Saturday, 10 March 2018

US economist’s crash warnings ignore ‘Aussie ingenuity’: John McGrath

US economist’s crash warnings ignore ‘Aussie ingenuity’: John McGrath

A CONTROVERSIAL US economist warning of a housing crash has come under fire from real estate mogul John McGrath for failing to account for the unique aspects of Australian real estate.
The Daily TelegraphMARCH 6, 20186:24PM

US economist Harry Dent’s predictions of a housing bubble have been criticised. Source:News Limited

CONTROVERSIAL US economist Harry Dent has come under fire from embattled real estate mogul John McGrath for his “doomsday” predictions for the housing market.

The McGrath Estate Agents founder slammed Dent’s forecasts in a column published in Switzer Daily for echoing Australian housing bubble predictions he made in 2014 and 2011, despite them being proved wrong.

McGrath also criticised Dent for failing to account for the “ingenuity of Australians, not to mention our long-embedded culture”.

In a recent interview with Channel 9, Dent admitted that his predictions in previous years had been off the mark but maintained Australian property was overvalued and in the midst of a bubble that would inevitably burst.

Dent also said high migrations levels had insulated the Australian economy from collapse but real estate remained its biggest weakness.

McGrath Ltd founder John McGrath said Dent lacked an understanding of the local housing market.Source:Supplied

“You’ll weather (the next GFC) better than most countries but I think real estate is your vulnerability,” Dent said in the TV interview, arguing rapid price increases put the market at risk.

“You are way more overvalued now than you were back (in 2011 and 2014), more than twice what the US is and most European countries,” Dent added.

McGrath, a real estate veteran of 35 years, said Dent’s views were typical of overseas commentators who did not understand the local housing market.

“I can understand why Dent would look at Sydney, in particular, and think it’s overvalued. That’s how it might look on paper to an analyst who doesn’t understand how things work here,” McGrath wrote.

Andrew Wilson talks Aussie auctions

“He fails to take into account all the unique factors that have kept our property prices growing while also protecting our market from collapse.”

Strong population growth was not the only reason the market weathered the GFC relatively unscathed, according to McGrath.

High levels of prudential oversight in the local banking system and the high concentration of Australia’s total population living in Sydney and Melbourne ensured steady demand for housing, despite high prices, he said.

Dent’s forecasts also failed to account for issues such as Sydney’s geography, which has encouraged a housing undersupply, McGrath said.Source:News Corp Australia

“When you’re having a growing population that is very concentrated around a small group of cities — and two in particular, you’re going to have much greater stability in home values no matter how high prices go,” he said.

“Additionally, in major growing cities like Sydney where urban sprawl has gone about as far as it can, we now have a chronic undersupply of new housing that is also serving as a strong foundation for ongoing growth.

“On top of this, we have low unemployment, a strong and resilient economy, low interest rates, a tax system that rewards property investment and a growing market of international buyers.”

Dent also failed to account for Australian’s love affair with property and the rise of alternative entry points to the market such as rentvesting, McGrath said.

McGrath has been the subject of controversy himself, with Fairfax Media reporting the real estate mogul had racked up an alleged $16.2 million in gambling debt.

McGrath has since described press coverage of his debts as “ridiculous” and wrote in a letter to the ASX in February that his account with a bookmaker was well within his means.

Originally published asDire US forecasts ignore ‘Aussie ingenuity’

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