US doomsayer Jordan Wirsz's predicted 60% drop in Aussie house prices 'silly': Analysts

Claims by self-promotional US real estate analyst Jordan Wirsz that Australian house prices could fall by up to 60% over the next five years have been torn to shreds by Australian property market analysts.

Wirsz is bearish about global property but particurlarly bearish about Australian real estate because of “artificially low interest rates, high loan-to-value lending practices, overinflated property prices, unrealistic vendor expectations and Australia's large number of second mortgages”.

"There have been corrections but they don’t hold up to the scale of what is coming,” he says.

Fairfax columnist and property market analyst Mark Armstrong says if what Wirsz is predicting is true in a few years’ time  a $1 million house in Sydney, currently let for about $700 per week, will be worth just $400,000.

“While this happens the Reserve Bank of Australia that currently has the cash rate set at 4.25%, a full 4% above the US, will sit back and watch.

“Further, the government with a public debt of about 20% of GDP compared to the US's almost 95% will watch as the single largest asset of most Australians goes down the gurgler. I think not,” says Armstrong.

Armstrong also points to the current conservative lending practices and robust supervision demanded by the IMF and Australian banks low exposure to non-conforming high-risk loans and the fact that the vast majority of loans are full recourse (as opposed to many in the US, where borrowers can just drop their keys in the letter box) as further evidence that such dramatic falls are entirely unlikely.

“Very broad-based comments like these fail to recognise the complex nature and differences between property markets, demographics and economic factors from country to country.

Hotspotting.com.au director Terry Ryder describes Wirsz alongside another US property bear Harry Dent as one of a number of US punters “seeking profile at the expense of Australian home owners”.

“Jordan who?, I hear you ask,” writes Ryder.

“Dent forecast a 50% drop. Wirsz (allegedly a self-made millionaire) went further, predicting a 60% decline. But he went further still – land values would fall 80% to 90%, Ryder says.

“Just pause a moment and contemplate what he is suggesting. A fall of 90% means a decline to almost no value at all. If a block of city suburban land is worth $200,000, a decline of 90% means it would be worth just $20,000. Given that planning charges per allotment are generally much higher than $20,000, this is just silly stuff.

“That didn’t prevent headlines in Australia such as ‘Bloodbath to hit real estate’,” says Ryder.

He has also been caught up in a stoush with well-known TV commentator and author Margaret Lomas on Sky Business.

Property Observer has not yet seen the debate, but believes it was heated.

Lomas tells Property Observer she kept challenging Wirsz on the facts and where he sources his information from and his only response was, “on the internet…”.

Writing following the debate, Wirsz writes “Well, that was fun debating on live national television with a clueless investor promoting her own agenda (funny cause that's what she accused me of!) time will tell who is right... :)”

“Pity he didn’t research me,” says Lomas. “He would have found out that far from being a ‘clueless investor’ as he puts it, I have been in this business longer than he has been alive, own 38 of my own properties, run a national company and have a long list of qualifications and credentials, many economics-based.”

Wirsz claims to have achieved over $500 million in sales and advised Fortune 500 CEOs about real estate investments.

He describes his life so far on his Facebook page as “a storybook tale of rags to riches, overcoming the ever-so-common challenging childhood, and working hard to attain his massive successes”.

Other descriptions appear plucked straight from Charles Dickens.

He describes himself on PRWeb (a press release distribution website) as “having come from a broken home and spending much of his childhood alone, even calling 4-1-1- up to 25 times a day just to hear another human's voice, has decided to take his challenges and turn them into a passion for feeding the world his secrets to his extraordinary success.”