US author and markets guru Harry Dent predicts tough times for Aussie property

US investment manager, economic commentator and author Harry S Dent is touring Australia this month to speak at seminars in Melbourne, Brisbane and Sydney, to address professional investors, retail investors and financial advisors about upcoming economic trends and what they mean for Australia.

During The Beginning of the End Tour – How to Profit from the Great Bubble Burst Happening Now, the Puerto Rico resident and New York times Bestseller List author will share insights based on research by his company, HS Dent Publishing.

The son of Republican political strategist and former special counsel to President Nixon, Harry S Dent Sr., and a regular on Fox Business, Mr Dent Jr. has written bestselling books that include titles such as The Great Boom Ahead, Zero Hour and Spending Waves.

The Harvard Business School graduate is also the chief investment officer of Australian-based investment fund, Dent Sector Fund.

Australian Property Investor Magazine spoke to Mr Dent ahead of his Australian tour, to ask his thoughts on the Australian property sector.

What does the road ahead look like for Australian property investors?

Unfortunately, there will be some tough times for Australia property investors over the short term.

Around the world we are seeing most asset classes depreciate as global economic conditions deteriorate with property values in particular declining in most of the major Western economies.

Property prices have already started to fall in most of Australia’s major population centres and I do expect these declines will continue as interest rates continue to climb and households feel the pinch from inflation.

The best measure is to ask, what was my house worth in 2012? That's your best downside estimate. 

You predict a ‘bubble of a lifetime’ in the global economy’s future. What does that look like for the Australian property sector?

We are nearing the end of one of the most extended global economic booms in modern history, which has seen the value of almost all asset classes, including property and shares, reach record levels.

Harry S Dent, US investment manager, commentator and author

Every boom has to end though and we are seeing that starting now with challenging economic conditions starting to affect asset prices around the world.

Those countries that have mature economies, high rates of urbanisation and older populations – Europe, US, and China for example – will be impacted the most.

While Australian asset prices will be affected, falls in property prices and shares won’t be as significant due to the strength of its economy and its demographic make-up, which includes enough of the population approaching their peak spending years.

Importantly, when global economic conditions do start to improve, Australian investors will be extremely well-placed due to their proximity to south east Asia and India, which will lead the next great global economic boom, and Australia is one of the few developed countries that has continuing rising demographic trends due to high immigration.

In the near term, can investors expect a dramatic drop in housing prices?

Property prices have already started to fall in most of Australia’s major population centres and I expect they will continue to fall over the next couple of years as interest rates rise and households respond to inflation.

While the drop in house prices will be significant by Australian standards, it won’t be as dramatic as in regions such as Europe and North America.

There are a few reasons for this. Australia’s demographic make-up means there are still enough people approaching their peak spending years of 45 to 50 years of age that will help support the economy, as well the fact that there are record levels of employment.

Australia’s banking and regulatory system is very strong and, if necessary, will work closely with governments to ensure that housing prices do not crash to the extent that they might in other countries. 

If you had one piece of advice to give Australian first-home buyers in 2022, what would it be?

If I was a first home buyer in Australia, I would consider holding off entering the property market for 18 to 24 months. Dwelling prices will decline and there will be some bargains for people looking to buy their first home. As always though, the biggest declines in property prices will be at higher price points, although there will still be savings at the entry level too.

There is a belief in Australia that young people can expect to never afford their own home. Is there hope for them?

Property prices in Australia’s major population centres have been so high for so long that, even with a market correction, entering the property market will still be challenging for some first-home buyers, especially as access to credit is also likely to tighten as the economy deteriorates.

If there is any silver lining to property prices falling though, it is that some younger buyers may be able to enter the market at lower price points than Australia has experienced for some time. Australia’s bust will be strong due to such a strong bubble. But it’s rebound will be stronger than in the US and Europe due to stronger demographic trends ahead for Australia.

If you were buying property in Australia, where (and when) would you do so?

I’d actually stay away from investing in property and shares for the next couple of years and park my money in an asset class that will be less impacted by global economic conditions, like longer-term US Treasury and Australian Government bonds.

In a couple of years’ time some very attractive investment opportunities are likely to emerge and the good news for Australian investors is that they will be very well placed to capitalise on these if they are able to protect their assets in the meantime.