February 10, 2015

This Normalising Is Not Good For The Fangnu

From Business Vancouver in Canada. “A new report from McKinsey Global Institute is warning that household debt levels are dangerously high in many developed countries, including Canada. The report calls for more action to reign in both household and government debt and to cool overheated housing markets. ‘We have to take note when a study compares us to Greece,’ said Chris Catliff, CEO of BlueShore Financial Credit Union, referring to a measure included in the report showing that the rate of Canada’s increase in debt-to-income has been second only to Greece from 2007 to 2014.”

“Wealthy immigrants from other parts of the world, such as China, the Middle East, Europe and the United States, continue to buy homes in Vancouver, he said. Vancouver’s real estate market might be in trouble if those wealthy immigrants were to stop coming to Vancouver and parking their money in houses. ‘We would be significantly hurt by it if it happened for a long period of time, but what you see in other jurisdictions is, they may stop coming, but will they sell?’ he said. ‘The house might be empty but it doesn’t mean it’s going to be sold.’”

This is Money in the UK. “Shares in some of the UK’s leading property names fell today as it emerged hedge funds have been taking out short positions against the London housing market-focused stocks in the belief that the London residential property market has peaked and is now headed for a downturn. The bets are a wake-up call for investors who have been riding the property wave over the past decade. There are now very real fears the capital could be left with an excess of expensive homes and no foreign buyers to snap them up - 54,000 luxury homes are planned or under construction in London, while just 3,900 were sold last year.”

“On average, the price of a flat fell by 9 per cent in central London between January 2014 and January 2015. Over the same time, the number of flats for sale in central London has increased by 64 per cent. Meanwhile since November 2013, the price of a typical flat in Belgravia has fallen 20 per cent, from £1,995,000 to £1,600,000.”

The Star Online in Malaysia. “There is growing evidence of softening demand for residential property priced at RM1mil and above, as buyers turn cautious amid a rising glut in the higher end of the market. ‘Currently, there is an oversupply of high-end condominiums and offices,’ VPC Alliance chartered surveyor and director James Wong said. This was evident, he said, as property developers had been launching fewer projects in recent months. Wong also said there had been a rise in property auctions, while banks were getting stricter in approving housing loans. ‘We have been seeing correctional signs since the fourth quarter of 2014. Coupled with the oversupply, we suspect this will not be a good year for the property market,’ he said.”

The Australian. “The fall in the price of iron ore has ended an era of astonishing rents in the Pilbara, according to local MP Brendon Grylls. In one of the starkest signs yet that the resources boom is over, a house in the Pilbara mining town of Port Hedland was passed in at auction for $360,000 at the weekend after it was bought for $1.3 million just four years ago.”

“Mr Grylls says small business operators left the town of Karratha in droves at the height of the construction phase of the resources boom because they realised it was more profitable to rent their homes than try to make money from a business. Mr Grylls said he paid $1350 a week rent for a Karratha house that fetched $2400 a week in 2012. ‘This normalising is not good for the Sydney investor who bought a place in the Pilbara sight unseen because their adviser told them it would be good for their negative-gearing portfolio,’ he said.”

The International Business Times on China. “Breakneck economic growth in China’s megacities has driven housing prices to record highs, and has made finding an affordable home difficult for millions of young people who don’t come from wealthy backgrounds. In Beijing, the average price per square meter in residential real estate has tripled since 2000. There’s even a term in Chinese — ‘fangnu’ or ‘house slave’ — to describe people who remain at jobs just so they can continue to afford mortgage payments.”

“After roughly six months of searching, Xu and his fiancée still haven’t found a place. ‘Most people nowadays will choose to live in the outskirts of Beijing for a better price,’ Xu said. As housing demand in Beijing increased in the mid-2000s, dozens of developers began building on the outskirts of the city, offering brand-new homes at more affordable prices in addition to cheaper rental options for young college graduates. But with the chaotic traffic and vast distances in Beijing, that’s too far for Xu.”

“So he waits, lest he end up like a cousin who, he said, ‘bought two apartments on the border of Beijing and Hebei,’ far from the city center: ‘He can barely pay the mortgage every month and they’re not even living in either apartment now, because they are too far away from the city.’”

The Times of India. “More than 100 residents gathered at Sarvanampatti to protest against a private infrastructure and housing company based in Sarvanampatti on Saturday as the company failed to complete construction of apartments before the scheduled deadline in 2011. The Sahara City Homes was announced in the city in 2003 and people started booking homes in 2008. According to residents, more than 700 customers booked homes and paid 90% of the amount by 2010. ‘It has been four years and not a brick was laid after 2010,’ said Lakshmi Narayanan, one of the investors.”

“In 2010, the builders informed clients that the building is being extended to nine floors from four floors. The customers were informed about the interests and the fees involved. ‘But after we paid the amount, the construction was stalled,’ said Anil Kumar, a client. The situation is worse for several NRI investors as many have invested up to 1crore. ‘For a 3BHK flat I have paid 1.07cr but the company is neither refunding nor completing the construction,’ said Babu, who is from Singapore.”

Bits Bucket for February 10, 2015

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