Housing Bubble Week: Speculation and Unchartered Waters — Chris Joye

Chris Joye manages $3 billion as the Co-Chief Investment Officer at Australian fixed-income manager Coolabah Capital Investments, and is a contributing editor with The Australian Financial Review.

He also has a long familiarity with the Australian housing market. In 2003, then-Director of the Menzies Research Centre Malcolm Turnbull commissioned Chris, fresh out of Cambridge University, to be the principal author of the 380-page Prime Minister’s Home Ownership Task Force Report.

In this conversation, Joe asks Chris why he paradoxically believes Australia’s housing market is a bubble that likely won’t crash. They also discuss the importance of investor expectations, and how the extent of national price falls may be larger than 15%, peak-to-trough, if these animal spirits are allowed to become too pessimistic.

Show notes

Selected links

  • Follow Chris: AFR | Twitter
  • Money Talks debate: Chris Joye vs. John Adams
  • ‘Are Home Prices the Next “Bubble”?’, 2004 New York Fed article by Jonathan McCarthy and Richard W. Peach
  • ‘Why We Should Be Worried About Australia’s Housing Market’, Chris Joye’s 2013 article in the AFR
  • ‘A Model of the Australian Housing Market’, 2019 paper by Trent Saunders and Peter Tulip
  • You can find Alex Joiner’s chart indexing house prices to incomes and interest rates in this write-up of the Joye-Adams debate

Topics discussed

  • Does Chris think the RBA was complicit in blowing a huge housing bubble? [5:34]
  • What does Chris think is the likely extent of falls in Australian house prices? [9:26]
  • Chris believes the Australian housing market is facing an ‘orderly correction’. [16:27]
  • How does Chris define ‘bubble’? [19:55]
  • The centrality of speculation and why Joe is reluctant to rely on Joiner’s analysis. [27:56]
  • Responsible Lending. [42:24]
  • Differences and similarities between the Irish and Australian housing bubbles. [45:31]
  • The wealth effect. [50:35]
  • Investor expectations can precipitate big changes in house prices. [52:21]
  • Why Chris may have underestimated his house prices falls if Labor comes to power. [59:46]
  • The unique characteristics of housing markets that generate inefficiency and downward price rigidity. [1:02:20]

2 Comments

John
May 16, 2019 7:59 am

You need to be speaking with Martin North from DFA

fred
September 12, 2019 4:11 am

Hey Joe,

discovered the podcast and its really interesting. The guys you have had on seem to be very switched on. I would love if you had a post keysnian economist on talking about the current financial situation. Because their idea that high debt is deflationary long term and in itself can cause a large recession seems to be a potential area of discussion about our current economic outlook. its an area i felt that the economists you have had on were a little hesistant to tread into even though it does seem to hold true for quite a few of the bubbles we have seen.

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