April 22, 2013

What’s Going On Here?

Some housing bubble news from around the globe. Reuters. “Grosvenor Group, which owns most of London’s upscale Mayfair and Belgravia districts, said the rate of luxury home price growth in the capital looked unsustainable after years of foreigners pouring cash into the safe-haven market. Luxury home prices have surged 53 percent since 2009, compared with 25 percent in Greater London. ‘The extremely high rate of growth over the last two, three years is a thing I’m concerned about and I think it’s probably unsustainable,’ Grosvenor’s Chief Executive Mark Preston told Reuters. ‘We’re reaching values in prime London that are just extremely high by historic standards.’”

Homes Go Fast. “Overseas property investors seeking a buoyant property market in the Eurozone should take a long hard look at Latvia and Estonia. Both countries have seen remarkable average house price rises in the fourth quarter of 2012. Slovenia housing and economic situation is probably the biggest worry for the Eurozone trying to hold its states together. According to the Paris-based Organisation of Economic Cooperation and Development, Slovenia’s local banks, mostly state-owned, are burdened with 7 billion euros ($9.2 billion) in bad loans, equivalent to a fifth of Slovenia’s annual output.”

The Moscow News. “The ongoing financial crisis may be hitting European economies hard, but the continent retains a good deal of interest for Russian customers looking to invest in property abroad. A decline in prices can revive interest in a moribund property market, but only with time to determine the market’s direction.”

“‘If we’re talking about countries in deeper crisis, such as Greece or Cyprus, where the crisis arose very recently, then the behavior of buyers is somewhat different [than in Spain or Italy],’ said Anna Batizi, head of international sales at Moscow Sotheby’s International Realty. ‘Customers have taken a wait-and-see position. The market for residential real estate is responding to the situation with a small delay, in all likelihood with a significant fall in unreasonably high prices.’”

Baltic Business News. “Spanish company Property Logic behind which is Estonian businessman Margus Reinsalu and that was developing a luxury real estate project in Morocco has been sued by about 50 foreign investors, writes Eesti Ekspress. Property Logic is developing Le Jardin de Fleur, a luxury residential development for 1,250 housing units in Saidia, a Moroccon resort on the Mediterranean beach in Morocco.”

“Six yeas ago the company announced grand plans to build a luxury residential estate with fully furnished apartments for 250,000 euros and normally asked half of it up in front. The whole area was in a property boom. All in all, more than 600 investors took the opportunity, many of them from UK and Ireland, but also from France, Norway and Swizerland who have paid Property Logic at least 30,000 euros in advance. Investors claim that the project which raised about 60 million euros in prepayment is stalled and fear that they could lose their investment. Reinsalu himself may lose 10 million euros of his own money in the project.”

The National. “How much is too much to pay for a townhouse that hasn’t yet been built? How many housing units does a growing city need? How much money from other countries is cascading into the UAE’s housing market? These questions are reverberating along the high-rise canyons of Dubai this week, along with an even more pressing one: Can another property bubble be averted?”

“Different price-measurement tools show that Dubai villa prices rose by 18 to 24 per cent in the past year. This time, unlike in 2008, investment money from countries nearby is adding fuel to the frenzy. As The National’s Gregor Stuart Hunter reported yesterday, the rowdy crowd at Saturday’s Emaar sale of 188 off-plan units at Arabian Ranches was not made up solely of people eager to live near Global Village. Many of the purchasers were speculators, paying cash, and some were offering their precious tokens - symbolising the opportunity to buy - on the classified website Dubizzle within hours, at markups reaching 30 per cent.”

“One way or another, the irrational enthusiasm must be wrung out of the property market, and soon. Soaring prices complicate life for ordinary people looking for housing, while they elevate the risk of further turbulence.”

“Meanwhile the city’s housing stock is increasing rapidly. Tomorrow Emaar opens registration for another development, the 640-unit Burj Vista.”

From Emirates 24|7. “Flippers are in action, once again. This time property agents started putting adverts for sale of units in Burj Vista, a luxurious twin-tower project in Downtown Dubai just a few hours after the launch took place on Saturday. In July 2012, the Dubai Land Department had urged developers launching new projects to ‘discourage’ investors from re-selling ‘off plan’ properties unless the project has reached an advanced stage of construction.”

“‘We don’t have any regulation to prevent people from reselling their property. The developer should discourage people from selling off-plan until the project has reached an advanced stage,’ the department said in response to a query by Emirates 24|7.”

The Vancouver Sun. “The different attitudes displayed by people from Hong Kong and more recent arrivals from mainland China contributes to the tension in the city of Richmond over the expansion of Chinese-language signs, according to a report in The South China Morning Post. At the same time, bilingual Hong Kong residents (who can often speak both Chinese and English) have almost stopped arriving altogether in Richmond and Metro Vancouver. Indeed, the newspaper suggests thousands of former Hong Kong residents per year now seem to be going home or elsewhere.”

“Kerry Starchuck’s concerns {about the preponderence of Chinese signs in Richmond) roughly coincided with a boom in mainland Chinese migration. Starchuk, a fourth-generation Richmond resident, said she was unaware of that demographic shift, but she knew changes were afoot in her beloved city. ‘I just knew that something had happened. Our real estate market went crazy. And I was wondering ‘what’s going on here?’ she said.”

From China Daily. “Chinese banking regulators warned that risks related to property loans remain high, and vowed to keep a close watch on such lending this year. ‘Pressure from risks posed by property loans is still rising. These potential risks cannot be neglected,’ said Wang Zhaoxing, a vice-chairman of the China Banking Regulatory Commission. He said a high level of liabilities has been accumulated by developers, with more than half of such companies suffering from negative cash flow in the first three quarters of 2012. ‘Defaults on mortgage loans have increased in some areas since the third quarter, especially for expensive or big properties.’”

“According to a survey conducted by the China Banking Association last year, nearly 70 percent of Chinese bankers expressed worries over the risks that stem from lending to the property sector. Rising home prices cannot simply discount the risks lying in property loans, said Hu Bin, a Moody’s senior analyst. ‘The previous rounds of property control measures from the government have led to consolidation within the property industry and the dropping out of some of the weakest players, which means more tightening would probably hit bigger ones, and that could cause much more serious problems for banks,’ Hu said.”

Macau Business Daily. “The average price of dwellings in Macau was 70,385 patacas (US$8,798.10) a square metre in February, a 71-percent surge over the same time last year, government data show. An uncertain global outlook and Hong Kong’s stagnant housing market will moderate Macau’s flat prices but scrapping the special stamp duty would increase supply and help prices fall further, according to some real estate agents. The government’s regime imposes a 20-percent duty on the price of homes sold within one year of purchase. Centaline (Macau) Property Agency Ltd director Jacky Shek Po Tak said the special stamp duty has sustained high prices since its introduction in June 2011. ‘The special stamp duty has tightened housing supply, which spurs the price,’ he said.”

Dow Jones Newswires. “The Singapore government in January imposed new measures to contain runaway housing prices, which have risen almost nonstop since the global financial crisis. Those steps–the seventh set of curbs since September 2009–helped curb housing-price growth in the first three months of this year. Singapore regulators aren’t planning more curbs for the property market now, as the latest steps appear to be having some effect in containing home prices, Deputy Prime Minister Tharman Shanmugaratnam said in an interview with the Straits Times.”

“Helped by low interest rates and abundant capital, private-home prices have surged nearly 60% since the second quarter of 2009, the market’s most recent trough. The January measures came after home prices jumped sharply in the final quarter of 2012. ‘Over the next two years, there’s a lot of supply coming on the market and I think there’s bound to be some softening in prices,’ Mr. Tharman, who is also finance minister, said in the interview.”

From Reuters. “Thailand’s booming banks are warily watching for signs of a credit bubble, even as they rake up record profits on robust loan growth on the back of a strong economy. The Bank of Thailand has cautioned banks on rising household debt in Southeast Asia’s second biggest economy, and expressed concern that cheap home loans could cause a steep rise in prices similar to that seen in Singapore and Hong Kong.”

“The country’s leading private lenders say there are not worried about a property bubble, but concede there is a possible excess supply of condominiums along Bangkok’s mass transit routes. Minutes from the April meeting of the Bank of Thailand reflected concerns about the risks to financial stability centred on household credit growth and ‘incipient signs of speculation’ in the property market.”

“Kasikornbank, Thailand’s fourth-largest lender by assets, said it is tightening its credit lines. ‘We should take a closer look at housing loans. The number of housing units has increased sharply, while purchasing demand should not rise at the same rate,’ said Patchara Samalapa, executive VP in charge of SME clients.”

The Nation. “Leading property firms, convinced that the market is still experiencing real demand and not developing into a bubble, are continuing to launch residential projects, despite the Bank of Thailand’s (BOT) concern about the state of the market, which it has been monitoring closely due to worries about oversupply and speculation. Pruksa Real Estate chief business officer Prasert Taedullaya said the company was sticking to its plan to launch 78 residential projects worth a combined Bt55 billion this year, despite the central bank’s warning about oversupply. ‘Some locations may be oversupplied, but not the overall market. Our customers represent real demand, buying homes in which to stay rather than for speculation,’ he said.”

“Pruksa also has its own measure in place to control speculative demand by refusing to sell to those wishing to buy more than 10 units, he added.”

From Adelaide Now. “Foreign investment in Western Australia’s property market has doubled in recent years, with experts fearing it is adding to the rising cost of real estate. Real estate agents said about one in 10 off-the-plan apartments in Perth were now bought by Chinese investors. Metropole Property Strategists director Michael Yardney said local buyers could be caught paying too much for off-the-plan apartments because the presence of cashed-up foreign buyers was keeping prices artificially high.”

“‘On completion, valuations for many off-the-plan purchases have come in 10 per cent to 15 per cent below contract price. Unfortunately some local investors have also been caught and paid too much for the properties,’ Mr Yardney said.”

The Daily Telegraph. “He’s Sydney’s most determined seller. Nick Papadopoulos has had his house on the market for nearly two years but he refuses to budge a cent on the price. It has failed to sell after two auctions, three different agents, countless open-for-inspection days and even a feature spot on a reality renovation television show. The retired engineer has even tried to sell it himself, with a home-made sign out the front.”

“Mr Papadopoulos, who bought the tired old terrace for about $60,000 in the early 1980s, parted with approximately $30,000 for the TV show’s renovation blitz. But Mr Papadopoulos, 73, reckons his three-bedroom two-storey terrace house in tree-lined George St, Redfern, is worth every bit of its $839,000 price tag. After 688 days on the market, he said the house is just waiting for the right buyer. ‘I don’t know why it doesn’t sell. I suppose I just need to wait for a buyer,’ he said.”

Bits Bucket for April 22, 2013

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