September 3, 2014

Whoever Buys Will Lose

Some housing bubble news from around the world. Globe and Mail in Canada. “Calgary’s tight housing inventory is starting to ease as more properties hit the market. Migration levels, while still strong, appear to be easing, said Ann-Marie Lurie, chief economist at the Calgary Real Estate Board. ‘We’re starting to see that listings are improving, so we’re moving out of this seller’s territory, which is really what’s been causing a lot of those high price gains,’ she said. For now, Ms. Lurie said she’s not hearing any concerns over a potential glut. ‘But it depends on how many are constructed,’ she said.”

“Calgary has so far escaped dire warnings that have characterized condo markets in other Canadian cities, namely Toronto. But developments are picking up: construction on Avenue, a two-tower 319-suite project in the city’s west end, is under way. Meanwhile, two massive residential towers are planned on the downtown’s western edge.”

The Helsinki Times in Finland. “Helsingin Sanomat on Sunday attended nearly 40 property viewings in Helsinki, Espoo and Vantaa. The viewings suggest that the uncertain economic climate continues to affect the real estate market, although some real estate agents blamed Sunday’s low turnout on the sunny weather. ‘I think the general market and economic conditions have had an effect. People postpone buying a house and think carefully about their decisions,’ said Matti Lehtelä, a real estate agent at Huoneistokeskus while hosting a viewing of a relatively new flat in Lauttasaari.”

“No one turned up for the viewing, despite the fact that the asking price for the five-room flat has already been slashed by 100,000 to 593,000 euros.”

Bloomberg on the UK. “More Britons are pulling the plug on home purchases amid signs that the market’s 16-month rally is coming to an end after banks tightened mortgage standards. ‘We saw a sharp increase in the number of buyers who made a generous offer in order to secure a property, then changed their minds and pulled out amid fears of an imminent property market collapse’ in August, said Donna Houguez, a market analyst for residential property investor and data provider Quick Move Now.”

“Buyers ‘aren’t being as forthright about their earnings,’ with late rejections from lenders proportionally higher among more affluent buyers, said Clive Rutland, director at Southampton-based Rutland Chartered Surveyors. ‘Previously, there were assumptions about people that are not now being made. The banks are cross checking people’s outgoings from different sources and now it’s all coming out.’”

From Businessweek. “Brazil’s residential real-estate bubble may deflate slowly, not pop, as speculators abandon the market. Speculators began to turn away from real estate to put their money into fixed income once policy makers began pushing up the Selic, as Brazil’s benchmark interest rate is known, according to Marcel Kussaba, the head of equity research at Quantitas Asset Management. ‘The stake of speculators in the acquisition of homes in past years was underestimated,’ he said. ‘But now that the Selic is high, those investors prefer options with better returns than real estate.’”

The Herald Sun on Australia. “Speaking at a business lunch in Melbourne, Australia and New Zealand Banking Group chairman David Gonski said it was difficult to predict when housing bubbles would emerge. But inevitably, there would be ‘corrections’ in the market, he said. Mr Gonski’s comments come amid fears a bubble is building as demand in Melbourne and Sydney surges. ‘Over time — there comes a time — there will be a correction,’ Mr Gonski said. ‘I don’t know whether it is tomorrow, at five o’clock this afternoon or in three months. Anyone who thinks that prices will always go up is a fool.’”

The Australian Financial Review. “A proposal to hit Chinese property ­buyers with extra stamp duties or fees is under active consideration by a ­parliamentary committee charged with finding a solution to the nation’s housing affordability crisis. With the busiest season for real estate sales about to start, community concern is growing that cashed-up mainland Chinese buyers are pricing Australians out of their own market.”

“The hearing heard from real estate agents that many Chinese buyers regarded the potential maximum $85,000 penalty for illegally buying an existing home as a ‘cost of doing ­business’ in Australia. Demand from Chinese buyers is expected to stay strong in coming years – particularly in the upper reaches of the market – as they move to ­shelter capital from the Chinese government and provide housing for their children’s education, according to industry experts.”

NTD TV on China. “Local governments in China have lifted restrictions on house purchasing. Hangzhou government even told the local People’s Bank to lower mortgage deposits for second house purchases. Duan Shaoyi, MBA instructor at Beijing Normal University, ‘the new policy may ease the issue a little, but can’t change the trend of the price drop. People all know that the real estate is going to collapse. The market prices are based on supply and demand. When supply is more than demand, nothing can stop the price dropping.’”

“Experts believe nationwide price drop will come soon. 20 to 30% slashed prices will appear. In fact, Beijing already had properties with a 20% price drop in the middle of August. On August 28, state-run Xinhua published a blog article ‘A Director of Housing Management Department Said Houses Are Horribly Too Abundant!’ In the article, the director gave 3 reasons for house prices dropping. Too many house supplies; sales slump; and many developers quietly lowering their prices. The director exposed that the biggest price drop has reached 50%.”

“Chinese economic commentator, Niu Dao, says house prices should have reduced down long ago. The Chinese Communist Party tried everything to save the market in the past years when the prices dropped. Such as using banks to release more money. Niu Dao, ‘but such money releasing doesn’t work now. Once people get out of trouble, they’ll escape to the US. Those who buy houses last will suffer devastating blow. Whoever buys will lose. The bubble is too big, and can’t be supported by a limited purchasing power. In the past, you could sell a house soon after you bought it, but now it’s impossible to sell it. No one would take it.’”

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