August 27, 2015

Like A Snake Trying To Eat An Elephant

A report from the New Zealand Herald. “An Auckland property agent is the latest beneficiary of a series of sales of a modest West Auckland house which has rocketed in price by $153,000 in 13 weeks. Barfoot and Thompson managing director Peter Thompson says he understands the three-bedroom home was sold at the weekend for a negotiated price of $628,000. That makes it the fourth time the property - which has a CV of $340,000 and was listed by his company just last week - has changed hands since late May. Neighbour Joanna Pou said no one had lived in the house since Mrs Wilson moved out on July 10 but the property kept going back on the market. ‘They’re all investors. It’s just constantly being flicked over.’”

The International Business Times on the UK. “Home sales to first-time buyers in the UK continue to decline, according to the latest market report. ‘It’s alarming that the number of sales being made to first-time buyers is steadily falling; with reports of house prices increasing and expectations of rising in the future, first-time buyers will continue to be pushed out of the market,’ said Mark Hayward, managing director at the estate agents’ association. A flood of housing coming on to the market has given some optimism to estate agents who hope that ‘over the next few months we’ll see activity in the market increasing and more sales completing,’ Hayward said.”

Bloomberg on Brazil. “Not long ago, Brazil’s real-estate market was one of the biggest symbols of the country’s burgeoning economic might. Now, it’s fallen victim to an ever-deepening recession. The real-estate industry, which is equal to about 10 percent of Brazil’s economy, is emerging as one of the latest casualties of a recession. Earlier this month, Rossi Residencial SA, which has 2.5 billion reais in debt, also brought in advisers to ‘restructure operations and review strategies.’ Since 2010, the builder has lost 99 percent of its stock-market value.”

“‘There is no real estate company that survives without sales,’ Bruno Mendonca Lima de Carvalho, the head of fixed income at Guide Investimentos SA, said from Sao Paulo. ‘You can’t import or export apartments. You’re relying solely on domestic activity.’”

“That’s a reversal from just two years ago, when real-estate prices in places like Rio de Janeiro and Sao Paulo had surged as much as 230 percent as rising incomes, a soaring real and record-low borrowing costs ignited a wave of home buying.”

CTV Kitchener in Canada. “In Waterloo, only a few years ago students were spreading into nearly every part of the city due to a rental shortage – people in the student housing industry say it’s more and more becoming the exception. Rob Jackson says he’s already felt a major shift to a market less favourable to landlords, and worries about what will happen once even more student housing comes online. Jackson rents out a converted house to students. He expected the income from that house to pay for an early retirement, but now says that’s unlikely to happen. ‘This isn’t the cash cow that people think it is,’ he said.”

“In recent years, he’s lost one of the five bedrooms he rented out – and now, he says, he might have to lower the rent just to attract tenants. ‘Utilities have increased. Property taxes have increased. I should be getting two per cent more than what I’m getting right now,’ he said. ‘(Students) know that they can wait until the very end and start negotiating down.’”

NDTV Profit on India. “A day after RBI governor Raghuram Rajan advised builders stuck with unsold inventories to cut rates, realtors’ body CREDAI today said there is no scope to reduce housing prices and demanded that interest rates on home loans as well as taxes should be reduced to boost demand. ‘From the developer’s side that a substantial reduction in prices has already happened across the country,’ CREDAI president Getamber Anand told PTI. ‘Any further decrease in sale prices would mean an out of pocket expense for the developers thereby acting as the last nail in the coffin of an industry which contributes so much to the economy and employment at large.’”

The Australian Financial Review. “While Chinese investors, the largest group of foreign investors in property, are still coming to Australia in droves many are more cautious about foreign-investment rules and are no longer thinking ‘just because we have money, we can buy anything,’ Asian property agent, House 18’s Michael Zhu said. ‘The rules have always been there. In the past, there were fewer Chinese investors and so the control of investments were not as tight. Now people especially the smaller investors are very worried.’”

“Mr Fang, a Chinese investor from Suzhou said he has postponed an investment in a house in Melbourne. ‘I don’t want to break the law. I am happy to get a lawyer but it costs money so I have to think about it more carefully,’ he said. ‘I am buying to support my only child who may go to Australia to study but now I am not sure if I want to do it.’”

“Sydney prices have leapt 20 per cent in the last 12 months, and Melbourne prices nearly 12 per cent. The inter-governmental body, The Financial Action Task Force identified property as a ‘high risk’ sector for laundering in Australia and noted AUSTRAC had no power over real estate agents, accountants and lawyers. ‘Australian housing is viewed across Asia as an attractive vehicle for parking illicit funds, particularly among corrupt officials,’ its latest assessment has found.”

CNN on China. “Faced with this new rout, local investors — many of who are still reeling from the meltdown that began in June — posted reactions across Chinese social media ranging from dark humor and despair to a revealing mistrust of the government. ‘The stocks I bought have dropped so cruelly,’ one Weibo user posted. ‘In a previous session, I made 200,000 (yuan). Because I was greedy I wanted to make more, like a snake trying to eat an elephant.’”

“‘What a great Chinese dream! The stock market bubble should just burst… Last month, my father went back to his hometown of Jiangyang (in Sichuan),’ one cynic said on Weibo. ‘Our relatives said in the last two years many businesses have closed and even a large factory wasn’t able to get enough orders to keep going. Compared to 2011 when he visited, it’s day and night. Who are you fooling?’”

“Another chimed in: ‘If housing prices would fall like this that would be great, then the Chinese economy would completely collapse and the government would also collapse. (You) can only rebuild after it breaks.’”

Bits Bucket for August 27, 2015

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