December 1, 2014

A Sort Of Malinvestment

A report from AzerNews. “Business is developing so rapidly in Azerbaijan that special agencies after investments in real estate abroad have popped up. Home prices in Istanbul increased more than 24 percent in August from a year earlier, the fastest since 2010, according to Turkey’s Central Bank. Nusret Ibrahimov, CEO of MBA Group- a consulting company- believes that middle-class Azerbaijanis prefer real estate in Turkey or Eastern Europe. ‘There are just a few people in Azerbaijan who have the ability to buy expensive real estate, for example in Europe,’ the expert told local media. ‘As a rule, the Turkish real estate is budgetary and a stable option for the middle class. If you compare prices in the markets of Turkey and Azerbaijan, in general, Turkish real estate is cheaper.’”

“Elnur Azadov, Executive Director of the Azerbaijani Association of Realtors said although Russian, Ukrainian and other real estate markets in the neighboring countries do not maintain a competitive advantage compared to Turkey, Azerbaijanis with relatives or business in these countries prefer to buy real estate in Russia. ‘While the small middle class prefers the budgetary real estate in Turkey, rich Azerbaijanis buy homes in prestigious areas of Moscow region,’ he said.”

“Moscow´s resale apartment prices fell by 2.13% during the year to the first quarter 2014 - an 8% fall when adjusted for inflation. In September, dollar prices of apartments in Moscow lost 2.5 percent, falling from $4,988 to $4,863 per square meter.”

The National on the UK. “After years of spiralling property prices, activity in central London – the most popular overseas property market for UAE buyers – will slow to a grinding halt next year. Experts predict that a combination of factors will come together in 2015 to subdue what has been one of the world’s best performing and most attractive housing sectors for the past five years. ‘The growth for the last five years has been phenomenal but in the end you just can’t expect the market to keep on climbing like that,’ Yolande Barnes, director of world research at Savills, told The National.”

“‘The Middle Eastern investors we deal with want to be in London; they understand London and they want to be there for the long term,’ says David Godchaux, the chief executive of Dubai-based Core Real Estate. ‘A lot of our investors have been buying in London for many years and we expect them to continue to do so. Yes, there could be a bit of a slowdown next year, that is only to be expected, but we certainly do not expect Middle Eastern investors to sell up as a result or even to stop buying in the long term.’”

The Province in Canada. “Shelly Moffat doesn’t recognize her Kitsilano neighbourhood any more. The homes are empty. The streets are like investment portfolios. And Moffat believes that in this part of Vancouver families like hers are becoming historical artifacts. Moffat said that in April she and her two daughters were evicted from a rental home. An international buyer wanted to renovate the home, which they had lived in since 2010, for personal use. The home remains vacant in a scenario that reflects the escalating affordability crunch impacting Vancouver neighbourhoods.”

“‘Do I live in a zombie neighbourhood?’ she said. ‘I’m living with a bunch of empty houses, and for-sale signs, and construction sites. You literally can visibly see the international buyers and realtors cruising the street and taking down house numbers,’ Moffat said.”

From Mortgage Broker in Australia. “Well-placed sources in the Australian mortgage and property space have revealed the magnitude of the systemic issue of foreign nationals buying existing property in Australia. Ausin Group argues that since 2006, the Foreign Investment Review Board (FIRB) has not prosecuted a single overseas buyer for purchasing a second-hand dwelling. ‘The FIRB’s policy stipulates that overseas buyers can only buy new properties or newly-completed dwellings,’ Ausin Group managing director Joseph Zaja said. Ausin Group, which has offices in Beijing and Shanghai, confirmed that clients are starting to reject new housing stock as ‘the word is now out’ that Australia’s FIRB rules are a joke. ‘Their friends and family are purchasing second-hand homes with no barriers to entry and they too are now moving onto this bandwagon,’ Mr Zaja said.”

“Speaking at a media briefing in Sydney last week, Credit Suisse senior adviser, Robert Parker, said foreign investment is now a ‘huge issue’ in London. ‘A number of surveys in central London have looked at new property developments in certain London boroughs and found that the majority of those apartments were not occupied,’ Mr Parker said. ‘Whether it is wealthy Russians or wealthy Greeks or whatever, it doesn’t matter what nationality they are, they are all coming in and buying this as an investment and leaving it unoccupied,’ he said. ‘I think you have a similar issue here.’”

From Australian Mining. “An analyst out of China has warned the price of iron ore could fall to lows of $US50 a tonne. Shanghai Jianfeng vice-president Liang Ruian said oversupply coupled with a slowing property market in China could mean the price rout lasts for 10 years. Speaking to The Australian Liang said the stagnate state of the Chinese real estate market would have a devastating effect on the steel industry.”

“‘The inventory of housing is up to a couple of years, while in China the rapid development of the e-commerce market is having a big impact on the sales and rents for the commercial real estate market. I think the golden ten years that we have had in the real estate market in China is over,’ Liang said. ‘The crash of the real estate market means the crash of the steel market.’”

From Business Insider. “The Chinese economy has wasted $6.8 trillion (£4.3 trillion) in investment during the last four years, according to a report from China’s National Development and Reform Commission and the Academy of Macroeconomic Research, written up here in the Financial Times. Even in the enormous Chinese economy, that’s practically half of the investment between 2009 and 2013, the period covered by the investigation.”

“According to the FT, the authors are blaming the investment on low interest rates and other forms of government stimulus, suggesting that there’s been a sort of malinvestment. The problem is exacerbated by graft and corruption among the country’s autocratic elite, which skims off the investment whether it’s wasteful or not.”

Bits Bucket for December 1, 2014

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