October 13, 2014

Like The Locusts, Destroying Everything In The Fields

The Daily Breeze reports from California. “With income inequality growing at home and abroad, Manhattan Beach’s housing market is seeing record numbers of home-buyers paying in cash. More than 30 percent of homes that sold for more than $1 million this year were purchased without financing. Several South Bay real estate agents said that they have seen an increase in the number of foreign investors this year. Often parents with children at Southern California schools will buy a home as an investment, knowing they can flip the home for a profit in four years, said Realtor Steve Goddard.”

“International buyers accounted for $92 billion in home sales in the 12-month period that ended in March, up from $66 billion in 2010, according to the National Association of Realtors. ‘It’s basically a world market that these sorts of properties are trading in. It’s not a local market anymore,’ said Richard Green, director of the USC Lusk Center for Real Estate. ‘As expensive as Manhattan Beach is for us, compared to China, compared to Singapore, compared to Hong Kong, compared to London, it looks like a bargain.’”

The Globe and Mail in Canada. “Demand from wealthy migrants from mainland China such as Ms. Hong has helped make the Vancouver area the most expensive real estate market in Canada. The average price of a single-family detached home is $1.26-million, higher than any other Canadian city. ‘In my opinion, I think it’s good for the economy,’ says Qiqi Hong, noting that the number of Chinese residents on her street has soared in recent years and that the local businessman she bought her house from made a cool $1.5-million more than he originally paid. ‘In Vancouver, the house prices are perfect.’”

“The Vancouver housing market has been less kind to Brent VanderRose and his wife Amy, who are both nurses. A few years ago, Mr. VanderRose purchased an older one-bedroom, 643-square-foot condo in Vancouver’s Fairview neighbourhood for $385,000. He and his wife wanted to start a family there, but they could not afford a bigger place nearby. The VanderRoses finally decided on a $585,000 detached, three-bedroom home in the suburb of Surrey, but couldn’t sell their older condo before the move-in date. They rented out the new house at a $500-a-month loss. They finally sold the condo at a loss for $335,000. They are expecting another child, but say they are stopping at two – because of housing costs.”

The Daily Mail in the UK. “A stampede of Chinese and Russian investors is snapping up British homes aimed at families and first-time buyers. Michael Sacks, of Sequre Property Investment, said foreign investors buying homes above their real value were ‘corrupting the market.’ He said overseas investment had seen prices for two-bedroom apartments in Manchester go ‘through the roof.’ ‘We know that Chinese investment companies are securing entire developments and then selling them to investors overseas for significantly more than they are actually worth, 25 to 35 per cent more in some cases,’ he said.”

The Sydney Morning Herald. “Chinese investors are aggressively lifting their Australian residential and commercial real estate investment at a time when the Reserve Bank is warning bubbly property markets could be hit with a price correction. Melbourne’s skyline will blossom with another 42 new skyscrapers to cater for demand if the state government approves all current proposals over 25,000 square metres on its books when there are already fears of a big oversupply. China has been booming for a decade but is now showing signs of slowing. ‘Now in our own market, more or less, we have reached certain capacity,’ says Adrian Sum (who) controls the purse strings of one of China’s largest property developers.”

“Its housing is in oversupply. The number of apartments in Shanghai is expected to double next year to total 1.1 million square metres. One new project in Shanghai’s redevelopment precinct is the size of both Melbourne and Sydney’s CBDs put together, says Savills’ Hong Kong-based research director Simon Smith. As a result, house prices, which rose to record highs for five consecutive years, are now experiencing a sharp deceleration. ‘Their main hurdles are lack of expertise and capability, so they are just dipping a toe in the market. They want to get practice,’ Mr Smith says, and they can ‘afford to fail.’”

The Associated Press. “By road, the little apartments are nearly an hour from central Hong Kong and the protests that have swept through it. Twice that long if you take the subway. But the apartments are also affordable, at least in the way that any real estate can be affordable in one of the world’s most expensive cities. The cheapest sell for 2.9 million Hong Kong dollars, or about $375,000. They are slightly larger than the average American kitchen. Young couples are desperate to buy them.”

“So when student-led pro-democracy protests began roiling Hong Kong two weeks ago, realtors saw a reflection of something else: the frustrations of a generation increasingly unable to afford the lives their parents had. Wealthy tourists from mainland China are regularly dismissed here as loutish boors who cut in line, spit constantly and flaunt their newfound wealth with newfound arrogance. To the people of Hong Kong, the rich shoppers are ‘wong chung’ — locusts — who buy whatever they can. ‘They are like the locusts, destroying everything in the fields,’ said Chan, the protesting student.”

From Bloomberg. “Rating companies say the risk of defaults in China has risen as Premier Li Keqiang pares implicit guarantees for local-government financing vehicles. The State Council said Oct. 2 that the finance arms can no longer raise funds for local authorities, and that the governments have no obligation to repay debt that wasn’t raised to fund public projects. ‘The market is entering a new era,’ said Chen Jianheng, a Beijing-based fixed-income analyst at CICC. ‘The time when everybody bought LGFV bonds for high returns without considering credit risks are gone. For any sales in the future, investors will apply a different set of criteria.’”

Want China Times. “The country’s economic slowdown and a slump in coal prices is taking its toll on the coal-rich areas surrounding the northern Chinese cities and township of Ordos, Ningdong and Yulin, with coal-mining and trading businesses in the region beginning to terminate their coal-related operations and turning to other business sectors. The ‘Energy Delta,’ previously dubbed an economic miracle, has now been overshadowed by the drop in housing prices, population outflows and loan problems, reports the Guangzhou-based 21st Century Business Herald.”

“During the rapid growth era, private loans mushroomed and investments were made in the real-estate market, given that housing purchases are one of few channels for people wanting to manage wealth acquired from coal mining.”

“However, the slump in coal prices triggered a fall in housing prices, which then sparked disputes between land developers and housing buyers over losses caused by the housing price drops. People who had bought property when the price was high complained about the sudden price drops and are seeking refunds or compensation from local governments or developers, according to the report.”

Bits Bucket for October 13, 2014

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