May 18, 2015

Some Sellers May Rush To Get Out

AFK Insider reports on South Africa. “Housing prices in South Africa’s leisure property market are still increasing, but they’re slowing as a result of slower economic growth and the prospect of rising interest rates, MoneyWeb reports. There’s a glut of leisure properties on the market, especially in coastal areas, said Herschel Jawitz, CEO of Jawitz Properties, in an interview with MoneyWeb. Times are difficult, and to make matters worse, banks are getting pickier about approving loans. ‘Bank lending on secondary properties is still very tight as they are taking a conservative view on borrowing on these properties,’ Jawitz said.”

Bloomberg on the UK. “Asking prices for London homes fell the most in nine months in May as concern about potential property-tax changes before the election cooled demand. Prices dropped 2.3 percent from April — led by top-priced Kensington and Chelsea Rightmove said. Nationally, prices slipped 0.1 percent, the first decline in a May since the last general election in 2010. Rightmove said there was a 17 percent jump in new properties coming to market in the U.K. after the May 2010 election and this could be replicated after the May 7 vote delivered a conclusive result.”

“In London’s most expensive districts, prices plunged 6.3 percent this month to 1.44 million pounds, according to the report. That’s a 7.4 percent drop from a year ago.”

The Daily Times on South Korea. “‘Long-term low growth’ is sometimes used by local news organizations to explain the South Korean economy. The three Bank of Korea rate cuts in the past 10 months were made to prop up the ‘eroded’ confidence of consumers and firms. Another factor was a rapid growth of household debts, which may drive the economy into the danger of housing bubble collapse. ‘Household debts are manageable now, but the recent pace of growth is very fast,’ said BOK Governor Lee Ju-yeol.”

“The rate of Jeonse deposit to home value surpassed 70 percent in February this year, which raised residence costs, as potential home buyers refrained from purchasing home on concerns over housing price falls. South Korea has the world’s highest percentage of interest-only mortgages, which requires interest payment alone. The rate of these loans was 74 percent in 2014, lower than 92 percent in 2011 but much higher than 14 percent in the United States, 33 percent in Australia and 55 percent in Netherlands.”

Business World on the Philippines. “Oversupply worries in the condominium market led developers to delay completion of some projects, property consultancy Colliers said in its first quarter research and forecast report. A total of 31,000 residential units are expected to be delivered in the next three years with nearly 40% of the figure expected by 2016, Colliers data showed. In the first quarter, the pre-selling residential market in Metro Manila suffered a 46% year-on-year drop in launches.”

“‘2012 was a special year — there were a lot of interesting projects and given the low interest rate environment, investors were looking at alternative assets to invest in. It’s a buyer’s market and they are waiting for the new developments to be finished before they make their next purchase,’ said Julius M. Guevara, Colliers head of advisory services. ‘For the rental market, we have seen unprecedented levels of construction and completion in the main CBDs (central business districts). It will be more challenging for an investor [to lease out their units] just because of the number of units that will be completed.’”

The New Zealand Herald. “The Government has surprised the market with a stronger than expected move on property tax. Coming just days after the Reserve Bank moves to restrict bank lending to property investors, it sends a strong signal that the risks of an Auckland property bubble are now universally accepted at an executive level. Ensuring all foreign investors must have a local bank account in order to get an IRD number also brings transparency around money laundering and deals with accusations that some of the Chinese money coming into the local market is from ‘corrupt sources’ not sanctioned by the Chinese Government.”

“Overall, yesterday’s announcement marks a major shift in government thinking. Where previously there has been a sole focus on a supply-side solution to Auckland’s housing issues, this move, along with a warm response to the latest Reserve Bank efforts, shows the Government is now more closely attuned to the risk of a property market bubble.”

Interest in New Zealand. “ANZ’s economists believe there may be a rush of new property listings in the next four months, as vendors and investors try to beat the October 1 introduction of new tax and mortgage lending rules on residential property investments. In a research report, ANZ said although uncertainty surrounded the precise impact of the proposed changes, it suspected it could be significant. ‘We suspect the impact could be stark given the extent of house price movement of late. We believe sentiment could turn on a dime. Some sellers may rush to get out while the going is good. Ultimately, we suspect this marks a turning point for the Auckland housing market.’”

From Perth Now in Australia. “House prices in Sydney and Melbourne are reaching worrying territory, says the head of Australia’s corporate watchdog. Australian Securities and Investments Commission chairman Greg Medcraft told The Australian Financial Review the self-managed super industry is especially exposed to a correction in property prices. ‘History shows that people don’t know when they are in a bubble until it’s over,’ Mr Medcraft told AFR. ‘I am quite worried about the Sydney and Melbourne property markets. In housing, the long-term average income to average price ratio is four to five times but at the moment it is at historic highs,’ he said.”

“Some policymakers and market observants have been concerned that the steady increase in property prices, particularly in Sydney and Melbourne, has more to do with speculators taking advantage of record low interest rates rather than a fundamental endorsement of the market’s long-term prospects.”

The Australian Financial Review. “The housing market took a breather this week, with values dipping in most capital cities, giving policy makers hope that the recent mad market may be slowing. Median home values were flat in Sydney and fell 0.4 per cent in Melbourne in the week to Saturday. Clearance rates also dipped in both cities, figures from CoreLogic RP Data show.”

“But coming in the same week that official figures showed investment lending on housing rose nearly 21 per cent in March, nearly twice the rate at which banking regulator APRA regards as sustainable, any sign of moderation will be a relief for the rate-setting Reserve Bank, which earlier this month cut the benchmark cash rate to a new record low of 2 per cent. ”

“Investors remain active, but falling yields on residential property - and in some cases, growing vacancy rates - suggest activity may slow in months to come. In Melbourne, clearances also slipped to 74.3 per cent of the 849 auctions reported - also down from 79 per cent last week - out of a total 973 scheduled. In Melbourne, a converted former postcard factory in Armadale was passed in at $3,525,000 on Saturday after it failed to meet the reserve price of $3.95 million.”

Bits Bucket for May 18, 2015

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