July 29, 2013

Buying A Home Is Always A Winning Proposition

Some housing bubble news from around the globe. Brent & Kilburn Times in the UK: “Flats in the controversial proposed development on the site of the scrapped Willesden Green library have gone on sale – in Singapore. Even though the first brick has yet to be laid, the ‘high quality London apartments’ are being sold by Hong Kong based Grosvenor International, who are asking the equivalent of £340,000 for a one-bed flat. As well as listing transport links as a key benefit, the agent has angered local campaigners by listing the lack of ‘affordable and key worker’ housing as a benefit.”

“On a blog run by campaigners, a resident said: ‘Like a slap in the face for those on the Council’s housing list, the estate agent advertising in Singapore has made the lack of affordable homes/key worker homes a selling point! ‘Presumably this ensures prospective buyers have the right sort of neighbours.’”

The Jakarta Globe in Indonesia. “Property developers have responded negatively to the central bank’s stricter mortgage rules saying they could stifle future demand. According to the regulation effective on Sept. 1 consumers who take out a mortgage on a second property larger than 70 square meters must make a downpayment of 40 percent with banks only able to provide finance of up to 60 percent of the price. For a third property, the down payment is higher at 50 percent. Bank Indonesia governor Agus Martowardoj said that the regulation was intended to prevent a housing market bubble.”

“I don’t know where Bank Indonesia wants to go with this,’ said Setyo Maharso the chairman at the Indonesian Real Estate Association. He rejected the idea that people buying second or third properties were speculating. ‘That’s not speculation, that’s investment. It [buying property] is not like buying stocks,’ he said.”

The New Straits Times on Malaysia. “At a recent condominium launch in Sentul, it took a mere two days for the 900 odd units to be sold out. This despite each unit, slightly more than 1,000 sq feet, costing about RM800,000. There were so many people at the property launch. Some waited from the night before and placed shoes and pieces of paper and arranged chairs to indicate their place in line. When they reached the showroom, it was like a game show — each participant was given exactly one minute to choose his or her unit. Those who failed to do so would lose their turn.”

“Of course, a great number of the people who attend these kind of sales are speculators. With the prices of property on an upward spiral, buying a home is always a winning proposition. But while some people are still able to afford the sky-high prices, most Malaysians can’t. ‘I think it has come to the point where maybe up to 60 per cent of Malaysians cannot afford to purchase properties,’ said real estate valuer Dr Ernest Cheong.”

The South China Morning Post on Hong Kong. “A luxury residential project in Causeway Bay received a tepid response despite a cash rebate of 3.75 per cent offered by the developer to make up for the extra stamp duty. Yoo Residence, developed by Couture Homes and ITC Properties, sold a 539 square foot unit for HK$16.41 million, or HK$30,460 per square foot of saleable area, in the first three hours after sales began at noon yesterday, the company said.”

“The firm released for pre-sale 50 units at yoo Residence, due for completion in June 2015. Lily Cheng, a senior district manager at Centaline Property Agency’s Wan Chai and Causeway Bay branch, said yoo Residence was the most expensive project to hit the market by per square foot value since the rules on marketing of new flats took effect on April 29. ‘Given that these units each cost more than HK$10 million, buyers will take more time to make up their minds. The response to these flats should not be compared with that in the case of mass housing projects that involve small lump sum payments,’ Cheng said.”

Bloomberg on China. “China’s eastern city of Yancheng has halted limits on home prices because an increase in supply was putting pressure on prices, the official People’s Daily newspaper reported. ‘Smaller cities like Yancheng probably face bigger risks of prices falling as demand couldn’t keep up with the construction boom,’ Dai Fang, a Shanghai-based property analyst at Zheshang Securities Co., said.”

The Australian Broadcasting Corporation. “Earlier this month, Australian Property Monitors released figures showing Perth was just shy of topping Sydney as the most expensive place to rent in the country. The data revealed that Sydney’s median price tipped $500 a week, while Perth’s was just $10 behind. But has Perth’s rental bubble burst? Tim Nickoll, property manager for Harcourts Realty, says activity in his rental portfolio has dropped about 20 per cent. ‘I am finding the vacancy rates for properties are sitting longer,’ Mr Nickoll said.”

“The head of the Real Estate Institute of WA, David Airey, said tenants who had signed leases at the height of the boom were even worse off. ‘They are facing huge bills because properties can only be re-let they what they were previous paying,’ he said. ‘For example, if you’re renting a property at $600 a week and now it can only be rent at $500 a week, that’s $100 a week difference for the term of your lease. Laws offer a lot of protection for tenants but you cannot be protected from the contract.’”

From Business Day in South Africa. “It was a tough auction for the Aucor multiple commercial property sale in Rosebank and a number of lots were passed over for lack of demand, but good properties in well-established and sought-after areas did well. Properties in the leisure market are feeling the pinch of economic conditions and are not fetching high prices, said Aucor’s Mark Kleynhans. ‘Demand is weak as financially things are beginning to bite and one can pick up phenomenal value in the leisure market as many owners are trying to offload their assets to meet current financial obligations.’”

“A 39m² one-bedroom unit in Dogon failed to attract a bidder at the auction. A modern 141m² duplex in The Newtown complex was knocked down for a hammer price of R450,000, which auctioneer Darren Winterstein said ‘was for nothing.’”

CNBC on the Netherlands. “‘Going Dutch,’ a term used to indicate that each person pays for himself, may be associated with frugality. But recent data shows that households in the Netherlands have been anything but frugal. The country has the highest total household debt-to-income for the seventeen countries that share the euro, according to Eurostat. At more than 250 percent, it far surpasses the same figure for Ireland, Spain and Portugal.”

“Surging house prices in the country have now given way to a ‘painful post-bubble adjustment.’ according to Michael Taylor, an economist at Lombard Street Research, similar to the adjustments in Spain and Ireland. ‘The Dutch housing bubble was not caused in the main by inappropriately low interest rates following euro membership as occurred in Spain and Ireland. Instead generous tax relief on mortgages fueled a prolonged period of strong demand that pushed house prices to extreme levels,’ Taylor said. ‘Any revival in external demand will almost certainly not be strong enough to lift the economy out of recession.’”

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