October 6, 2014

Finding Themselves In A Bubble Situation

The Strait Times reports from Singapore. “If the private property market is suffering price pangs, then those seeking to offload their public housing flats are under even greater pressure. Housing Board resale prices are still falling more steeply than those of private homes, official flash estimates showed. Compared to a year ago, HDB resale prices have fallen 6 per cent and private home prices, 3.8 per cent. R’ST Research director Ong Kah Seng thinks private home prices may start falling faster than HDB resale prices in the next six to nine months. The demand for private property could dry up, he said. ‘As home loan curbs continue, aspirations have to take a reality check.’”

The New Zealand Herald. “Affordability issues for buyers have kept asking prices for properties nationwide at subdued levels for the fifth consecutive month, according to the inaugural Trade Me Property Price Index. The West Coast had the weakest result with a decline in asking prices of 9.5 per cent year-on-year. ‘In recent months we’ve seen that pace of increase all but stutter to a halt,’ said Trade Me Property Nigel Jeffries. ‘The trend is most noticeable in Wellington where larger houses showed a year-on-year decline of 5 per cent, despite the overall market in the capital ticking up nearly 7 per cent.’”

“Anecdotally, Jeffries has heard from real estate agents that many Wellington baby boomers have been selling the family home in central suburbs and buying apartments in the city but this oversupply of larger homes had depressed prices.”

The Sydney Morning Herald in Australia. “Experts say negative gearing is having a greater impact on Australia’s rapidly rising house prices than Chinese investment. Saul Eslake, chief economist from Bank of America Merrill Lynch, said negative gearing was contributing to the inflation of property prices to the point where Australians could find themselves in a ‘bubble situation.’”

“But Grattan Institute chief executive John Daley said Australia’s planning policies have the biggest impact on house prices – much bigger than foreign investment or the tax regime. ‘The numbers on foreign investment are very difficult to gather, but it certainly looks as though they are not the major source of investment in Australian housing,’ Mr Daley said. ‘The essential problem is that land prices are very high, and land high prices are very high because land is a scarce resource and we’re making it much more scarce by making it very difficult to subdivide it.’”

Perth Now in Australia. “The latest RP Data Pain & Gain report shows that only 4.8 per cent of homes in Perth re-sold for less than the previous purchase price but some areas fared worse than others. Sellers in the Mandurah (18.9 per cent) and Subiaco (17.2 per cent) councils, as well as the Shire of Murray, recorded the highest proportion of loss-making property transactions in the June quarter. The average gross loss in Perth was $88,238 and the average gross gain was $242,754 — compared to the national figures of $63,097 and $225,830 respectively.”

“Regionally, WA recorded 16.8 per cent loss-making resales, coming fourth behind regional Queensland (21.6 per cent), Tasmania (21 per cent) and South Australia (18.4 per cent). After WA came regional ACT (11.3 per cent), NSW (10 per cent), Victoria (8.1 per cent) and the NT (6.4 per cent). ‘In the regional market you are seeing some all-right conditions in the coastal lifestyle market but obviously that is off set by the mining areas. I would not be surprised to see both of those figures trend a little bit upwards in both Perth and regional WA,’ said RP Data senior analyst Cameron Kusher. Mr Kusher said this meant they would have a higher level of loss-making sales.”

From Bloomberg. “Underlying the test to China’s control of Hong Kong with pro-democracy protests over the past 10 days are economic tensions that have fueled social unease and concern over the city’s place within the nation. Hong Kong homes are the world’s least affordable, costing 14.9 times household incomes in 2013, according to the Demographia International Housing Affordability survey.”

“There’s a perception that the rich mainland Chinese ‘are here to snap up property, leaving the Hong Kongers to fight for scraps,’ said Dylan Loh, a research analyst studying Chinese politics and international relations at the S. Rajaratnam School of International Studies in Singapore.”

The Business Standard on India. “Today, over 200,000 apartments are under construction in Greater Noida alone, of which 40 per cent are yet to be sold, according to data compiled by Jones Lang LaSalle Property Consultants (JLL). Housing sales have declined for seven straight quarters, while private developers have completed only 9,690, or 5 per cent, of their promised targets. The significant illiquidity in the market has meant that average property prices have risen barely 14 per cent over seven years.”

“Almost 70 per cent of commercial space in Greater Noida is unoccupied, according to JLL data. ‘My family invested a large amount of money in the project because we were so impressed by this presentation,’ says Colonel (retd) Gulshan Joneja, who paid a premium on the commercial space for an assured return scheme that guaranteed monthly payouts till completion. In January this year, Joneja says, his payments suddenly stopped.”

“D P Singh, who retired as a civil engineer from the Delhi Development Authority, also invested his savings in the project. ‘I was living off the monthly payments from the assured return scheme,’ he said, ‘We are in a very difficult place.’”

Bits Bucket for October 6, 2014

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