August 4, 2015

The Boom Seems Like A Distant Memory

A report from the New Zealand Herald. “The latest E-Valuer statistics show only 10 of Auckland’s 167 suburbs have homes with a median value under $500,000. The number of suburbs that have hit an average $1m mark has jumped from 43 to 50 in just two months. Real Estate Institute of New Zealand chief executive Colleen Milne said there were still opportunities for first-time buyers but they had to move quickly. ‘These properties are quickly sought out,’ Milne said.”

The Sunshine Coast Daily in Australia. “A prominent Gatton real estate agent has labelled the new ‘investment property’ rate unveiled in the new Lockyer Valley Regional Council budget as unfair and unnesessary. John Boyd, principal of LJ Hooker Gatton, precicted the decision to post a 20% extra rate levy on investment properties would see rents rise almost immediately. ‘The rise will not, and can not, be absorbed by landlords as most rentals are negatively geared and the owners of investment properties are having to find additional funds to make their mortgage payment,’ Mr Boyd said.”

The Globe and Mail in Canada. “Fort McMurray’s housing market is weakening. Real estate prices are slumping, vacancy rates soaring and rents dropping. The boom seems like a distant memory after crude-oil prices plunged by half over the past year, triggering widespread layoffs in the oil sands. The local resale housing sector is looking wobbly as some owners begin feeling the economic pinch. In the Wood Buffalo area, the price of all types of properties sold on the Multiple Listing Service will average $544,000 this year, down 9 per cent from $597,626 last year, according to a forecast by CMHC.”

“Stephanie Swain, an administrator who has switched her career path to pipe fitting, is thinking about moving back to Nova Scotia with her husband, a veteran pipe fitter. ‘Things are bad in Fort Mac,’ she said, referring to growing unemployment.”

Live Mint on India. “The real estate market has been among the sectors worst hit by the economic downturn. Debt-laden developers in the country’s key property markets—Mumbai, Bengaluru, Chennai and the National Capital Region (NCR centred on Delhi)—have been struggling with slow sales, high unsold inventory, delayed construction and stalled projects. There are no signs, yet, of things getting better.”

“Following the collapse of Lehman Brothers Holdings Inc. in September 2008 and the ensuing global financial crisis that froze credit markets, India’s property market went into a tailspin. Yet, by late 2009, the sector started getting back on its feet. This time around, the slump has endured a lot longer.”

“‘The big difference between the two slowdown cycles of then and now is that today, it is a buyers’ sentiment issue. Developers have more access to different sources of capital now but customers just don’t want to buy,’ said Ashwinder Raj Singh, chief executive of residential services at the Indian arm of property advisory Jones Lang LaSalle Inc.”

ABC News on China. “Wu Xiaoya knows the rough and tumble of Chinese stock markets all too well. As an undergraduate student, Ms Wu lost money when the stock bubble burst in 2007 because she did not cash out in time. The same thing happened this time when the shares she bought on the Shanghai stock exchange plunged in June. This time the stakes were higher because Ms Wu had borrowed a significant amount of money from brokerages to gamble in the market.”

“‘The [Communist] Party wants to use the market to cause some reform in the real economy,’ she said. ‘I didn’t sell at the first sign of trouble because I thought the Party would never let the market fall since it would be disastrous for them and the country. But I was forced by the brokerage to sell because I had borrowed on margin. I was just too greedy.’”

“Regulators are reportedly taking their investigations of alleged short selling overseas while scarred investors, such as Wu Xiaoya, turn their thoughts to bread and butter issues. They are worried about what the future holds because it will not be easy to make the money back in a cooling economy. ‘The economic environment will be very tough over the next few years,’ said Ms Wu. ‘The people I know don’t have much money left. It’s the shareholders of listed companies, the sons and daughters of officials and wealthy businessmen who are wealthy. Your average person really doesn’t have much left at all.’”

From CNBC. “Perhaps the biggest indicator of the magnitude of China’s slowdown can be found in the global commodities market. The true message of plunging commodity markets is that the Chinese government wasted $20 trillion worth of credit digging holes to mollify the fallout from the Great Recession of 2007, primarily creating a huge fixed-asset bubble with little economic viability. And then it forced another $1.2 trillion in margin debt to engender a consumption-based economy, primarily by creating a stock-market bubble after the fixed-asset bubble strategy began to fail miserably.”

“As China tries to balance the demise of its equity bubble while still keeping the illusion of free markets intact, two delusional narratives have started to circulate around Wall Street. The first such Wall Street-inspired delusion is that the collapsing Shanghai stock market will have no effect on the underlying Chinese economy. The second fallacy is that Wall Street believes in the TV commercial that claims what happens in Las Vegas stays in Vegas. Or, in this case, what happens to the Chinese economy stays in China. But the truth is that the meltdown in China is already spreading all around the Asia-Pacific region.”

Bits Bucket for August 4, 2015

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