May 26, 2015

Because It Has Been Good, It Must Be Good Forever

The Torstar News Service reports from Canada. “A group of midtown Toronto residents has banded together to fight what it’s dubbed ‘density creep,’ amid a push for midrise development citywide that shows no signs of abating. The group of about 50 neighbours claims the project will ruin their stretch of million-dollar homes set on deep, private lots. ‘I’m really concerned about my property value going down,’ says Lisa Goodwin, 49, a stay-at-home mother of two who has lived in a four-bedroom dwelling for 19 years. ‘Right now all the houses are $1.1 to, say, $2.2 (million) but they’re looking at putting in places that are only $500,000.’”

The Guardian on New Zealand. “Economists in New Zealand have expressed alarm at a housing market boom which could soon see average prices of property in the country’s largest city pass the $1m mark. In Auckland, the cost of an average domestic property has risen from $550,000 during the last property boom in 2007 to nearly $810,000 now. Some houses are increasing in value by $1,000 every day while 36 suburbs in the city now have an average house value of $1m or more. And at current rates the whole city’s average will be $1m within a year-and-a-half.”

“Small, one–bedroom apartments are selling for $800,000 and delapidated wrecks in barely desirable suburbs are fetching more than $1m. ‘The narrative goes because it has been good in the last 10 or 15 years, it must be good forever,’ said Shamubeel Eaqub, principal economist at the Institute of Economic Research. But it is impossible for this to continue, he says. ‘Auckland is in a massive bubble.’”

From Arabian Business. “With rents now back soaring and tenants having to compete once again for units, we were surprised to find an interesting report that claims that as much as a fifth of Dubai’s prime properties lie empty for most of the year. This might sound high but it is actually in line with international statistics, which claim that one in four apartments in major cities across the world lie empty. ‘There are no recorded statistics for absentee owners, but in my opinion, I would safely say it is currently in the region of 20 percent of properties, of which buyers mainly come from Europe, Russia, the GCC and to a lesser degree the Indian sub-continent,’ Andrew Cleator, luxury sales director, LuxHabitat, told the Khaleej Times newspaper.”

“Is it time for Dubai to follow suit and implement some form of penalty, such as a tax, on absentee landlords and reduce the number of units lying empty across the city? ‘No we don’t need a tax on undeveloped property as that would most likely lead to an oversupply of property across the market. The ecosystem’s success is the result of a mixture of foreigners permitted to own property, commercial enterprise, the tax status and the overall lifestyle. As a result, Dubai has a huge amount of property under development (visible all around the emirate), and rather than the market at risk of not keeping pace with demand, there is more likely a risk of oversupply,’ said Ryan Mahoney, CEO, Better Homes Real Estate.”

Invest Asian on Singapore. “Real estate prices in Singapore have plummeted since the beginning of 2015, and analysts are worried that the city-states’ property bubble could burst soon. The government of Singapore has tried to cool its property market since 2009. The implementation of the Additional Buyer’s Stamp Duty in late 2011 imposed an additional 10% tax on foreigners buying property, and was then increased to 15% in 2013 resulting in a reduced transaction volume. Since then, prices have suffered a massive decline and many real estate developers are saying the measures have gone too far, destroying Singapore’s luxury property market.”

“‘Average residential rents across all market segments, particularly the high-end, are on the decline, coupled with a weak secondary market,’ warned Kwek Leng Beng, executive chairman of City Developments Ltd. ‘If this trend continues, with prices dipping more, some mortgage borrowers affected by lower rentals may have difficulty servicing their loans, possibly leading to forced fire sales,’ said Kwek.”

The Hindustan Times in India. “If you own a house and it is unoccupied, you may soon have to pay a new tax—the vacant apartment tax— which will be double the amount levied on the property at present. This move will open up approximately 4.79 lakh houses in Mumbai in the rental market. The draft document states, ‘In order that the vacant flats and plots are put to use, there should be double taxation… This will deter the tendency to maintain the plot and the flat vacant for speculative gains.’”

“Real estate experts welcomed the move. ‘We talk of housing shortage, but the number of vacant houses are increasing by the day. The move is necessary,’ said Pankaj Kapoor, CEO, Liases Foras, a real estate research firm. ‘With an increase in number of houses in the market, the high rentals will be moderated.’ Yeshwant Dalal, president, Estate Agents Association of India, said, ‘Most of the vacant houses are owned by investors who have purchased for speculative gains.’”

Bloomberg on China. “China’s Ordos city, where towers that sprang from Inner Mongolian farmland now sit empty, is showing the hangover has just begun from a decade-long building boom. The city whose fortunes reversed as a coal boom turned to bust is grappling with China’s slumping property market that researcher SouFun Holdings Ltd. said led to more than 10 ‘ghost towns.’”

“Five years after the first building was finished in the eastern city of Tianjin’s replica of Manhattan, the district remains almost deserted. Locals in the city of Handan, where a burst property bubble left half-constructed high-rises, have blocked streets to protest soured investments. ‘Many small-city developers are running into financial trouble,’ said Liu Yuan, a Shanghai-based research director for Centaline Group, China’s biggest property agency. ‘It’s the problem Ordos faces after its property bubble burst.’”

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