August 19, 2015

Taking A Hit Because Of The Housing Bubble

The Independent reports from the UK. “With its forest of cranes and mushrooming show apartments, Battersea remains outwardly the buzzing epicentre of the property boom that has turned London into Britain’s very own Monaco. But if the rumblings from within a circle of brokers and investors involved in the redevelopment of the south London former power station and the surrounding Nine Elms area are anything to go by, the legions of foreign investors credited - and blamed in equal measure - for driving the capital’s decade-long luxury property boom may finally be getting cold feet. Sime Darby, one of the major stakeholders in the redevelopment acknowledged a ’softening of interest’ in buyers from Malaysia and elsewhere in southeast Asia who had previously been responsible for the spending splurge.”

“With one estate agent recording a 10 per cent drop in the value of luxury homes in Battersea and its environs in the year to June, experts blamed the cooling of ardour for buying up London’s high-end penthouses on the strengthening of the pound in recent months and economic volatility in the home markets of investors. Among those hardest hit are Russian buyers. Online estate agent eMoov said it had recorded a three per cent drop in demand for housing worth £2m or more in a single month in May. Demand has fallen since May in some 60 per cent of ‘prime’ London boroughs, such as Westminster or Kensington and Chelsea.”

“Founder Russell Quirk said: ‘I don’t think that there are many who will shed a tear for the well-heeled, sharp suited Mayfair type property predators. They have long crawled along the golden streets of prime central London, yet it seems that the tide has turned. What comes up must come down and we are now starting to see a rebalancing with other parts of the country.’”

From Shanghai Daily in China. “As Shanghai emerges from a long housing slump, real estate agencies are mushrooming across the city and workers are being sucked into the industry by the prospect of big salaries and commissions. A second-year college student, Hou Yuan, said he is thinking of becoming a real estate agent when he graduates. ‘I won’t say it’s a dream job, but the income is attractive,’ he said. ‘It’s not easy nowadays to find decent work.’”

One News Now in New Zealand. “International credit rating agency, Standard and Poor’s, has downgraded the stand-alone credit profiles of ANZ, BNZ, ASB and Westpac New Zealand because of what the agency says is the increased risks they and other lending institutions face from Auckland’s hot property market. Labour’s finance spokesman, Grant Robertson, says, ‘the out of control Auckland housing market is now threatening the banking sector, with Standard & Poor’s downgrading the credit rating of our banks out of fear of the bubble bursting. For years, the Government has been warned of a bubble and done nothing. Now, just when our economy is suffering the impact of the collapse in dairy prices, our banking sector takes a hit because of the housing bubble.’”

The Australian Financial Review. “Property prices in mining heartland of the Bowen Basin - which rode the wave of the coal boom - have fallen off a cliff, burning investors who believed China’s thirst for Australian resources would never end. The median value of a home in Morbanah, about 200 kilometres west of Mackay, have fallen 66 per cent in the past three years, from $751,989 to $251,933, according to CoreLogic RP Data. Properties that used to receive rents of $3,000 to $4,000 a week during the boom, are now only getting $220 a week, leaving investors struggling to pay their mortgages. Many have gone under.”

“Moranbah Real Estate owner Bella Exposito, who has been in the real estate game for 28 years, said 99 per cent of the properties she sold in Moranbah were snapped by investors from across Australia, including Sydney and Melbourne, as well as as far away as Hong Kong, Singapore and the United Kingdom. ‘But I haven’t seen one investor since the boom. I think they were being unrealistic thinking the boom was going to last forever,’ she said.”

The Calgary Herald in Canada. “The precipitous decline in oil prices from a year ago has pummelled the housing market in Fort McMurray this year with MLS sales so far in 2015 down nearly 50 per cent from 2014 levels. In comparison, Calgary has seen a 27.3 per cent decline.”

“‘The numbers just released on the Fort McMurray market are 100 per cent reflective of the downturn — not in production in the oilsands, but in the exploration and development of new oilsands projects,’ said Don Campbell, senior analyst with the Real Estate Investment Network. ‘This is also being reflected in the rental market in Fort McMurray, where vacancies have skyrocketed in the last six months. The market– both rental and resale, will begin to feel even more pain in the November to February quarter coming up.’”

Business in Vancouver. “Fears of a housing bubble. The Shanghai stock market crash. Disappointing economic data on exports and plunging auto sales. And now this. A few years ago, China’s move to devalue its currency would likely have been seen as a positive development. ‘The big issue is the signal that it sends about the weak Chinese economy, and that is bad news for Canada in terms of export of commodities and raw materials to China,’ said Michael Devereux, a professor at the University of British Columbia’s Vancouver School of Economics.”

“‘Demand for pretty much everything that’s imported into China is likely to slow,’ said Sherry Cooper, chief economist for Dominion Lending, ‘which is why commodity prices have fallen once again and, most importantly for Canada, oil prices are down.’”

“‘There’s a huge excess of construction in China,’ Devereux said. ‘They have all these empty houses, empty cities, they had this gigantic stock market bubble which has gone into reverse, and they’ve only prevented a complete collapse of the stock market by shutting down trade in a bunch of major listed corporations. With the fall in the local stock market, you’ve had a really big fall in domestic consumption. The only way China can continue to grow long term is if they get their households and private citizens spending more, but now it looks like they’re cutting back dramatically.’”

Bits Bucket for August 19, 2015

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