November 11, 2013

Yet Another Hysterical Burst Of Investment Greed

A report from China Daily. “The much anticipated policy meeting of the Communist Party of China - the Third Plenary Session of the 18th CPC Central Committee - is scheduled to open on Saturday. The meeting is expected to steer the country to an historic turning point. China Daily invited four experts in economics as well as social and political studies to share their insights and expectations. What would be your most expected reform in China? A: Opening the capital account would be one of the most expected reforms.”

“What would be the biggest challenges and risks in carrying out reforms? A: Opening the capital account would probably cost capital flight from China and a fall in property prices. The issue of a property price crash is definitely the biggest risk as it connects to the banks’ loan sector.”

The Epoch Times on China. “A tidal wave of migrations has surged out of China over the last month. Shaken so violently by the recent execution of fellow tycoon, Zeng Chengjie, president of the Sanguan Real Estate Development Group in Hunan Province on July 12, followed by the arrest of a business investor, successful businessmen are taking their capital and leaving China.”

“So what will the consequence of this mass migration and capital loss be? Chinese economic writer Niu Dao wrote an article on his blog titled, ‘The Capital Flight is More Terrifying Than the 383′ on Oct. 30 stating that the ‘383 strategic plans’ the CCP is discussing to solve the housing bubble problem are now insignificant. This major capital leak from China will deliver a critical blow to the housing bubble.”

The South China Morning Post on Hong Kong. “Sun Hung Kai Properties surprised the market when it released 181 flats for sale at The Cullinan at Kowloon Station last month at an average price of HK$29,097 per square foot of saleable area. Once rebates on stamp duties and discounts were factored in, the net effective price amounted to HK$25,024 per sq ft, which analysts said was some 21 per cent below prices in the secondary market of about HK$31,763 per sq ft.”

“New World Development and Wheelock Properties offered an initial 116 flats for sale at their joint venture The Austin, above the Austin MTR station in Kowloon, at a headline price of HK$ 22,875 per sq ft. Barclay’s expects discounts and rebates of stamp duties to come to 20 per cent, making the effective selling price less than HK$19,000 per sq ft.”

“Despite prices being cut at The Cullinan, sellers in the nearby mass housing market surrounding Kowloon Station had cut their asking prices by just 5 per cent, said Patrick Chow Moon-kit, head of research at Ricacorp Properties. ‘Most of the flat owners would rather keep their flats for leasing than cut prices to lure buyers,’ he said.”

Channel NewsAsia on Singapore. “Estimates from SRX showed that prices dipped just 0.1 per cent, with mass market homes in the Outer Central Region leading the decline with a drop of 1.4 per cent. Eugene Lim, ERA’s key executive officer said: ‘For OCR, which is the suburban areas, we are seeing more TOP (temporary occupation permit) projects coming on-stream. So if I am selling my home… (I) may have to be more (flexible as) the price will be lower. The days when it (was) a sellers’ market… is over for the suburban region. It is a buyers’ market now; buyers basically have a lot of choice.’”

World Property Channel on India. “Property prices have come under pressure in India. ‘This year, the residential real estate markets are slow in many cities, and are reaching a stage where only hard discounts will achieve any significant extra momentum,’ said Anuj Puri, the chairman of Jones Lang LaSalle India. ‘Freebies and schemes are the last line of approach for many developers - if these don’t work, they will have to mark down their prices to catalyze more sales.’”

The Indian Express. “While there has been a significant increase in inventory levels across India in the same quarter for the 2013-14 financial year, the inventory pile-up in the Mumbai Metropolitan Region (MMR) was the highest at 58 months, according to a report. ‘These levels have not been seen during the past five to 10 years, reflecting a very poor market for residential units,’ said Pankaj Kapoor, managing director of Liases Foras, adding that a typical middle-class and above middle-class citizen, who earns about Rs 80,000 to Rs 1.5 lakh a month, has been unable to afford a home in the city.”

“‘There is demand for housing and people want to buy at the right price, but the current rates are exceptionally high and developers are unable to cut down prices beyond a certain level,’ said Kapoor.”

The New Zealand Herald. “Homes in first-time buyers’ price range - which were being snapped up a few months ago - are now struggling to attract interest, auctions at Auckland’s biggest real estate agency this week suggest. Of 19 properties under the Herald’s eye, only 13 sold at auction. Several were below $600,000. Agents say there is an absence of young Kiwis inquiring about properties and attending auctions for lower-priced homes in the city and mortgage brokers report a big fall in clients trying to secure funding.”

“Squirrel Mortgage Brokers’ boss John Bolton said his company had seen a 40 to 50 per cent drop in clients trying to buy their first homes. ‘That home ownership dream in the Auckland market is looking further and further away,’ he said. ‘The new people coming in have just given up … they come in and talk to us. We can’t get them preapproved.’”

ABC News in Australia. “A report by a property think tank argues houses prices in Melbourne are being kept high by tens of thousands of homes that appear to be unoccupied. Prosper Australia says its findings challenge the common belief that a shortage of homes is helping to drive the surge in rents and property prices. ‘For residential properties we found that about 12,500 properties did not use any water whatsoever over 2012,’ said Prosper researcher Philip Soos. ‘And about 64,000 use less than 50 litres of water a day.’”

“Given that average daily water use per person is 161 litres, Prosper says those properties using less than 50 litres a day were probably vacant. Mr Soos says many owners are holding onto empty properties because the net return from rent is so low as to make it not worth the time and effort, while the real profit is to be made from rising property values.”

From Daily Life in Australia. “Reading the newspaper lately has felt like being trapped in an infernal Sydney dinner party: ‘There’s never been a better time to sell!’ ‘Do you think that it’s better to buy in the east or inner-west?’ ‘Did you hear about the property lawyer who bought his unborn grandchildren their own gated community?’”

“Now, in the midst of yet another hysterical burst of investment greed, we’ve started to count the costs: an entire generation locked out of the property market, first-home buyers pushed out of the inner city by baby-boomer investors, and carnivorous foreign investors consuming our land. Call me treasonous, but to me the great Australian dream has always seemed like more of a nightmare: mortgaged up to your eyeballs in a house you never get to enjoy because you’re too busy working to pay off the mortgage.”

“Civilisation has arrived at a very dark point when people in the richest country in the world cannot afford to put a roof over their heads. We constantly complain that our rent is too high or that the property is over-valued and yet we do nothing about it. We need collective pressure placed on our government to behave like most other governments in Europe: restrain greed, protect low-income families from housing insecurity and in so doing, liberate us from the conversational tyranny of the housing market.”

Bits Bucket for November 11, 2013

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