July 2, 2015

There’s Going To Be A Lot More Tears

A report from Agence France-Presse. “Leading global producer Australia on Tuesday lowered its forecast for iron ore prices as Chinese steel production eases, but said export volumes were expected to grow as suppliers ramp up output. ‘China’s steel production is forecast to contract in 2015 and 2016 as the seaborne supply of iron ore increases,’ the report said. ‘These factors are forecast to drive the price of iron ore down 38 percent in 2015… and a further 4.2 percent in 2016. Housing construction in China remains a key area of uncertainty.’”

The Australian Financial Review. “There is only one type of house sale in the iron ore export hub of Port Hedland – a distressed one. ‘In a word the market is ‘dead’, John Briggs, of Port Hedland Real Estate, said. ‘The last one out of Port Hedland please turn the lights out.’”

“Median home prices in Port Hedland are down 12.5 per cent from already depleted prices 12 months ago, the Real Estate Institute of Western Australia (REIWA) says. One Port Hedland house on a 928-square-metre block in Trembath Street – a mortgage repossession – has been put on the market for $330,000. It last sold for $605,000 in 2008 and one agent believes it was worth as much as $1 million in 2010-11. Mortgagee repossessions were abundant now, Mr Briggs said. ‘There’s going to be a lot more tears in Port Hedland,’ he said.”

The Globe and Mail in Canada. “CIBC World Markets says people frequently ask about Canada’s housing market in client meetings. Economists Benjamin Tal and Andrew Grantham put some meat on those bones in a report this week, noting that much has to do with ‘truths, lies and averages.’ For example, Calgary’s market had been surging, but in the wake of the oil shock ‘prices have now started to move downwards, prompting concerns of a hard landing for that market,’ Mr. Tal and Mr. Grantham noted.”

The Calgary Herald in Canada. “CBRE data indicate vacancy in Calgary’s central business district jumped to 13 per cent in the second quarter, from 10 per cent a year earlier, due largely to the amount of office space coming back to the market. Greg Kwong, executive vice-president of CBRE’s Calgary office, said the downturn in the oilpatch has not affected the industrial sector as severely as the office market. ‘There was a lag of five or six months,’ he said. ‘The drop in oil in November of last year almost had an immediate effect on downtown office leasing … Things started to slow down.’”

“The average net rent in the second quarter was $7.80, down from $8.25 a year ago. ‘If the low oil price environment continues on, we expect to see a further slowdown in Q3,’ said Kwong.”

The Houston Chronicle in Texas. “This city is leading the way when it comes to rising home price listings. Even despite plunging oil prices. While the real estate bubble is still expected to bust, research site FindTheHome reports that the median list prices of homes in the Houston metro area are increasing more quickly than any other place in the state. In Houston, median list prices have increased 19.91 percent since last year. In Texas they’ve shot up by 6.47 percent, and in the nation that number is 12.70 percent.”

“The local median list price is currently $266,927, according to FindTheHome, much higher than Texas’ $232,455 medial list price. Compare that to the nation’s $231,543. The researchers at that site resolve this discrepancy by explaining that higher-priced homes are moving faster than lower priced homes. ‘Although more homes on the market typically means waning demand, Houston remains a seller’s market,’ FindTheHome states. ‘Home inventories across the state remained flat with no change over the last year, yet the number of homes for sale in the Houston metro area increased by seven percent even as list prices pushed higher.’”

The Midland Reporter Telegram in Texas. “As in the 1980s, falling oil prices have undercut the Lone Star State’s economic growth. But unlike the 1980s, the state’s economy is much more resilient, said Mine Yucel, senior vice president and director of research for the Federal Reserve Bank of Dallas. She acknowledged that the 60 percent drop in oil prices has taken a bite out of the Texas economy. Evidence of the contraction in the state’s energy industry is evident in employment statistics.”

“The state is forecast to lose 60,000 to 100,000 jobs this year, she said. That contraction has spread throughout the state economy, Yucel said. The state has lost 20,000 jobs in the energy sector in the first five months of this year, followed by 19,000 in manufacturing and 5,000 jobs in construction, three sectors with high-paying jobs. Construction activity has also been affected, with declines in multi-family and single-family housing starts declining.”

“‘We’re all aware China’s growth is slowing. And it’s not just China. It’s Korea, it’s southeast Asia. That gap between demand and supply will remain open longer than we’d hoped. Instead of 18 months to bring supply and demand back into balance, it may be two or three years,’ said Steve Pruett, chief executive officer of Elevation Resources.”

“Bobby Burns, president of the Midland Chamber of Commerce, said Texas has handled the downturn ‘very well,’ as has Midland. ‘We’re still stable, we’re still strong. Although the foot is off the gas pedal, we’re still moving forward.’ He pointed to Midland’s continued strong housing prices and said that ‘hotel rates are still amazingly strong.’”

Business Day on Dubai. “It is another round of knocks for investors in the Dubai housing market as the market has slumped again. The reality now is that demand is low, prices are down and the market is festered with high vacancy rate. The Guide, a research house dedicated to residential property, covering market trends in 101 countries, in its Q1 2015 global property report noted that the Dubai housing market started to recover in Q2 2012 with double-digit house price increases.”

“‘Demand is now plunging. During the year to April 2015, property transactions, both in number and value, plunged by 51.8 percent and 37.1 percent respectively,’ the report revealed, quoting real estate consultant, Jones Lang LaSalle, and the ratings agency, Standard & Poor’s, as expecting that average house prices in the emirate could fall by between 10 percent and 20 percent this year.”

Bits Bucket for July 2, 2015

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