June 30, 2015

Bubbles Usually Happen Because Of Speculators

The Helsinki Times reports from Finland. “Over 300,000 homes are without a permanent resident in Finland. How is it possible that Helsinki has enough vacant properties to accommodate the entire population of a small town? And why are there nearly as many vacant properties in Helsinki relative to population than elsewhere in Finland? That is a good question, says Ari Pauna, the chief executive at the Mortgage Society of Finland (Hypo). ‘It’s because people here can afford to keep a mortgage-free home empty,’ he replies. ‘There are people in Helsinki who can and want to keep their homes empty.’”

The Estevan Mercury in Canada. “Estevan may still be boasting the highest rental prices in the province, but in a Saskatchewan dealing with low oil prices, there is growing pressure for those prices to decline. At 5.5 per cent a year ago, rental properties are now roughly 20 per cent vacant. Estevan’s vacancy rate was effectively zero per cent in 2013. When looking at the fixed sample, Goodson Mwale, senior market analyst for CMHC in Saskatoon noted the rental price across all unit types has declined 13.4 per cent. ‘That gives you a sense of what has happened,’ said Mwale.”

ABC in Australia. “The mayor of a rural district in the heart of Queensland’s coal seam gas country says the industry’s construction boom has ended quicker than expected, with the industry now shedding jobs. The housing market in towns such as Dalby, Chinchilla and Roma responded quickly to the drop in employment opportunities. Chinchilla real estate agent Don Hart said some investors were shocked to see how rapidly the market dropped. ‘The people that have invested in the houses are probably worried because their rents have halved,’ he said. ‘There’s something like 300 rentals available in Chinchilla between all the agents. Two years ago we might have had 30 or 40 between us all.’”

The Economic Times in India. “Rajesh Mehta’s cellphone has not stopped ringing in recent days. The Bangalore based Mehta runs one of India’s largest jewellery export companies but the calls have nothing to do with precious metals or their value which has been as volatile as crude oil in recent months. Rather, Mehta has been inundated with enquiries from cash-strapped builders about financing their incomplete projects as banks turn off the spigot and equity markets remain hostile. Such private money is coming at exorbitant rates of even 36-40 per cent a year but that has not turned off anybody. ‘They (builders) are approaching us for loans, but we are being little more selective this time as we want our interest as well as loans serviced regularly,’ Mehta says.”

The Khmer Times in Cambodia. “Phnom Penh is changing at a blinding pace, with major new residential and commercial projects. Chrek Soknim, CEO of Century 21 Mekong Realty sees oversupply in some segments of the property market – but no sign of a bubble forming. KT: ‘Is there a healthy condominium market in Cambodia?’”

“Soknim: ‘With condos, at the moment, I don’t think there is a good market because of the large oversupply. The oversupply is mostly in condos that cost $100,000 or more. Foreigners buy 80 percent, and 20 percent Cambodians. I don’t think there are many speculators in the market right now because of the 30 percent oversupply [on expensive condos]. Most of the buyers are genuine investors. There is no bubble right now – bubbles usually happen because of speculators.’”

City Metric on China. “Enough floorspace to cover Hong Kong twice over is being constructed in China’s cities each year. Yet despite the fact that 250m more people are expected to move into cities by 2030, and even though the demand for modern housing is huge, an incredible amount of apartments are currently vacant. At a rough estimate, there are around 600m m2 of floor space still unoccupied – enough to completely cover Madrid.”

“Up until very recently, China’s housing market was loaded with speculators, people looking to store their excess savings in real estate, individuals aiming to launder illicitly received funds, and other parties who were buying property they had no intention of living in. This feeding frenzy of economic activity often pushed the prices of real estate so high that the pool of potential residents was severely reduced. This has lead to many cities and districts across China standing largely empty, even when all the houses have sold. As a result, they look like ghost towns.”

All Africa on Namibia. “Housing and rental prices in Tsumeb have dropped significantly in recent months and realtors in the copper-mining town anticipated this decrease in rental and housing prices earlier this year. A two-bedroom apartment in the townships cost as much as N$4 000 in the past with prices dropping to N$2 700 currently. Some one-bedroomed apartments in the posh areas of the town were rented out for as much as N$5 000. At the moment, apartments in the posh area have dropped to about N$3 000 for a one-bedroomed apartment.”

“A resident of Tsumeb, Alexia Xamises says she could not afford to rent a flat six months ago but now she can afford a one-bedroomed flat, as rentals have dropped. ‘I am able to rent a place of my own now although it has not completely dropped to affordable rates, at least I can have a place of my own,’ said Xamises.”

The Business News Network in Canada. “With the strong American dollar and partial rebound in U.S. real estate prices, Canadian snowbirds are coming back to the cold, selling homes they acquired following the U.S. housing meltdown. Lennon Sweeting, Currency Strategist at CanadianForex, says there has been a sharp jump and a clear trend of Canadians selling U.S. real estate. ‘A lot of investors are realizing the gain and took advantage of a soft U.S. economy, and are now looking to reinvest in Canada [because] we’ve got a pretty hot housing market as well,’ Sweeting said.”

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