Macquarie’s Robertson Wins Mountain Bet on Australian Houses

By Jacob Greber

Nov. 2 (Bloomberg) -- An Australian academic who predicted a collapse in house prices concedes he lost a bet with Macquarie Group Ltd. economist Rory Robertson that commits the loser to walk from Canberra to the top of the nation’s highest mountain.

Steve Keen, 56, plans to start in April the 230-kilometer (143-mile) hike from the Australian capital to Mount Kosciuszko, a 2,228-meter peak that is snowcapped for much of the year, the University of Western Sydney associate professor said in a telephone interview with Bloomberg News today.

The concession follows a report published earlier today showing Australia’s house prices jumped 6.2 percent in the 12 months through Sept. 30, shattering Keen’s forecast a year ago that the housing market would collapse by 40 percent. Robertson, 43, challenged Keen to hike Mount Kosciuszko if values fell by less than 20 percent.

“Keen could scarcely have been more wrong,” Macquarie’s Robertson said today in Sydney. “I wish Dr. Keen well on his long walk.”

The Sydney academic will do the walk wearing a tee-shirt saying: “I was hopelessly wrong on home prices! Ask me how.”

Keen said his prediction was confounded by the government’s decision to more than triple the size of grants to first-time buyers of new dwellings to A$21,000 ($19,000) in October 2008. The government also doubled payments to those buying existing homes for the first time to A$14,000.

Government Grants

“I didn’t know the government was going to be stupid enough to bring in the first home buyer’s boost,” Keen said. “It’s a classic way of enticing people into debt when they shouldn’t be.”

Some 171,347 people have used the grants to enter the nation’s home market for the first time, Housing Minister Tanya Plibersek said last month, helping stoke property prices at a time when values plunged in countries such as the U.S. and U.K.

“We’ve seen the housing industry and the housing market holding up under what would have been very difficult circumstances,” Plibersek said Oct. 31. “We’ve seen people losing significant amounts on the value of their home in many other countries.”

Keen said the grants, which will be reduced to their original level of A$7,000 on Jan. 1, mean the government “is now beholden to raising house prices, and the central bank is going on the war-path against them” by raising interest rates.

Young buyers “are stuck in the middle,” Keen said. “It’s pretty sick. If Rory’s starting to crow about that, then good luck to him.”

Central bank Governor Glenn Stevens will raise the benchmark lending rate by a quarter percentage point to 3.5 percent tomorrow, according to 18 of 22 economists surveyed by Bloomberg late last week. The rest expect a half-point increase.

Stevens last month became the first Group of 20 policy maker to raise borrowing costs since the height of the global financial crisis. He slashed the overnight cash rate target by a record 4.25 percentage points between September 2008 and April.

Robertson said Nov. 28 last year that he expected to “record an easy win within two years” amid a housing shortage in Australia, which saw a surge in migration in 2008.

To contact the reporter for this story: Jacob Greber in Sydney at jgreber@bloomberg.net