April 9, 2015

The Way To Enlightenment

The New Zealand Herald. “It is hard to know what I am more excited about this week, our dollar or our houses. Records all over the place. Barfoot & Thompson, who sell the bulk of Auckland’s homes, saw an average price of 776 grand. And in one of those lines with an appropriate amount of flourish, they said that ‘never had there been a March to compare’ to the month just past. I, like so many, am obsessed with housing, but unlike so many I have loved every bit of it. With the possible exception that young people are being locked out.”

“What the house prices represent is not dissimilar to what the dollar represents: success. People want what you’ve got, they want the houses because they have decided to live here, or they feel confident enough to borrow more money because their jobs are going well and they want a bigger or better place, or they want a second home. The dollar is on a roll, housing is on a roll, we’re on a roll. These are golden days.”

The Cambridge News in the UK. “Hundreds of new homes in Cambridge could be standing empty having been snapped-up by foreign investors, it is feared. An investigation by the News has found so-called ‘buy-to-leave’ investments could be rife in Trumpington, which has seen unprecedented housing growth in recent years. Just under 1,700 new homes were completed in the ward in the south of the city between 2008 and 2014. But numbers on the electoral roll have only risen by around 900 over the same time period.”

“But an overseas investor considering buying property in Cambridge insisted he is not doing it just to make a quick buck. The investor, who asked not to be named, is a global traveller with work and remains a frequent visitor to the city. He hopes his children will study in Cambridge one day. He added: ‘Walking down the alleys in Cambridge, I feel like I’m travelling back in the past. Many of my international friends, they feel that Cambridge has something very unique and they rate it the best city in the world, even though they travel a lot.’”

Business Vancouver in Canada. “From Albertan black gold to globetrotting wealth to lucky heirs, big money is flocking to Vancouver real estate and fuelling huge price increases that show no sign of stopping, according to Ross McCredie, the CEO of Sotheby’s Canada. The high-end real estate markets in Vancouver, Toronto and Montreal are all ‘heavily influenced’ by international buyers, according to the report. Buyers from China dominate in Vancouver, from China, Russia and the Middle East in Toronto, and from the Middle East, China, Europe (especially France) in Montreal.”

“While some observers have called for policy makers to take a look at reigning in foreign investment through higher taxes or restrictions, McCredie balked at that suggestion. ‘If the government came out and prevented foreign buyers from buying real estate, it would have a huge impact in our market,’ he said. ‘And you would see a correction.’”

The South China Morning Post. “New developments in the Quebec Immigrant Investor Programme (QIIP) - long one of the world’s most popular wealth migration vehicles - suggest rich Chinese are deserting the scheme which has brought thousands of mainland millionaires to Canada, most of whom end up to living instead in faraway Vancouver via an immigration loophole. This was despite the application window having been repeatedly extended and pushed back three times, before ultimately closing on March 20 this year. Initially slated to open only for 12 days last September, the traditional annual rush of Chinese millionaires who have dominated the scheme never happened, the source said. That was even after the application window was widened to two months.”

“Quebec runs an independent immigration policy. For years, the QIIP was run in parallel to the federal IIP. Both schemes most recently required applicants worth a minimum of C$1.6 million to loan the respective governments C$800,000 for five years, in return for permanent residency visas. The federal IIP was shut down last year, but the lucrative QIIP continues. The QIIP is of major significance for the distant west coast city of Vancouver. Housing affordability in Vancouver is now the second worst in the world, behind Hong Kong, with the average detached house price now C$1.4 million. ”

“Maxime Lapointe, head of the legal department for Hong Kong-based immigration consultants Yelo Consulting, said three Quebec-based financing companies - which earn their cut from the industry by loaning immigrants their C$800,000 ‘investment’ - had approached him to ask if he could refer them to any non-Chinese clients to fill their quotas issued by the Quebec government, since the Chinese market had apparently dried up. ‘Quebec is now not so competitive,’ compared to other popular schemes, such as the EB-5 or Portugal’s ‘golden visa,’ he said. ‘Maybe Quebec has forgotten that there is now a global competition for immigration.’”

The Beijing Review on China. “Zhou Jun is the manager of a Home Link outlet, a ubiquitous real estate agency in Beijing. Recently, Zhou has sensed a new round of intense changes coming, as regulators have loosened housing market policies to stabilize the sagging sector. The housing market has been sluggish since March 2014 following the price surge from 2012 to 2014. ‘The demand is there–you just have to make it cheaper and easier for them to buy,’ Zhou said.”

“Out of 70 major cities surveyed by the National Bureau of Statistics (NBS), 66 reported a drop in new home prices in February from the previous month. The total floor space of new residential housing projects sold declined 17.8 percent year on year during the January-February period while sales slumped by 16.7 percent, according to the NBS. Sluggish sales and falling prices are partly because of China’s enormous housing inventory. Due to the housing price surge in previous years, real estate developers rushed to build housing projects.”

“According to the NBS, there had been 622 million square meters of unsold homes as of the end of 2014, an equivalent of over 6 million homes if each home is 100 square meters. ‘Generally speaking, China’s housing market still has a large inventory to digest,’ said Zhu Min, Deputy Managing Director of the International Monetary Fund (IMF).”

News Corp Australia. “This is the eighth free property seminar I’ve attended in Perth over the past three months. The products and promotions vary, but everyone promises the same thing — to change my life. For hours, and in some cases days, the hosts work the crowds into frenzies. They’re not salespeople — they’re ‘educators,’ or even ‘philanthropists,’ who have made their fortunes through property investment. And now they want to teach me the way to enlightenment.”

“Some groups are selling education courses that cost tens of thousands of dollars. At one of the seminars on February 28, popular ‘guru’ Dymphna Boholt tried to sell the crowd a $10,000 program she said was actually worth ‘more than $39,000 of value.’ The discount only applied if you signed up on the day. ‘You’re not taking a chance on me, I’m taking a chance on you,’ she told us. Ms Boholt told a crowd of more than 300 that if we didn’t have the financing for an investment property we were ‘just making excuses.’ The self-proclaimed property millionaire said those who don’t invest are bound to lives of ‘mediocrity.’”

“When father-of-three Karl Friehe attended a seminar in 2012 he wasn’t dreaming of becoming a millionaire — just providing for his kids. A construction worker with a big mortgage, he was sceptical about whether he could afford the $300,000 off-the-plan apartment recommended to him. He claimed ParkTrent’s consultants told him to focus on finding a $30,000 deposit and worry about the rest of the financing 12 months down the track.”

“Mr Friehe said the cost of the property, which was purchased through the equity in his home in Byford, left him scraping the barrel for money each week. ‘I was promised rental guarantee, but every month ParkTrent would deliver the rent late. We ended up falling behind in our own mortgage. There were times I was scared we would lose our home,’ he said. He sold the property this year. He estimated he lost ‘about $30,000′ through the venture.”

“A Canberra couple I talked to in March, Suzie and Peter Engstrom, said they struggled for nine years with their ParkTrent property before selling it at a loss of $70,000. ‘We didn’t have the income to sustain it,’ Ms Engstrom said. ‘But we were fed the idea that we needed to invest to survive the future.’”

“In Dianella, pensioner Michael Downer and his wife Kaye are waiting to find out whether they’ll lose the home they’ve lived in for more than 10 years. Their spruiker nightmare didn’t start with a seminar, but a knock at the door from yet another property investment company. They were swept away by glossy catalogues displaying house-and-land packages in Queensland and ended up purchasing a home for $489,000. The doorknockers pitched it to them as a low-risk investment in an area with high rental demand that would set them up for retirement.”

“Three years down the track the property has an estimated value of $345,000 and they are struggling to keep a tenant. The remaining debt on their 30-year interest-only loan still sits at $489,000. Their original loan application form is riddled with errors. Ms Downer’s income was inflated from $12,994 to $28,550. Mr Downer’s income had been raised from $62,751 to $93,500. The document showed valuations conducted by the bank at the time put the value of the property at $64,000 less than the purchase price.”

“‘If they had shared the valuation with us, there’s no way we would have ever gone ahead with it. Looking at the document it’s obvious that the loan was always going to implode,’ Mr Downer said. Legally they are also arguing the bank broke their code of practice in administering the loan. ‘We’ve been customers with them for more than 20 years, they knew our incomes, it was obvious to them we could not afford it. Yet not once did the word risk come up,’ Ms Downer said. ‘We were foolish.’”

Bits Bucket for April 9, 2015

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