August 11, 2015

Acche Din Should Be On The Way

Reuters reports on Brazil. “The Brazilian real estate market is witnessing a drastic reversal from four years ago, when an economic boom lifted millions into an expanded middle class and fueled a home-buying frenzy that pushed prices up by as much as 30 percent on an annual basis. At the time, developers like Cyrela Brazil Realty SA and Rossi Residencial SA, flush with cash from recent initial public offerings, launched into a building binge of middle- and high-income housing to meet what they expected would be continuously growing demand. ‘It’s a perfect storm,’ said Itau BBA analyst Enrico Trotta, who also pointed out scarcer mortgage funding and the high number of apartments collecting dust following the industry’s overly optimistic expansion.”

“Already-reticent buyers have sensed their strengthened bargaining power, which they are using to demand discounts of up to 30 percent on some apartments. ‘We have to explain the reality of the market to sellers nowadays,’ said independent Sao Paulo-based broker Milena Moreira. ‘Some just don’t believe it.’”

Bloomberg on the UK. “London’s swankiest neighborhoods of Knightsbridge and Belgravia are becoming no-go areas for even the wealthiest property investors. They are being driven out by higher sales taxes. The average value of a London home sold by broker Savills Plc fell by 200,000 pounds to 3 million pounds in the first half of the year, compared with the same period in 2014, while transactions fell 15 percent in the period, the broker said. ‘The buyers’ market has returned,’ William Carrington, chairman of data researcher Lonres, wrote in a report on London’s best districts. ‘I do not see an improvement in market conditions before September.’”

Perth Now in Australia. “According to new CoreLogic RPData statistics, Shenton Park, just 4km from the CBD, is the top bargain suburb for units, with median prices falling by 22 per cent in the past 12 months. North Fremantle followed closely behind with a price drop of 20.4 per cent and Highgate came in at number three with a median price of $410,000 — 13.2 per cent less than it was 12 months ago. The Perth CBD had the seventh biggest drop, with the average unit now $465,0000. Tsokos Property director Anthony Tsokos recently sold a two-bedroom apartment in Newcastle St, Perth for $62,000 less than what it was purchased for in 2008.”

“‘Often buyers want something that’s new, but with so many apartments currently on the market they have the upper hand in the established market,’ Mr Tsokos said.”

The National on Dubai. “A former employee of a property company that closed last month has been left homeless, penniless, jobless and unable to leave the country. The operating licence of S&K, also known as Smith & Ken, was revoked in June but it continued trading until July 21. The closure left more than 80 staff in Dubai and Los Angeles, California, out of work. Briton Amina Ali, 27, took a commercial property manager’s job in Dubai in June last year with a basic monthly salary of Dh8,000, 50 per cent commission on transactions, a company car and accommodation. ‘Some days I will eat, others I won’t,’ Ms Ali said. ‘I don’t know where I will be staying some nights. The longest I have been anywhere is a week.’”

“Regulators are investigating complaints that the company routinely asked tenants to make rent cheques payable to S&K instead of the landlord, and asked property buyers to make cheques payable to the company instead of the seller. Both practices are illegal. ‘A lot of landlords still don’t know what has happened and will only find out when they miss a mortgage payment,’ Mr Khan said. ‘One landlord has lost Dh160,000. That is just the start, some will not even be checking their accounts.’”

From DNA India. “The unsold stock of flats in Mumbai Metropolitan Region (MMR) is increasing by the day. With the current rate of buying, it will take over 41 months to dispose off this inventory, according to a survey by Liases Foras Real Estate Research Firm. Managing director Pankaj Kapoor said, ‘The current stagnant scenario in the real estate market will continue for at least the next two years.’”

“Meanwhile, buyers remain unsure of which way to go. Rajesh Parab, a suburb resident, had booked a 1-BHK flat in Nalasapora for Rs 23 lakh. ‘I had some financial problems so I could not buy the flat at the time. But a few days ago, my agent called and said the same flat was available for Rs 21 lakh. It was a pleasant surprise for me. But now I am wondering whether to invest at this rate or wait some more for the cost to decrease,’ he said.”

Yahoo India Newsroom. “What can safely be said is that in the current financial year (which started on April 1, 2015) on an aggregate basis, the banks haven’t lent a single rupee to real estate companies. And all this should be good news for buyers. Why? For the simple reason that the funding source of real estate companies is drying out. Real estate companies have to repay the interest on the loans they had taken on previously. Over and above this, there are projects that are still being built and need to be delivered by a certain date. Money will be needed for all these things.”

“All these reasons will ensure that the companies will have to get around to selling the unsold apartments that they have built and have been unable to sell. The number of unsold homes in cities across the country is huge. The only way these unsold homes can be sold is by cutting prices. While the real estate companies have resisted this so far, with the funding from banks almost coming to a standstill, they really have no more options left in the days to come.”

“Finally, acche din should be on their way for those looking to buy homes to live in.”

Bits Bucket for August 11, 2015

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