A 40% drop is unlikely in a country with recourse loans. Although it is possible. I think Keen was a bit reckless to make this bet. House prices may fall 40% in real terms anyway over the next decade. But for it to happen quickly would require a very deep and painful recession, which no one wants.
Don't forget that in the US, banks lent to people with little regard of their incomes for a good reason: House prices hadn't fallen since the 1930s. We all know how that ended up.
