November 25, 2014

The Runaway Property Boom Looks To Be Over

The Mirror reports from the UK. “Foreign buyers accounted for almost three-quarters of home purchases in central London in 2012, according to a report by one property group, and more than half were snapped up by buyers from Singapore, Hong Kong, China and Malaysia. But many of these high-end homes are bought by wealthy foreign-based investors and left empty. Labour MP Sadiq Khan said: ‘Londoners are being priced out of the housing market by an influx of foreign buyers, who see London property as an investment and in many cases leave properties sitting empty as ‘ghost homes’.”

The Vancouver Sun in Canada. “Senior economist Robin Wiebe, a former analyst at the Canada Mortgage and Housing Corporation, says it’s true, Vancouver’s prices are out of whack with personal incomes. Wiebe says the only things that could reverse the escalation of West Coast prices is a significant downturn in China’s economy or a move by Beijing to restrict the ability of its citizens to take money out of the country. The idea of Chinese buyers being in some way responsible for higher housing prices in the city is controversial. Vancouver’s politicians and realtors, fearing a public backlash, have long been downplaying the notion.”

“The cat now appears to be well out of the bag. As Wiebe says, ‘If China’s economy slows, that has the potential to cool Vancouver’s housing demand, stall sales and price growth.’”

The Telegraph on China. “China has abandoned its policy of monetary tightening, cutting interest rates for the first time in over two years to head off a corporate crunch. China is uncomfortably close to deflation, made worse by the plunge in the Japanese yen, and by China’s quasi-peg to the soaring US dollar. The country is importing a contractionary policy at a time when its housing boom is already wilting, with prices down for the last six months.”

“Wei Yao from Societe Generale said bad loans are rising at a clip of 50pc a year. ‘The worst is still to come and banks know it. Chinese banks have doubled their loan loss provisions,’ she said. ‘But the bigger concern lies with state-owned enterprises (SOE). We estimate SOE debt at close to 100pc of GDP, twice as much as private corporate borrowing. Given that banks have always preferred SOEs, a disproportionally large part of banks’ balance sheets is probably locked in to non-performing SOE loans,’ she said.”

The Sydney Morning Herald in Australia. “The heady days of Sydney’s runaway property boom look to be over, with numbers of buyers at open homes and auctions halving in recent weeks. Experts say the flood of listings in November has diluted the number of buyers searching for homes. ‘We’re certainly seeing a waning of house price growth in Sydney,’ said Domain Group’s senior economist, Dr Andrew Wilson. ‘There is no surge in activity in our economy that’s pushing up real incomes to give us the capacity to keep bidding up house prices.’”

The Indian Express. “The weighed average cost of a new apartment in tony South Mumbai has soared to a dizzying high of Rs 7.5 crore, leading to peaking of an inventory pile-up to such an extent in the area that it will take more than eight years for many units to get sold. ‘The kind of pricing of super-luxury residences is unaffordable even to the high-end buyers who are, as it is, minuscule as compared to the spate of launches in the segment,’ said Paras Gundecha, builder and former president of Maharashtra Chamber of Housing Industry.”

Gulf Business on Dubai. “It’s been a year since the Dubai real estate market began to slowdown. Property agent Knight Frank reports the amount invested in Dubai property in the first half of 2014 was less than half that invested in the same months of 2013. However, price falls have been fairly rare until recently. Motivated-sellers, as they are known in the trade, now find that they have to reduce their prices to find buyers in all but the most popular locations.’

“Residential units available for rent or sale hit 192,000, admittedly a figure that multiple listings would net down to a much lower amount. In mid-October, that figure was down but still high at 164,000. It is impossible to estimate exactly how many empty units for rent or sale this now represents. But this could easily be 30 to 40,000 when netted out. There are also around 15,000 units being added annually to this inventory by developers, according to the survey. There has also been a marked deterioration in the economic outlook for Dubai over the summer.”

The Star on Kenya. “Real estate investors’ interest in building and buying bedsitters is increasing because the units offer a fasteer return on investment and higher financial liquidity. High mortgage rates have led to a slowdown in the property market over the last few months as potential home owners delay buying decisions waiting for interest rates and prices to reduce. Consequently, property developers are left with a cash hitch and glut in high-end and middle-income units, prompting them to venture into bedsitters which are easier to sell or rent.”

“While smaller houses always have higher demand, bigger houses can stay empty for months, said Property expert Clifford Mwenda. ‘I have four big housing units that I have been pushing in the market for a while, without success. I attribute it to the prices we have quoted, which are high and cannot be compared to bedsitters,’ he said. ‘As an investor, the bank will never take away your property. You are always liquid, unlike those who spend too much on expensive houses and are unable to sell them,’ he says.”

The Daily Express in Malaysia. “In a project located in Kota Damansara, Selangor when the first block was launched in 2012, all the 400-odd units were sold in less than a week. When the second block was launched, the next 400-odd units took a longer time to sell. The developer has launched the third and final block at about RM1,200 per sq ft but there were only 80 buyers after its launch early this month. Das Gupta the principal of Stocker Roberts & Gupta Sdn Bhd says the lettings market is very weak and this weakness is evident in all sub-segments of the property market.”

“Many of the sectors are ‘flat’ and many buildings – both office buildings and condominiums – are empty. Owners will be forced to reduced rental, he says, referring to the overall property market. He says the paltry capital appreciation was evident since a year ago and he expects the situation to persist one more year, at the minimum. Says Gupta: ‘Never in the last 20 years have I seen so many bungalows in Damansara Heights – one of Kuala Lumpur’s premium residential suburb – up for sale, with owners asking realistic prices.’”

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