June 9, 2015

Robbing People Of Significant Amounts Of Equity

CTV Vancouver reports from Canada. “In recent weeks, Vancouver Mayor Gregor Robertson has called for the implementation of a ’speculation tax’ on those who ‘flip’ properties for profit. He sent a letter to British Columbia Premier Christy Clark asking her consider such a tax, as well as to ask for additional power to track foreign ownership and monitor vacant homes in the city. The premier’s response — in a letter sent to Robertson — was less than favourable.”

“‘Industry experts estimate most of the real estate speculation taking place in the region is being done by local investors,’ Clark wrote. ‘For many individuals this is a source of investment income.’”

“For most people, a home is the largest investment they ever make, she said. Solutions to Vancouver’s affordability problem should not hurt the investments of those already in the market, she said. ‘If the goal of the policymaking is to lower the value of people’s houses, we will be — essentially — robbing people who already own houses of significant amounts of equity,’ Clark said.”

Smart Company in Australia. “Prime Minister Tony Abbott is spot on with his comments this week about house prices. He said on Monday he thought rising house prices were a good thing. It’s long overdue for someone in authority to make the point that for people who own homes, which means the vast majority of Australian households, rising property values are a good thing.”

“Most of us want property values to rise – and so does the nation. We’re all tasked with the challenge of providing for our retirement years amid a rapidly ageing population and a fragile Budget. The latest research figures suggest house values are going backwards in Darwin and Hobart, stagnating in Perth and rising only marginally in Canberra, Brisbane and Adelaide. Sydney, up 16%, has the only boom housing market. Apartments markets are falling in Perth, Hobart, Canberra and Darwin, and there’s no meaningful growth in Brisbane or Adelaide. Melbourne is up only 3%.”

“There’s nothing in those figures to support the notion of a bubble, nor the bleating of those who claim an affordability crisis, in contradiction of the situation described by the affordability indexes. It says something about the state of journalism in Australia when the Prime Minister can generate a media storm by commenting that rising property values are a good thing.”

ABC News in Australia. “Investigations are underway into 195 cases where foreign investment rules on residential real estate may have been breached, the Federal Government says. The widened probe into foreign investment in Australian real estate comes a month after the Federal Government announced plans to crack down on rogue foreign investors amid concerns it was helping to fuel a dangerous property bubble in Sydney and Melbourne.”

“The Government is also seeking to ‘capture any capital gain made on divestment of a property.’ ‘Third parties who knowingly assist a foreign investor to breach the rules will also be subject to civil and criminal penalties, including fines of $45,000 for individuals and $225,000 for companies,’ the statement warned. ‘Foreign investors who think they may have broken the rules should come to us before we come to them. They will still be forced to sell the properties, but will not be referred for criminal prosecution if they voluntarily come forward before 30 November.’”

The Herald in New Zealand. “The Government’s pre-Budget announcement of its 2-year ‘bright line’ tax on capital gains by property traders surprised a few people and was the major focus in the ensuing coverage. But the accompanying news that any non-residents buying property here would have to first open a bank account here, get an IRD number and then declare their own passport and home tax details when they bought the property may actually have more of an impact.”

“The Government is privately pointing to this measure as having the most potential to reduce some of the foreign demand for Auckland properties and Prime Minister John Key has indicated the information gathered on non-resident buying would be gathered and published. Mr Key made clear on the day after the announcement that New Zealand tax authorities would be happily sharing these details with foreign tax authorities too.”

“Mr Key was personally made aware of it by the most knowledgeable source in China — President Xi Jinping. Last November the Chinese leader asked for Mr Key’s help to track down a number of Chinese nationals who had fled to New Zealand with corruptly obtained funds. The elephant in the room of Auckland’s property debate is whether some of the money pouring into Auckland from China in particular is effectively money laundering of ill-gotten funds. Without any data, the debate is fuelled by anecdote and rumour, but it is an issue capturing more and more attention around the world.”

From CNBC. “Taiwan’s long-bubbly property prices appear headed for a correction, but it doesn’t look like bargain hunters will fill the breach. ‘Quite a number of buyers want to sell…(and) speculators have left the market already,’ said Cliff So, executive director at REPro Knight Frank, a property agency in Taiwan.”

“It’s quite a shift for what had become one of the world’s frothier property markets, with prices there nearly doubling since 2009. ‘The demand is still very strong. There’s not a match for the type of property,’ So said, noting that over the past couple years, developers have focused on large units of over 4,000 square feet. ‘For a small family, that’s too much for them.’ Investors are even having trouble leasing out those luxury units, So said, adding that he expects sharp price drops in that end of the market.”

“Indeed, REPro Knight Frank is launching a residential property agency in Taiwan, but that’s in large part to help local property investors look overseas instead. Taiwanese buyers have increasingly been looking outside their home market, buying around $1.63 billion worth of overseas properties in 2014, up 25 percent from the previous year.”

The Rio Times in Brazil. “The Brazilian National Monetary Council passed a resolution last week which will direct R$22.5 billion of reserve requirements towards farm and housing credit. Since the beginning of the year Brazil’s federal government has tightened housing credit to consumers. Without financing, homeowners have shunned away from the real estate market, and that has significantly affected sectors such as construction. According to CBIC more than 90,200 workers in the construction sector have lost their jobs in the first four months of the year.”

“Prices for real estate are also suffering. According to the Fipe-Zap index real estate prices across Brazil have fallen by 3.70 percent in real prices (when prices increase below inflation) from January through May of 2015. A survey conducted by news radio station CBN, based on data from the Labor Ministry, shows that 2015 has registered the worst April in ten years in the housing sector.”

Bits Bucket for June 9, 2015

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