Aussie Housing: The Anatomy of a Bubble

Published on
December 17th, 2019
Duration
56 minutes

Cycling into Recession? Understanding the Growth Rate Cycle


Aussie Housing: The Anatomy of a Bubble

The Interview ·
Featuring Philipp Hofflin and Joe Walker

Published on: December 17th, 2019 • Duration: 56 minutes

What can the Australian housing market tell us about how bubbles in asset prices inflate? Philipp Hofflin, a former academic mathematician and portfolio manager at Lazard, breaks down how complex systems function — and unpacks the key tools required to cut through the noise in an ever-growing sea of data to determine what truly drives price discovery in markets. Filmed on December 3, 2019 in Sydney, Australia.

Comments

Transcript

  • BP
    Byron P.
    27 December 2019 @ 18:39
    Too many people read Buffett. Bufett is just a beneficiary of monetary debasement, especially since credit expansion and deregulation in the 70's. Buffett is nothing. Armstrong is one of the bests.....REALVISION, why don't you interview Armstrong?
  • NP
    Nick P.
    18 December 2019 @ 01:40
    I just got back from 6 weeks in Australia. My trip was focused partly on a family business heavily invested in Australian property. We spoke to dozens of agents, owners, tenants, investors, and private equity professionals. - The average Australian still thinks owning property is the best investment vehicle long term. It's so ingrained and starts in childhood. - So much money is on the sides waiting to buy a dip, just like the current situation in US equities, i.e., melt-up. - The bank of mom & dad remains strong and is growing faster than any major financial institution. (Grandparents and parents are cashed up and loan to children/family). There is credit available; it's just not from the banks. - House prices in some tourist areas, 100s of KMs from the cities have seen rapid price gains as cashed-up city people look for "value" in these tourist towns. - Owning a home, styling a home, building a second home by the beach or mountains, renovating a house, etc., is stronger than it's ever been. I've never seen a country so obsessed with the fashion/status part of putting a roof over your head. - Airbnb has unleashed a new vehicle, buy-to-Airbnb. This trend has just started and has room to grow. Some of the Airbnbs are taking housing away from renters, especially in tourist or country areas. - The population is aging, and the middle class to wealthy Australians are inheriting houses and retirement savings from their parents/grandparents. The money remains in the family, and there is no pressure to sell quickly. Some of this money fuels new property and apartment purchases in cash at these high prices. So the cycle continues without the need for credit. The biggest problem in Australia is not a housing bubble, but a massive transfer of wealth and widening inequality.
    • NA
      N A.
      18 December 2019 @ 04:00
      Thanks for sharing your insights.
    • NS
      Nir S.
      18 December 2019 @ 14:46
      Thank you for insights. Wouldn't you say that that is exactly what is happening in the United States? Wealth in equality has not been this high since the mid-30s
    • DB
      Doug B.
      20 December 2019 @ 09:23
      "The average Australian still thinks owning property is the best investment vehicle long term. It's so ingrained and starts in childhood." Without seeing it for yourself, it is hard to truly appreciate it. Real estate is seen as "free money". If you have an investment property and rent doesn't cover mortgage costs, you can write the losses off against employment income. Really. A relative had been angling to buy a rental property since high school. Now barely out of university ... 2 investment properties and $600k debt. Another lives with Mom and Dad so an investment property can be purchased. Really. A whole generation have never lived through a recession. Really. I can't imagine this ending well.
    • MS
      Marcus S.
      22 December 2019 @ 01:34
      Agree Australian's are obsessed with property, but all of your points are predicated on one thing - continually rising prices. Bank of Mum & Dad doesn't exist without the price rises we've had. It's not cash profit - it's current equity valuations, based on what someone else is prepared to pay, which can change quickly. These are not productive, cash flow businesses, they are assets whose value is only determined by current sentiment. And sentiment can change quickly in a credit crisis or some other external shock.
  • TC
    Trevor C.
    21 December 2019 @ 01:51
    One of the best interviews I've seen this year. Kudos
  • KD
    Katherine D.
    19 December 2019 @ 05:56
    Much like Australia, Canada hopes to tamper an economic downturn and housing correction with mass amounts of immigration and monetary manipulation. Could it work to produce a soft landing as Hofflin hopes?
  • PJ
    Peter J.
    18 December 2019 @ 10:41
    Excellent discussion / interview. Disappointing that it doesn't seem to have had the take up in views of other comparable pieces. Maybe this is because of the 'Aussie Housing' title in the header, with people thinking it is a narrow discussion, which it certainly is not.
  • TC
    Thomas C.
    17 December 2019 @ 19:51
    Had to switch off with 25 to go. Off topic, one trying to appear smarter than the other with a consequence of both appearing dumb. Learned nothing
  • ET
    Eugenia T.
    17 December 2019 @ 12:51
    Alright, now that I've ranted out about how no matter how good the content, it always ends with irritation- I enjoyed this interview a lot. As someone who is not from Australia, I hear less insightful analysis about the Australian economy than I'd like (ditto Japan, EU, UK, Brazil, India, etc.). I particularly enjoyed the historical context and how the US and Aus were compared to illustrate the point.
  • GN
    Griffin N.
    17 December 2019 @ 11:03
    Great interview, many valuable insights. Looking forward to this week! But always sad to hear smart people thinking that you can get a better outcome from "managing a bust" by government interventions then letting the market have its course. That's not how malinvestments work. I think there was a bit of inconsistency as well. Starting of by saying that almost everything about housing prices is about credit growth and that everyone thinks their market is special. Then finishing by listing why the Australian market is different because of less supply, people not moving etc. :D But overall a great interview, would listen to them again if they had an update in say a year or so.
  • SF
    Simon F.
    17 December 2019 @ 09:15
    Joe’s Jolly Swagman podcast is one of the very best and it is indeed great to see him on RV. It is also so refreshing to see an interviewer who really listens....
  • SB
    Simon B.
    17 December 2019 @ 08:57
    Joe Walker finally on RV how good!!!!