Clash of the mites: Joye versus Adams

We report, you fall asleep:

Because the property “fight of the century” looks more like a little false binary.

David Llewellyn-Smith


      • i can’t wait to see how many properties he owns around Sep – if prices continue to fall at this rate.

      • The peanut is advising his groupies that due to the coming hyperinflation that he predicts will hit our shores in the next couple years they should leverage upto the eyeballs and buy property as the debt will deflate away while property will increase in value…. all this while clearly outlining he is not licensed to provide financial advice (wink wink)…. wtf, feel for the credulous that believe he actually knows what he is talking about and follow his 2 cents

    • Used the heard it all before excuse that has been trotted out by many a boomer BBQside. Skirting the fact that last time we were coming off a 725 basis point high, with lower HH debt to income levels and a mining complex that was in a blow-off development phase to meet the demand of a once in a generation rise of an emerging super power.

      Now we are sitting in the enviable position of having only 150 basis points left in the tank, with HH debt levels even higher than they were, and incomes struggling to get off the canvas (again, you skirted this one; assuming ‘full’ employment will stimulate wages any day now?).

      • Also, noted your caveat that IF we crash, it’ll only be because of a global crisis 😂👍🏻 You’ll need to lean hard on that one, as you continue to chase house prices down the gurgler and INTO said global event.

      • Too deadly bruv

        You’re not fooling anyone brenten. Economics is complex stuff, stick to cleaning toilets. Who knows? If u save enough pennies you might even be able to buy a house one day! ….but probably not

      • Maggot, you became a troll because you couldn’t understand this sh!t and your delicate feelings got hurt (your words, not mine). The last thing we need in this ‘debate’ is someone that’s Too Weak to admit that buying property at the top was a bad (bad!) idea.

      • Too deadly bruv

        There, there brenten

        You can always calm your nerves with a nice scotch and discarded cigarette butt….but please dont buy the top shelf stuff. Its a big waste of your centerlink assistance payment

      • Yeah ok, bud. I don’t need to make sh!t up to get through my day or cower behind troll accounts. Ava good one.

    • Very much a one-sided TKO

      If this was only a boxing match.

      The argument that a loaf of sliced bread is reasonably and market priced at $10 mark because it is serviceable, no storm in the eyesight and the weather is sunny vs. the argument that the loaf of bread is severely overpriced at $10 because the market price is set by prolonged “no tomorrow” lending, average joe struggles to loan to have a slice of bread and that it is sunny but the air pressure is dropping fast… not really a boxing match.

      If the contest was 100words/min pronunciation, well…. that was a carnage.

      Please remember that if someone totally unknown, at the bus stop, tells you it’s a sunny day, his statement is no less truthful than that of the BOM official report.

  1. Personally I think a lot of Joye’s behavior is explainable by complex psychology since he was the main author of the PM’s Task Force Report on Housing Affordability in 2003. He absolutely nailed it; no-one since has produced anything of that level of clarity and comprehensiveness. It should have established him as one of the best policy advisors around. Impressive given how young he was.

    John Howard rejected the report out of hand on the basis that the voters liked their house values going up, thanks.

    So everything Joye has done since, needs to be viewed through the possible interpretation that “if Australia won’t listen to good sense, then stuff them. I’m looking after number one from now on”. This has major explanatory power, to me. I have a sneaking admiration for the guy, I think he understands property markets and the economic cycle like the very best of the global 0.1%’s advisors, and I suspect he will emerge from the coming bloodbath smelling of roses, having cashed out at the right time and even done a bit of smart “shorting”. Just like the global 0.1% who are playing the establishment for suckers with their conspiracy of anti-sprawl urban planning, QE, and mass immigration. Joye isn’t a knowing agent like them, he’s just spotted what’s up; and if his fellow citizens don’t want to know about it, why should he go down with them?

    • ErmingtonPlumbingMEMBER

      The anti-sprawl urban planning really goads me…its as much of an attack on Australian Cutural norms as anything else.
      One of the greatest con jobs of all time, 25 million people having to live on top of one another, like bees in a hive whilst occupying almost 8 million square kilometers

      • HadronCollisionMEMBER

        Hi EP
        Much confusing. So you say we should sprawl to infinity and beyond, even into the desert? I suppose it would underwrite the HSR.

        Or else we could lower immigration to its long term average.

      • ErmingtonPlumbingMEMBER

        “Sprawl to infinity”,…pffft! hyperbole!

        Most of Israel is just as shyte as most of Australian territory and they got 8.5 million on a chunk of land that isn’t even a third of the size of Tasmania!
        I support a much lower rate of immigration as well, but our land rezoning/release rule suck and are designed to force people into high density living AGAINST THEIR WILL.

      • Ermington, all good. Hadron; there is absolutely nothing inherently wrong with “sprawl”. It has deliberately been demonised as part of a rentier ploy against the normals. Prof. Alex Anas, after publishing a series of analytical papers on urban form, finally ended up titling one “Discovering the Efficiency of Urban Sprawl” to really emphasze the point.

        If there is sufficient freedom and the right institutional settings, the “city” form is endlessly replicable, with residents, jobs, and amenities all replicating. A majority of US cities have a superb institutional arrangement where new development is done by newly incorporate municipalities; they raise bond finance to do the infrastructure and amenities, payable against future property tax revenue.

        It is an anachronism, a mythical absurdity, to claim that an urban economy gets more and more inefficient as it grows horizontally. This is not true at all; it gets more efficient as it grows, period. The “all employment in the central CBD” model is imaginary, a myth perpetuated only by the rentier racketeers funding compact-city activism. The ability of industries to disperse onto lower-cost land has enabled the emergence of whole new types of economic cluster. Forego those, and your economy is less productive: see the UK.

        It is true that analysis of some data sets of cities show dense centres to be “more productive” but this thesis collapses as soon as cities which have suffered from anti-sprawl planning all along, are added. For example, the UK’s cities suffer from a “productivity gap” which is the opposite of what should happen if the planners assumptions are correct, seeing the UK’s cities have been forcibly kept to old-fashioned densities since 1947. The “more productive” dense centres are the ones that just evolved that way, at the same time as the urban area was also sprawling – New York is a classic example. But those “more productive” dense centres are overwhelmingly based on economic rent and consumption; they “make” nothing and add nothing to aggregate wealth. They merely capture a share of what is created elsewhere.

    • That one was a freebie to get you through the door…

      Anyway, you don’t need no sessions, “stuff them” is the right mindset to maintain. Just keep that up and you’ll remain suitably balanced and happy.

      You can’t save everyone… and you quickly realise that it is hardly worth the effort to try to save ANYONE. Look after your own backyard and let the others sink or swim, as they may.

      • Peachy,

        You sound angry?

        I recommend a white noise machine and a few mindlessness apps with a choko kombucha chaser.

        This is the dawning of the age of octogenarians.

        Relax and float up stream.

      • Nah mate, I’m not angry. I’m taking my own advice and serenely taking care of my own backyard. Not trying to save anyone. In fact, I’m hoping to watch them cook, in time.

        What got me angry is LVO’s post on NDIS. Screwing people who can’t help themselves because they are kids and/or somehow sick or disabled really irks me. wasting billions of dollars in the screwing process makes it that much worse.

  2. reusachtigeMEMBER

    Love it. Bulls support each other in the herd. Bears tear each other apart for territory. That’s why they are always the losers! LOLOLOL

  3. I really think that someone knowledgeable like Joye is fully aware that one cannot just look at initial repayments relative to income when assessing relations between debt levels in the economy, new debt creation and house prices (in 80s someone using 50% of income was able to pay off house in 5 years despite and because of high IR/inflation)
    in 80s one could pay off the mortgage by paying interest only because inflation was eating away principal much much faster than principal repayments are doing it now so high level of debt was not detrimental to the future economy

    so being aware of that he must be playing some game

    • MountainGuinMEMBER

      And serviceability claims based on interest rates and income ignore that wages are flat and interest rates already at emergency lows. So that leaves us with historically high debt and a long way to fall.

  4. Adams’ argument wasn’t terribly coherent.
    What does debt bubble mean? Does he mean the debt is trading above its intrinsic value?
    Housing is in a bubble, debt is fairly priced. So “debt bubble” makes no sense.
    How will the level of net foreign debt trigger a crash?

    re. Ireland; the history of their national accounts is very different to what was presented in the debate. There are strong similarities
    – in 2007 public debt to GDP was just over 20% (similar to Australia) – increased > 100% post crisis.
    – in 2006 Ireland’s NIIP was approx. (6%) of GDP (much better than Australia) – increased to > (100%) post crisis.

    At the time of the crisis Ireland’s accounts were *better* than Australia. So what happened:
    – public debt exploded due to the governments blanket guarantee on all of the banks liabilities (forced upon them by the ECB) incl. subordinated debt, declining tax revenue and falling national income.
    – the NIIP blew out not so much due to the CAD but due to huge revaluation losses on Ireland’s gross position v the rest of the world. ie the gross foreign assets turned out to be rubbish, whereas gross foreign liabilities ended up becoming safer because it took on a state guarantee.

    Both these stories *do* apply to Australia. Our NIIP is bad (much worse than pre crisis Ireland), and our gross position is even worse because like Ireland there has effectively been overseas borrowing to fund riskier / equity like foreign assets. This is why we have a favourable foreign equity position. Think Macquaries model of borrowing overseas to fund investment in foreign junk bonds and plane leasing portfolios.
    So like Ireland there is a real risk of revaluation losses on the NIIP especially if a crash coincided with a global downturn.

    If you are going to use Ireland as an example you have to be able to make these points.

    Also framing the issue in terms of serviceability and affordability is a dead end. Bulls will always be able to correctly point out housing is affordable and debt serviceable at low interest rates (if you excl. time to save a deposit).
    So stop framing the issue like this. If you are claiming housing is a bubble, explain why in a valuation framework. Here there is much stronger ground.
    Ignore debt (because the way the asset is financed is irrelevant)
    Ignore household incomes because they are an unrelated cash flow (houses return rent not household income)
    Then compare median house gross rental yield v 10 year bond yield in Sydney and Melbourne. If gross rental yield is below the safest assset in the country, ask the bubble denier to respond either:
    1. housing cash flows are the safest in the country
    2. Houses are the most liquid asset in the country – with a liquidity premium v bonds
    3. Explosive never before seen growth in rents are priced in – when historically rents plod along with GDP
    4. Housing is a bubble

    If your answer is 4, then prices will crash, not due to credit contraction or blah blah blah but because *it is a bubble* and prices reflect expectation of CG not supported by a realistic forecast of cash flow. When these expectations change prices collapse. End of story.

    Avoid talking about all the stupid distractions: credit availability, household incomes, interest rate, planning etc. – ie anything which determines intrinsic value so cannot explain a bubble – and you will be on much stronger ground.

    A message for others who want to take up the bear case.

    • I disagree. It is ALL about debt serviceability. Debt serviciablitily is only possible at higher debt levels due to decreasing interest rates (finite process) and easy credit (substituting for income growth).

      When either condition is constrained (we currently have both), debt deleveraging occurs, puncturing whatever unproductive assets have been the recipient of excess credit in the blow-off (just happens to be housing in our case).

      • Credit is the determining factor only if demand is sufficient. If rental vacancies exploded and rent prices tanked to the point of being much cheaper to rent than buy, the banks wouldn’t be able to give the credit away at any price.

      • @Freddy – Yeah but with our migration program any demand weakening is temporary and easily fixable over a 5 year period. Just restrict land supply for developers, regulate credit to them and boost infrastructure spend to soak up construction employment. Eventually the population will catch up.

        Australia has been using the “housing shortage” and “infrastructure deficit” to buffer its capacity to service economic shocks for some time now using this somewhat as an interest rate buffer – its in the governments interest to create these conditions again to keep kicking the can. Migration allows this to happen which is why both sides won’t give it up.

    • Thanks Sweeper. Yes, he looks much more comfortable having a chat with nodding heads, like North’s.
      He was nervous and pretty much lost it from the get go, before Joye had said anything, as all he could focus on was getting the point across that we have high levels of debt. So what, we’ve got some of the highest incomes in the world, and so on.
      Yes, we do struggle sometimes to get a simple point across, eh?

    • Sweeper,

      “..Then compare median house gross rental yield v 10 year bond yield in Sydney and Melbourne. If gross rental yield is below the safest assset in the country….”

      What are the gross rental yields in Sydney and Melbourne v 10 year bond yield?

      Siri tells me the 10 year yield is about 1.8%.

      Are there any rental gross yields lower than that?

      Does that mean you don’t think that a house price is bubbly if the gross yield is greater than 1.8%?

      Bearing in mind the points you make regarding liquidity etc shouldn’t a sign of a bubbly house prices be a gross yield somewhat higher than the 10 year.

      What do you consider to be the point where the gross yield indicates the price of a house is getting bubbly?

      • At peak insanity I saw median gross rental yields in Melbourne of around 1%.
        Point is if it is less than the 10y yield then yes it is a clear bubble.
        If it is = to the 10y yield it is a bubble
        If it is slightly greater than 10y yield then it is a bubble.

        This to me is just a check mate argument. I can’t see anyway a bubble denier can dispute that gross yields below the 10y is an obvious bubble.

        I don’t know exactly what the spread should be but if you look at overseas markets there is usually a 4% at least spread. Admittedly gross rental yields are stickier than bond yields.
        But if anyone says houses are safer than bonds or more liquid then the obvious question is why isn’t the RBA targeting gross rental yields? Since it’s the benchmark rate for all other assets.

      • Sweeper,

        1% really? Don’t think I ever saw something that bad.

        That is insane…..though with our RBA and APRA those punks may have felt lucky.

        Yes 4% sounds like a reasonable spread.

        In the days before Ponzi a 5-7% gross yield was considered a rule of thumb.

  5. They are basically in agreement that there is too much debt, both just have a different opinion on what will unravel it and the timing. Joye agreed that Australia is in trouble come the next global crisis… how far away can the next one be?

      • Hmm I reckon I could put together some macro data points which confirm your theory, I’ll sell it to permabears and make a fortune 😄

      • Mining BoganMEMBER

        No one makes a fortune from bears. Just look at the owners of this little-read blog.

        That fortune you speak of is eighteen months away too.

      • It doesn’t take that many subscribers to make a ‘little-read blog’ a lot of money. One of the trading blogs I subscribed to ~8 years ago had 2,500 subscribers, he was charging $199/year and he’s a one man show i.e. making $500,000/year minus minimal expenses.

  6. Yes. ChrisJ has been right with his predictions more than anyone. Also first to call out RBA in MSM on low interest rate setting, calling house price growth ‘out of control’ few years back. He seems to be a very logical, numbers guy and I am sure his numbers on serviceability add up. But what about the emotional element? The sentiment. It is a significant variable that makes this very tough to predict. More and more people joining side-line waiting for downturn to play out. As Eddie Hobbs said, explaining the Irish housing bust – ‘the effect of this self fulfilling prophecy cannot be measured’. I guess Chris argues, vendors can service loans, they can wait. We are about to find out.

    • There’s only so low or high sentiment can go though (i.e. no one buying, everyone who will sell trying to sell). While I argue we aren’t there yet I’m not sure if it will get there before the RBA cuts rates, election splashes hit households, QE is pumped to lower mortgage rates, etc. The people holding on in the crash at that point might just cave and go with the system instead of waiting another decade or two for the next cycle. I am in agreement with cjoye that there is still tools in the govt’s arsenal to do this but I would go one step further – expect for our currency I don’t think there is an upper bound on the RBA’s ability to produce inflation where it wants to if it does.

  7. Too deadly bruv

    Switzer should shut the fck up! Always interrupting when key points are about to be made. Irritating old pr!ck

  8. “I guess Chris argues, vendors can service loans, they can wait. We are about to find out.“

    …errrrr, if it’s not that, what do you think dropping teh interest rates is all about?!?!!!????!?!?

    • Humans are emotional, they don’t just process numbers. We have had one of the bank chiefs correct the popular opinion few weeks back re credit availability – “it is not true that credit is not available, customers are not coming through the door”. If this is indicating a mass behaviour change you can drop the rates all you like.

  9. CJ mentioned banks will start loosening credit again in addition to dropping mortgage rates with encouragement from the RBA. That’s the key IMHO and probably the most plausible scenario!

    Should this occur (bear in mind ANZ has already provided access to 10yr IO loans) house price falls at the very least can be abated…. well at least until the next global shock occurs (in 18 months 😉 ).

    • darklydrawlMEMBER

      Just be aware there are some heavy caveats around the ANZ 10 year IO offer – many people will not qualify. If you can clear all the hurdles, you’re golden, otherwise you are in the reject box – at least for that product.

      • You’re right, but my point was to exemplify that banks are already starting to provide access to these type of ‘unnatural’ loans (in spite of the RC). This has set a precedent for other banks to follow. Furthermore, when combined with loosening of credit with the backing of the RBA (as CJ mentioned), the potential to re-inflate the bubble or at the very least abate further falls is quite plausible.

  10. Too deadly bruv

    Adams doesnt help himself with his frantic demeanour and poor posture. His self presentation just reeks of fringe economics loonie

    • ….says a property spruiking troll. I’d comment on your general demeanor, but I’d have to take a shower after.

      • Too deadly bruv

        You should take a shower anyway, you smell like sh!t from your toilet cleaning duties

        And brush your teeth too, its really unhygienic smoking other ppls discarded cigarette butts

      • I know, but I like to chip away. I don’t want him to ever make the mistake of thinking he is anything but a loser. What kind of weakling has to resort to making troll accounts as a way of “getting back” at people? Is it some kind of sad coping mechanism for lacking the cojones to do it like a normal person? He reminds me of those beta losers who didn’t get laid until their 20s (if ever) and wilt under the slightest pressure, especially when it comes to real confrontation. If this bloke isn’t a classic incel type, I don’t know who is.

        Anyway, duly noted. I’ll back off him for the day.

    • Unfortunately this is what i thought too. Adams came across as rushed, always wanting to interject and poorly presented. It’s not possible to portray any message with those characteristics.

  11. One thing that Joyce said was that yes credit had slowed but it was still growing, so no worries. But as Keen has shown in a credit bassed economy it only needs credit creation to slow, it doesn’t have to fall, to possibly cause a crisis.

    Adams is right in many ways but I don’t think his predictions will be that accurate as the powers that be will throw all sorts of unconventional kitchen sinks that will prevent the worst of it (assuming no external crisis), her can’t sir much of ties perhaps because of his opposition to MMT.

    One thing that is becoming clearer by to day is the world economy is slowing, so we will likely end up in a pretty bad way.