PENRITH'S booming property market could be headed for a sharp fall, leaving many out of pocket, a home-seeking economist has warned.
Rodney Forrest, who lives in Penrith, is managing director of Austrian Economics, an investment research house.
"Either [home] prices fall 50 per cent or incomes rise by 50 per cent," Mr Forrest said.
He said this was because median home values in Penrith — about $455,000 — were priced at about six times the average local income, far above the global average of three times local income.
"We have rapid credit growth and maniac irrational expectations: the two ingredients of a bubble," Mr Forrest said.
"Once the bubble bursts, the fiscally irresponsible will be burned."
Penrith's Statewide Real Estate's joint owner Anthony Flammia said there was no doubt the region was in a housing bubble.
Mr Flammia said this was because investors were driving the market.
"I'd say 90 per cent of buyers in the last 12 months have been investors," Mr Flammia said.
"Dollar for dollar, you get a higher return on rents in Penrith."
But he said this would change when interest rates increased.
"Investors will then start falling away and prices will probably go back to where they should be," Mr Flammia said.
Mr Forrest said he looked forward to that because high prices were locking many aspiring home owners out of the market, including himself.
"I'm earning $200,000 and still feel priced out.
"I saw a property in Glenbrook sell in just two days, 20 per cent above the listed price and people were still wanting to buy."
He said this was despite him being ready to put in an extra $100,000.
"I can't wait until the market correction arrives."
Wallacia's Forge Real Estate general manager Anthony Bauchler said Penrith home prices would fall, but he did not believe it would be a sharp decline.
"We're still seeing releases of land and people aren't buying beyond their incomes; it's not out of control," Mr Bauchler said.
"Interest rates are also as low as they've been for a long time. I can't see it going backwards."