An Unproductive Asset
The Age reports from Australia. “Melbourne’s auction market is white hot. There have been few weekends in property to match the one just gone. The resulting $1 billion in total sales will no doubt be further evidence for some observers that Australia’s market is headed for a US-style price crash. Others will see the property bandwagon as only just gaining pace. Get aboard now or be left behind eating dust. Buyers’ advocate Mal James said there was a top-end buyer for almost everything on sale this weekend, with about two buyers at each auction who wanted to buy but could not. ‘On this fact alone prices will continue to rise in the foreseeable future,’ he said.”
“‘The first sign of a rebound is when first home buyers come back because affordability has returned’ said Matthew Armstrong, of Properly Planners Australia. ‘Once confidence in the economy returns, so do investors and that’s when property prices really begin to take off.’”
From ABC News in Australia. “There was a 22.2 per cent jump in building approvals for January over December, mostly driven by unit dwellings. Robert Harding of the HIA says the market is on the right track in South Australia. ‘It does indicate that investors are back into the market and, of course, if people are going to start investing in real estate, then often they do start with unit developments and have probably overtaken first home buyers now as the main focus of the industry.’”
The Sydney Morning Herald in Australia. “Housing commentators have warned more rate rises are likely to come, after the central bank increased the cash rate. Loan Market executive chairman Sam White said the rise in the cash rate was no surprise and had been factored in by most mortgage holders.”
“‘These rises have really put a lot of pressure on Australian families and we’ve seen that already start to influence how they’re looking at spending their money,’ Mr White said.”
From the Star. “After a bleak past two years for Vietnam’s real estate market, industry players are hoping things will start to look up this year. ‘Demand for property, including suburban and modern housing, has picked up quite strongly due to a rapidly expanding urban middle-class. Even second-home vacation dwellings are seeing good take-up and this shows the kind of appetite that still prevails in Vietnam,’ says SP Setia Bhd CEO Tan Sri Liew Kee Sin.”
“According to a recent report by CBRE Vietnam, real estate is making a big comeback as there is strong interest from investors. ‘As their lifestyle changes, the Vietnamese are looking to purchase second homes away from the city. The market is still relatively untapped with demand higher than supply. This segment of the ‘new money’ population that are seeking better quality products such as second homes and luxury homes is growing exponentially as the people’s purchasing power rises,’ the report says.”
“Savills Vietnam, in its latest market update, says…a number of apartments in Ho Chi Minh City and Hanoi, and holiday homes in Danang worth US$1mil to US$5mil, have been bought by Vietnamese.”
“Singapore’s property sector, as with Hong Kong’s and China’s, have piqued quite a bit of interest among Asians themselves and watched with envy in the West. Property prices in this part of the world have remained excitingly buoyant by contrast, so much so that the Singapore government has recently imposed a levy on people selling residential properties within a year from the date of purchase.”
“The city-state also lowered the loan-to-value limit to 80% from 90% for all housing loans provided by financial institutions. The measures are ‘aimed at pre-empting the formation of a property bubble,’ Adrian Chua, an analyst at DBS Group Holdings Ltd writes in a note. ‘The earlier-than-expected introduction of measures signals that more could come should prices and volumes not revert back to sustainable levels.’”
“The Urban Redevelopment Authority’s property price index surged 15.8% in the third quarter. China’s property market is no less exciting. Having grown by leaps and bounds, it will probably go through a ‘more meaningful correction’ this year because the price gains in 2009 aren’t sustainable, Christopher Lee, corporate ratings director at Standard & Poor’s, says.”
From Kelowna.com in Canada. “There’s really only two ways to make money in real estate. Buy and hold until the price goes up or subdivide, that is, cut a lot in two and sell each piece for a bit more than half of the original price. High-rises are this principle taken to the surreal extreme. Find a piece of property, jump through the bureaucratic hoops, and start subdividing the sky. The higher you can go, the more money you will make, because now you can not only sell a piece of the sky, but the view from it as well.”
“Peter Chataway, a local building designer and community activist…sees a sterile bank of condo high-rises sitting mainly empty while their wealthy absentee owners live somewhere else. ‘It’s an economic ghetto where most of the units will not even be occupied on a regular basis,’ he says. ‘Development here in Kelowna is already investment driven, not use-driven. You want property to be used, not just bought.’”
The Times Colonist in Canada. “Greater Victoria real estate sales jumped by 45.5 per cent in February from the previous month as buyers blasted back into the market before a rise in borrowing costs and more stringent mortgage rules are imposed. Tighter regulations for borrowers wanting a mortgage backed by the Canada Mortgage and Housing Corp. come into effect April 19. The maximum amount buyers can borrow to refinance mortgages is moving to 90 per cent of the value of the home, from 95 per cent.”
“Also, investors who want a government-insured mortgage to buy a home that they will not live in will need a down payment of 20 per cent, an increase from five per cent. B.C. buyers may also be trying to beat a new harmonized sales tax in July. The HST rebate on new homes will apply to properties selling for up to $525,000. Also looming is the possibility of higher mortgage rates expected at about the same time.”
“The average price for a single-family home in Greater Victoria slipped to $620,833 last month from $644,678 in January. February’s median price was $560,950. Condominiums sold for an average price of $304,163 in February, down from $313 337 in January. The median was $285,000.”
From Business Week. “As Spain’s economy faltered over the past year, outsiders marveled at the strength of financial giants Banco Santander and BBVA. The pain has hit a separate category of bank: the cajas, nonprofit institutions that make roughly half of all loans in the country. These banks—similar to savings and loan associations in the U.S.—eagerly served up credit as the housing bubble inflated over the past decade. Last September they had some $330 billion in loans to developers on their books, up from $50 billion in 2000, the central bank estimates. Today, nearly half of the cajas’ $1.8 trillion in assets are mortgages or other real estate loans. With home prices plunging, the 45 cajas are suffering.”
“Smaller cajas rarely publish financial reports, so it’s hard to know exactly how they’re faring. But Mauro Guillén, a professor at the University of Pennsylvania’s Wharton School, says the biggest problems are in southern Spain, where billions were plowed into seaside resort hotels and condominiums. ‘Many got caught up in the real estate gold rush,’ Guillén says.”
“”To raise cash, the cajas are scrambling to sell properties they have seized as collateral, which could further pummel housing prices. ‘Everyone is trying to offload assets,’ says Robert Tornabell, former dean of ESADE Business School in Barcelona. ‘It’s a war out there.’”
From Reuters. “Spain’s already lengthy jobless queues grew longer in February. The number of people registered as jobless in Spain rose by 2 per cent compared to January, sending unemployment up to 4.13 million, Labour Ministry figures showed today. Since February last year, the number of jobless has risen by almost 20 per cent.”
“While the ongoing economic crisis continues to add to the nation’s unemployment lines, seasonal effects also played a significant part, an economist at Spanish savings banks consultancy FUNCAS said. ‘These figures were much worse than we’d expected … but illustrate a seasonal effect in Spain that leads to higher job losses in the first months of the year than seen in the spring and summer time,’ said economist Angel Laborda.”
“Yesterday, the government presented plans to create 350,000 jobs in the beleaguered construction industry by cutting value-added tax on home improvement work. The government has said construction would continue to play a key part in Spain’s economy though concedes the model must move away from the rampant speculative building that helped fuel the decade-long boom that preceded the slump.”
Property Showrooms. “The Spanish property market will provide investors with some ‘fantastic opportunities’ later this year, it has been claimed. According to Mark Stucklin, head of spanishpropertyinsight, the weak economy could mean buyers are able to make a shrewd investment purchase in the popular European destination. He explained: ‘In this year and next year, there are going to be some fantastic opportunities to buy really great quality property at a great price - taking advantage of this depressed market. That is what the canny buyers will be doing.’”
“Mr Stucklin recommended buyers stick to prime locations when it came to buying property, taking advantage of prices which ‘are basically back to where they were eight to ten years ago.’”
The MENAFN Press. “The world’s housing markets are (mostly) recovering, according to the Global Property Guide’s latest survey of residential property time-series. During the last quarter of 2009, house prices rose in 22 countries, of the 34 countries for which quarterly house-price statistics are available, and fell in only 11 countries. However, if we look at year-on-year figures, 2009 has not been a happy year. During 2009, 18 countries’ housing markets experienced price declines, while only 16 countries experienced house price increases.”
“Hard-hit Lithuania and Ireland’s housing markets fell sharply during 2009 (-29.29% in Lithuania, and -11.09% in Ireland), and during 2008 (-19.22% in Lithuania, and -11.89% in Ireland). The last quarter offered no respite to either country (-5.83 in Q4 in Ireland, and -4.87% in Q4 in Lithuania). Ireland’s latest quarterly drop of -5.83% is the worst since the Irish time-series began.”
“Back in the boom years, Ireland enjoyed steep house price appreciations, peaking at 26% during the year to Q1 1999. Now there is still no sign of respite. The economy shrank 7.4% y-o-y to Q3 2009. Irish unemployment increased to 11.6% in 2009, from 6.4% in 2008.”
‘Bulgaria’s housing market was badly hit during 2009 (-26.36%), and its house-price decline continued during Q4 (-2.26% on the quarter). Slovakia is another country which experienced a steep decline during the year 2009 (-12.70%), and whose housing markets were still heading down in Q4 (-2.09%).”
“Spain is a similar case, added to which Spanish statistics are widely believed to understate its house-price declines. By end-2009, Spanish houses were back to their 2004 values. House prices fell 6.42% during 2009 and 1.62% during the last quarter. Portugal’s recovery in mid 2009 proved to be short-lived. House prices were up by a meagre 0.91% in 2009. But over the last quarter of the year, house prices were down by 1.06%. Portugal, like Italy and Germany, is something of a special case, because these countries entirely missed the housing boom that swept through the world.”
“In Kiev, Ukraine, house prices fell 30.22% during the year and 3.67% during Q4 2009. Kiev had enormous increases during the boom years, peaking at 75% y-o-y to Q3 2005. Figures for Ukraine are in nominal terms. Russia’s housing market has been in crisis since Q4 2008. Over the year to Q3 2009 (the latest quarter for which data is available data), house prices in Russia dropped by 19.97%./;
“House prices in Greece (data is for cities outside Athens) declined by 1.39% y-o-y to Q3 2009 (the latest quarter for which data is available.”
“The biggest price-declines in the world during this crisis have taken place in Riga, Latvia (down 50.22% in 2009, after a fall of 36.98% in 2008), and in Dubai, UAE (down 43.29% in 2009, after a surge of 42.66% in 2008).”
“Much of Latin America is experiencing a house price boom, but, with the partial exception of Colombia and Argentina, Latin American countries publish no house-price data. Israel’s house prices have been rising strongly ever since Q4 2008. During 2009, prices rose 15.52%, the highest increase in 10 years. Israel ranked third in this quarter’s survey. Lebanon is also enjoying a house price boom, though it has not yet published figures for 2009.”
From Finfacts. “UK housing market at a delicate tipping point: Davy analyst, Flor O’Donoghue, commented: ‘UK housing market bears, most definitely not an endangered species but in hiding for much of 2009 as the market showed unexpected resilience, have been given better ammunition since the start of the year. Whether the most negative sceptics will be proved correct remains to be seen, but there is little doubt that the UK housing market, at the very least, has had a sluggish start to the year.’”
“‘While the UK housing market is unquestionably in a better position than this time last year (not that difficult it must be said), there is no doubt that hard-fought momentum has been lost. Bad weather, wavering consumer confidence and the imminent General Election (and increasing uncertainty about the outcome) have all been unhelpful. But what is likely to have really distorted the market was the termination of a temporary extension of the removal of stamp duty on house purchases up to £175,000. This relief lasted until the end of December, when the stamp duty threshold reverted to £125,000.’”
“‘Unsurprisingly, this deadline probably prompted a front loading of activity towards the end of 2009 to avail of the temporary relief. Hence the apparent robust housing market figures for December were almost certainly artificially flattered with some inevitable payback in January. Evidence of this was January’s Bank of England mortgage approval figures, which were 48,200 seasonally adjusted, down 17% on December and the weakest month since last May.’”
“The Bank of England data are not alone: UK housing transactions slipped in January and house prices, according to Nationwide, fell for the first time in ten months. For those exposed to the UK housing market, what is worrying is the loss of momentum. As we see it, this risks a negative feedback loop, where disappointing housing figures ultimately become self-fulfilling.”
South Wales Argus. “The following is the letter sent by the four Islwyn councillors to the Prime Minister. ‘Your government did absolutely nothing to contain asset based inflation of 10% year on year and indeed at the time seemed pleased that it was occurring.’”
“‘The asset bubble has not only taken UK plc to the verge of insolvency, it has resulted in many young people in the communities we represent who earn £12,000 unable to buy a home. This accompanied to the fact the Labour Party has prevented Local Authorities from building council housing has made the housing situation young people face in this country far worse than it need be.’”
“‘The asset based inflation which brought the UK banking system to its knees, we believe should have been prevented by government regulation. However, when the banking crisis began, we agree that your government had Little choice but to re-capitalise the banks. However, we do object to banks which we are majority shareholders in, lending our money to foreign companies to buy much loved British companies, who then go about making British workers redundant.’”
“‘What is the point in having a Labour government, who just watches from the sidelines whilst such practices occur? Why does your government do nothing about billionaire bonuses being paid to brokers in a bank that we own and a bank that will not lend to small businesses in Islwyn?’”
From Irish Central. “Ireland threw money away like a drunk in a bar room during the economic boom, according to a new survey. Okay, that’s not quite what they said, but they should have. A damning new report from Davy Stockbrokers says Ireland wasted the boom years blowing money on the housing bubble.”
“The Davys report says Ireland failed to invest in even basic services like roads, rail, school, hospitals and telecommunications between 2000 and 2008. The lack of investment has put Ireland way down the European ranks for the basic building blocks of a country. Even tiny Finland and Belgium are better off than Ireland.”
“The report says that 63 percent of net investment in capital stock went on housing which Davys calls an ‘unproductive asset.’”
“Far more productive are the country’s young people; although they, like my generation, are leaving the country in droves. Davys should have added another line to its report. The Irish Government blew the boom and they blew the future for hundreds and thousands of our young people. It’s one thing emigrating (as I did) with $300 in your pocket. It’s quite another emigrating with a $300,000 mortgage to feed.”
