Louis Christopher rejects Steve Keen's forecast of 20% house price drop

University of Western Sydney associate professor of economics Steve Keen believes property prices may fall, peak to trough, by 20% through 2013, warning the most recent peak in prices may be the last one for some time.

But where house prices go over the next year depends mostly on employment growth and interest rates, says SQM managing director Louis Christopher, who warns predictions without significant modelling behind them cannot necessarily be relied upon.

"We need to see a lot more detailed analysis about these sorts of predictions," he says.

In an interview with Business Spectator, Keen says prices could fall by 20% through 2013 from their most recent peak.

"I'd be quite happy now to say the last price peak was the overall peak and so I'd expect something of the order of a 20% fall between now and say the end of 2013," he says.

"I think you could tie me down to saying I'd expect something of the order of a 20% fall from peak to trough, whatever the peak might be, whatever the trough's going to be."

Keen has previously made headlines for predicting that prices would fall by as much as 40% over a decade or 15-year period. Now, he tips that not only will house prices fall, but that as China's growth slows down, economic conditions in Australia will soften.

As a consequence, the country could see rising levels of unemployment.

"You know, it's murky data, but the trend appears to be for rising unemployment now and of course the falling house prices at the same time," he said.

"So I think the 'everything is wonderful here' argument partially is based on the important role of China, but it's also based on the same delusion that made Iceland think it was hot shit before it fell apart."

However, Christopher warns that while prices have fallen in some cities, there are too many variables to necessarily come up with a "nice round number".

"We need to look at questions like, what are his assumptions for interest rates over that time? Is he factoring in economic Armageddon or not? What are his assumptions for government stimulus?"

"Our forecasts are that if rates remain unchanged we will see, in some cities, a 15% decline from peak to trough, but we simply don't know the future direction for interest rates."

Christopher says the real question is employment growth and how global economic turmoil will affect that. But overall, he says, it's hard to come up with "big round numbers".

"We understand fundamentally there are plenty of problems with global systems of debt, I agree with that. But there needs to be a lot of detailed analysis around these types of predictions."