September 30, 2014

The Price Is Too High, Will Keep Going Up

A report from China Daily. “China will abolish all home purchase restrictions in the next 12 months and cut at least one policy rate in the first half of 2015 or before, said Shen Minggao, head of China research with Citigroup Inc. ‘Look around the world. No country keeps monetary policy unchanged when a correction starts in the property sector,’ Shen said in an interview. Most people agree that China’s property market is cooling, but they are divided about how the government should react. Some said more easing would further inflate the property bubble and lead to a systemic financial crisis. ‘Sure, there is a bubble, but the bubble does not have to burst now,’ Shen said.”

The Australian. “Sydney couple Daniel Yuen and Hua Ping Xu recently purchased a two-bedroom apartment in inner-city Sydney, and Mrs Xu said while prices were ‘ridiculous’ she had confidence in the market. ‘Honestly, my husband and I still believe the market will keep going up, we definitely think the price is too high, which means a lot of first-home buyers will struggle to afford to buy, but it is what it is,’ she said.”

“The couple paid $885,000 for the apartment in the Mezzo development in Glebe, but haven’t decided whether they will move into the unit once it’s completed.”

Today Online on Singapore. “With more than 20,000 non-landed private homes expected to be completed in each of the next two years, yields are expected to be further compressed. Vacancy rates of non-landed private homes have already been rising for five straight quarters to 8.3 per cent in the second quarter of this year. ‘We have noticed that many people are choosing to rent first and hoping that prices will come down later on. They sell off their properties and rent before getting their next home. We are also seeing people signing shorter leases because they are hoping for rents to come down,’ said Mr Chris Koh, director of property firm Chris International. ‘What we are facing now is oversupply that’s going to put a toll on the market because tenants will be spoilt for choice.’”

The Malaysian Reserve. “Iskandar Malaysia, the main southern development corridor in Johor, is seeing the formation of a housing bubble as a result of Chinese developers that have been flooding the property market with masses of projects. RHB property analyst Loong Kok Wen said the formation of a bubble could be seen in Iskandar Malaysia.”

“‘We could see a formation of a bubble as property agents are offered 5% to 8% of commission from the usual 2% to sell the property. The ones that are not doing so well are the high-rise properties in which there is oversupply by the Chinese developers, which has led to a supply glut,’ said Loong. Loong, however, cautioned that it is not necessary property prices will fall as the ability of the Chinese developers to hold on to the property will be dependent on their financial strength.”

And from AFP. “Ireland is mounting a spirited fightback from economic collapse but as recovery takes hold, a housing shortage has sparked talk of another dangerous property bubble. Despite almost two years of trying to find a family home with her husband and their young baby, Karen Creed has been unable to find an affordable and suitable property. ‘I’ve witnessed panic bids taking place on a first viewing and I got so caught up in the panic at one point that I was going to put a deposit on a house before I had even seen plans or stepped inside a show house,’ she told AFP.”

The Telegraph. “On a global level, growth is being steadily drowned under a rising tide of debt. The conclusion of the latest ‘Geneva Report,’ an annual assessment informed by a top drawer conference of leading decision makers and economic thinkers of the big challenges facing the global economy, aptly titled ‘Deleveraging? What Deleveraging?,’ points out that far from paying down debt since the financial crisis of 2008/9, the world economy as a whole has in fact geared up even further.”

“Reduced mortgage finance during the banking crisis temporarily succeeded in capping and partially reversing the growth in UK household debt. Yet with a reviving housing market, these reductions may have come to an end. In the meantime, the government has been piling on borrowings like topsy. The UK remains the fourth most highly indebted major economy in the world after Japan, Sweden and Canada, with total non financial debt of 276pc of GDP. The US is not far behind with debt of 264pc of GDP.”

“The real stand-out is China, which since the crisis began has seen debt spiral from a very manageable 140pc of GDP to 220pc and rising. The speed of the increase, combined with the fact that it is largely private sector debt, makes a hard landing virtually inevitable. The only way the world can keep growing, it would appear, is by piling on debt.”

Bits Bucket for September 30, 2014

Post off-topic ideas, links, and Craigslist finds here.