September 23, 2014

A Scare Of Price Correction

Global News reports on Canada. “It’s no secret that renting or buying a home in Vancouver is extremely unaffordable. The reality is that a lot of homes and condos in Vancouver are purchased, and then sit empty for years. Romy Lindner, owner of rental agency ‘Happily Ever Homes,’ says despite Vancouver’s incredibly low vacancy rates, several downtown neighbourhoods are ‘condo ghost towns.’ ‘Coal Harbour is at about 25 per cent vacancy right now,’ says Lindner. ‘Even when you are driving over the Lions Gate Bridge, you can see lights out all over the place.’”

“Lindner says 48 per cent of investors are foreign, and many owners want to leave the units as-is, not wanting to deal with the hassles of being a landlord. ‘They’re here for about three months out of the year, so it’s just easier to keep them as new,’ she says.”

From Perth Now. “Australians are under more financial stress as the cost of living goes up, and wages don’t rise as much. The level of Dun & Bradstreet’s consumer financial stress index is expected to reach 25.3 points by the end of September. That level is up from 18.4 points in the June quarter and is the second highest level in four-and-a-half years. Personal debt agreements, a precursor to bankruptcy, in Queensland had jumped 33 per cent in the second quarter of the year compared to one year earlier. Personal insolvency activity in Queensland was also the nation’s second highest.”

“Dun & Bradstreet’s director of consumer risk solutions, Steve Brown, said it was well known that Australians carried a large level of personal debt, but most of that was related to investment in housing, which was generally viewed as positive. ‘What’s particularly worrying is that this rising stress is coming at a time when we have very low interest rates and a relatively steady jobs market,’ he said.”

The Straits Times on Singapore. “The property market’s woes have spread from the luxury sector to more modestly priced homes on the city fringe as new loan curbs keep buyers in check. Unsold units are piling up in areas such as Bukit Merah, Kallang and Marine Parade, with developers forced to dangle big discounts to move homes. ‘Developers of suburban condos have not needed to slash prices as most HDB upgraders find launch prices of about SG$1,000 per sq ft (psf) affordable. But developers of RCR non-landed homes have had to cut prices to fit the total debt servicing ratio (TDSR) limits of buyers,’ said R’ST Research director Ong Kah Seng.”

“Alex Residences in Alexandra and Sky Vue in Bishan, which were both launched in the second half of last year, have sold at average prices of SG$1,640 psf and SG$1,576 psf respectively, ‘way below (the prices of units in) the nearby projects launched before them, before TDSR,’ he said. As at the end of last month, Alex Residences had sold 214 of 429 units and Sky Vue 504 of 694.”

The Economic Times on India. “The rapid rise in the stock market since the new government was formed has taken the sheen off real estate, where investments have not only dropped but investors are trying to monetise their existing assets, creating a scare of price correction. Prices of new residential projects in the National Capital Region, for instance, was down 10% in June this year compared to a year ago. In Pune, it was down 25%, while in Bangalore it remained stagnant. Unsold inventory levels at the end of June 2014 stood at 765 million sq ft or about 7.6 lakh apartments, which would take about 35 months to be sold at the current pace of sales.”

“Pankaj Kapoor, managing director of Liases Foras, said the downward pressure on property prices today is pushing investors away from real estate. ‘They see very little hope of a turnaround any time soon.’”

Mingtiandi on China. “94 people were detained in a growing funding scandal involving real estate developers and private lenders in the northern Chinese city of Handan recently as a slowdown in housing sales exposed risky funding practices. A report in the official Xinhua news agency today said that government work teams had been sent in to investigate thirteen local real estate developers in the city in southern Hebei province after a total of thirty-two property firms illegally raised RMB 9.3 billion ($1.5 billion) in funding for new projects in Handan.”

“The fall off in housing demand meant big trouble for Handan Golden Century, which was also the guarantor for a trust product launched during July by Sino Australian ­International Trust Company (SATC), a shadow banking entity which is nearly 20 percent owned by Australia’s Macquarie. Since Handan Golden Century defaulted, there has been a widespread run on private trusts in the city as individual lenders attempted to collect their funds out of the loosely-regulated shadow lenders.”

“A staffer from a trust company who spoke to Xinhua attempted to explain the breakdown in the company’s financing. ‘Starting last year, bank would no longer give us loans. If we could still get bank loans we would not need to turn to personal financing,’ said the employee on condition of anonymity.”

Bits Bucket for September 23, 2014

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