rate of Australian house prices falls, which started in 2011, would begin ‘accelerating’. He also confidently stated that he would “let the data do the talking”. Of course, as I anticipated here, nothing remotely like Keen’s prediction has materialised. (Nor, disappointingly, has he allowed the house price data to do the talking.)

Keen attributed his latest error to the claim that Australian “mortgage debt has accelerated.” His exact words on Twitter. Now, this has only one meaning: credit growth has increased. There is no other way you can interpret the statement. Unfortunately for Keen, this was also wrong: the rate at which housing credit has been expanding has not been accelerating at all. The chart below shows the official monthly housing credit growth data from the RBA. Observe how the bars trend downwards since 2009. (As we’ve long argued, housing credit growth has been tracking household income growth since about 2006.)
The ongoing battle between the property bulls and bears








Recognising this new mistake, which was forcefully pointed out by economist and former Gillard advisor, Stephen Koukoulas, amongst several others, Keen then proceeded to explain that, no, he was not actually talking about credit growth per se. He was talking about the “change in the change” in housing credit. Actually, he was not even talking about the change in the change. In this post Keen explains he was referring to, “the change in the change in mortgage debt over a year, divided by GDP at the midpoint of that year.” 

Keen says he wants to be judged against the ABS house price index. He’s made three high profile forecasts. One was for a 40% decline in Aussie house prices in 2008, which he seems to have subsequently modified to a 20% correction. And then he confidently informed us the rate at which prices were falling in 2011 and 2012 would ‘accelerate’. You can see the first two forecasts highlighted by the stars in the chart below.

The ongoing battle between the property bulls and bears
The bottom line is that Aussie house prices are currently 9% higher than when he originally made his prediction. The losses have not accelerated. They have, in fact, stopped, for the time being, with prices rising again.

Finally, I note that Keen is now starting to refer to house price growth after deducting consumer price inflation, or ‘real’ as opposed to actual or ‘nominal’ house prices. Yet he has previously clarified that his forecasts–and his bet with Rory Robertson–related to nominal (ie, actual) house prices, not house price growth after inflation. I sense some goal-post shifting.

Source: Chris Joye’s blog



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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 one of Australia's 50 most influential Thought Leaders. His opinions are regularly featured in the media. Visit

'The ongoing battle between the property bulls and bears' have 3 comments


    August 23, 2012 castor

    i sense some data misrepresentation… and keens prediction was 40% drop over 10 years



    August 22, 2012 Ian

    Don’t you just love the doomsayers, inventing anything to try to justify their wildly wrong guesses.
    Good on you Michael for disclosing these well-kept secrets – the facts!
    I’d love to see the media doing an expose on the property and economic media. When pure truth came out, the GFC would almost cease to exist in Australia, because we’d get on with life and that would be the only further stimulus we’d need.


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