Too Much Speculation Is No Good
A report from The Times of India. “Market insiders said competition in the housing trade has become cutthroat with supply exceeding demands. ‘An estimated 1 lakh housing units worth Rs 15,000 crore are on the pipeline in and around the city. These houses would be ready for possession within the next three to four years. Booking, however, is not more than 30 per cent now,’ a real estate trader said.”
“Speculative buyers from both inside and outside Odisha had made a beeline to buy houses in Bhubaneswar following the hype in industrial investment in the state a few years ago. Several people had even invested in second and third properties in the city. ‘Buyers had then thought that prices of property would escalate due to the promise of big industries setting shop in Odisha. But the situation has changed,’ said Anup Mohapatra, a developer. ‘Till 2007-08, at least 30 per cent clients were IT professionals who make quick purchases round the year. Now, IT companies are not adding significant new workforce while majority of the existing ones have already invested in real estate.’”
The Malaysia Chronicle. “People buying investment property in Malaysia should take a long term view and avoid ‘flipping’ homes for the good of the country’s property market. That’s the view of the Real Estate and Housing Developers Association of Malaysia (REHDA) who believe that too much speculation is damaging the country’s property market. Datuk Ng Seing Liong, REHDA’s past president, said: ‘We, as developers, we also don’t want them (speculators) to come and buy to flip. Too much speculation is no good. Don’t rush into property,’ he said. ‘It is a long-term investment.’”
“The comments come after widespread complaints that speculators or ‘flippers’ have been responsible for pushing up property prices in urban areas, crowding out genuine homeowners and investors.”
NZ Week reports on Singapore. “The strong demand for residential property in Singapore is likely to persist as interest rates stay low amid the monetary easing in the United States and Europe, National Development Minister Khaw Boon Wan said on Monday. There will be a significant supply of residential properties in Singapore over the next two years, he said.”
“‘With the recent announcements of further monetary expansion in both U.S. and the eurozone, the current low interest rate environment is likely to persist. This will continue to contribute to the strong demand for residential property, which could cause prices to rise beyond sustainable levels,’ he said.”
From Vietnam News. “HCM City authorities are looking for ways to revive the city’s property market, as nearly 900 of 1,108 property projects have been left unfinished because of financial problems. According to figures released by the city’s Construction Department at a meeting last week, the property projects comprise a total of 165,079 apartments in 23 districts. Nguyen Thanh Tai, former deputy chairman of HCM City, said the stagnant property market was caused by inappropriate business strategies on the part of developers and an imbalance between supply and demand.”
“Tai said that to develop all of these property projects, a huge capital source was needed. However, many enterprises are financially incapable and have to depend on bank loans and contributions from home buyers. As a result, they face difficulties when the market liquidity runs low. According to a study conducted by Dragon Capital, Ha Noi and HCM City each have 35,000 unsold apartments. It would take seven years for the two cities to sell these apartments, the report said,”
“Despite several cuts, apartment prices remain too high for low-income residents, and there are few low-cost houses on the market for low – and medium-income buyers. This is why many apartments remain unsold, although residents badly need accommodations.”
The China Post. “The government’s anti-speculation measures have caused a freezing of capital in the real estate market, where a sales decline may continue, said Yen Ping-li, president of DTZ Taiwan, yesterday. Right now, only life insurance companies have the money to buy properties, he said. ‘Frozen capital may result in continued sales decline in the real estate market, which is in for a cold, bitter winter,’ he said. ‘Not only brokerage firms will close their businesses, some developers may also have to sell their assets just to survive,’ he added.”
“According to him, various crackdown measures launched by the government, including credit control and the stock capital gains tax, have diminished Taiwan’s stocks and real estate, which he described as the two lifelines of the island. The credit control measures have strongly impacted sales as loan reductions and interest rate increases have devastated even those who buy properties for residential purposes, he said. Yet paradoxically, prices have remained high even as sales have gone down sharply. Yen attributed this phenomenon to the fact that, in the midst of a low-interest environment, sellers are in no hurry to sell their properties.”
“‘I don’t know why the government keeps launching measures that suppress these two industries,’ he said.”
People’s Daily on China. “A growing number of people take a wait-and-see attitude because of soaring property prices and the fact that a great deal of market demand has been met in the past few months, ‘I do want a small apartment in Beijing, but the current price is now beyond my reach,’ said Huang Ying, a 28-year-old company executive.”
“She took a fancy to a one-bedroom apartment along the southern Third Ring Road. However, as the unit price has increased nearly 30 percent over the past three months, she could no longer afford the down payment. Some buyers, however, expect that there might be some policy fine-tuning in the real estate sector later this year.”
“‘Since the price has jumped more than 30 percent this year, I would rather wait to see if the government will take more measures to curb price growth,’ said Zhang Lian, a retired teacher who plans to buy an apartment for her son.”
The Epoch Times on China. “Local officials in the Chinese Communist Party have violently and forcefully evicted people from their homes and property before seizing them in an attempt to make up for local budget shortfalls, according to a report from Amnesty International. ‘Local governments have borrowed huge sums from state banks to finance stimulus projects and now rely on land sales to cover the payments,’ giving them a reason to evict locals, the group said.”
“Of the 40 forced evictions it examined, Amnesty said nine resulted in the deaths of people who were protesting against them. For example, a 70-year-old woman, Wang Cuiyan, was buried alive by an excavator in March 2010 when a crew came to destroy her home in the city of Wuhan. Some people, facing such pressure, have even set themselves on fire in protest, the group added.”
“In a recent example, a home belonging to a Uyghur family in the northwestern Xinjiang region was bulldozed and their land taken after the family rejected what they saw as inadequate compensation from local authorities. Radio Free Asia reported that the family petitioned for more than three years against the plans. ‘We asked them to appraise our house fairly, but they did not listen and simply bulldozed our home,’ Rebiya Yusup, whose family home was destroyed, told the broadcaster. She later broke off contact and might have been detained by police, RFA said.”
“At the same time, the Chinese Communist Party is enabling local officials to carry out the evictions by promoting them because they were able to achieve economic growth, even if by an any-means-possible approach, Amnesty said. Authorities usually do not consult with the local residents, nor provide housing for them, as required by international law. Compensation is also often inadequate, while cadres stand to make a killing by quickly selling the property on to real estate developers.”
“‘Local governments and property developers frequently hire thugs wielding steel rods and knives to rough up residents,’ Amnesty said, adding that ‘police hardly ever investigate such crimes.’”
The Bull on Australia. “A property slowdown in China is altering the list of who’s who in China’s billionaire ranks. Property is no longer the top source of wealth for Chinese billionaires, losing out to those engaged in manufacturing-type businesses. Could the same happen in Australia? Australia has ridden on the wave of the China boom for well over a decade – and according to researchers at the IMF, a 10% improvement in our terms of trade lifts Australian property by about 5%.”
“However, what happens when our terms of trade takes a reverse course? Australia’s trade balance has been in deficit every month now since January this year. Our exports to China have declined by 20% since May – taking $1.5 billion from our export revenue. In August just gone, we recorded our worst trade result in over four years – it blew out to $2 billion, almost three times higher than expectations.”
“Over the past few weeks TheBull has put the question to readers: is the Aussie property market about to face a profound correction, or has it already bottomed? Burak Mete, a derivatives investor, agrees that declining exports are a sore point. ‘The fact that mining glory days seem to be over makes [labeling it] a so-called [property market] bottom a very optimistic outlook.’”
“Duncan Mcleod, director of MAA Livestock & Property is in the front seat when it comes to assessing property values. He says that rural land in regional south western Queensland has fallen 10-30% depending on the land usage and whether there is gas involved. ‘We have been looking for a house on the Sunshine coast area from Coolum Beach to Noosa. Values for sub $400,000 have remained strong, $450,000-$750,00 weaker, $750,000-1m weaker again, while above $1m is shocking.’”
“Agents cite lower interest rates as one factor that will save the property market from collapse. The RBA has dropped 75 basis points from the cash rate since March – and further cuts are likely. Offshore experience shows, however, that lower interest rates can only do so much. The US and European countries have kept interest rates at near zero levels for years while property prices have continued to stagnate.”
“The Bull reader John Bowman says that the ‘long term outlook for property is not good.’ However he adds that high house prices are really only good for banks (lending of credit), the government (taxation and stamp duty) and real-estate agents (commissions). ‘Home buyers pay the increase!’ he concludes.”
