Australian house prices could mirror California and fall by almost half.
The next global recession will make the GFC look like a picnic, with property prices to fall by almost half across Australia.
That's the view of American economic forecaster Harry Dent, who says Australia could be dragged into a massive global economic slowdown, brought on by Europe's sovereign debt crisis.
He said the crash in Australian property prices would be similar to what was seen in California, where values have dropped by about 40 per cent since the crisis began.
"[The] whole country is like California," Dent said.
"California has always been more expensive than the rest of the US because it's one of the most attractive place to live, with the most limited supply for development."
In Sydney, the average house price is over nine times the average income, which is clearly unsustainable, Dent argues.
If this continued, it could lead to banks easing their lending standards, as was the case in the US before their property market crashed in 2008.
"I call it 'the frog in water'," he said.
"The water keeps getting warmer at a steady rate and then when it finally boils, the frog never gets out - it's so used to it."
Commonwealth Bank of Australia economist Michael Blythe rejects Dent's view of the housing market.
"Our housing market is a bit different from everybody else's," Blythe said.
"Our housing market went through, in some ways, the ultimate stress-test a few years ago, when the financial crisis was in full swing and it came through with flying colours."
He said the local sector's resilience during the GFC showed that demand for housing was very strong, courtesy of the strong population growth.
Alarm bells were raised last week when fresh data showed the number of first home buyers had fallen by a third, new home sales were at the lowest in a decade and more Australians were failing to meet their mortgage repayments.
National Australia Bank reported on Wednesday that capital city house prices fell by 2.4 per cent in the three months to September, following a 2 per cent decline in the June quarter.
That backed up figures from RP Data and Rismark that showed home prices fell for a seventh consecutive month in July, and by 2.9 per cent in the 12 months to that month.
Meanwhile, investment services firm Moody's reported the rate of delinquencies rose to 1.67 per cent from 1.36 per cent between March and June.
More alarming than the increase in national delinquency rates was the rise in the number of regions where mortgage stress is rising, according to Moody's analyst Arthur Karabatsos.
The number of regions performing very poorly, defined by Moody's as having a delinquency rate over 2.5 per cent, rose to 11 from two.