September 9, 2015

Another Property Boom Could Soon Turn To Bust

Blomberg reports on the UK. “Investors betting on making a quick profit on luxury apartments in south London’s Nine Elms district, Europe’s largest project for prime new homes, are facing long waits for buyers. Almost 30 percent of new properties in the district have languished on the market for more than a year, according to real estate data provider Lonres, who didn’t include sales by developers. Investors who made down payments two or three years ago need to sell the contracts before taking delivery to avoid paying sales tax, said Mayad Rassam, a real estate finance broker at Mutual Finance Ltd., who advises developers. The so- called stamp duty on a 1 million-pound home is 43,750 pounds.”

“‘Owner-occupiers don’t buy a property now for completion in two years time,’ said Anthony Payne, managing director at Lonres. ‘The people who’ve bought these properties are gambling on prices rising.’”

“London’s housing market is ‘a bubble unlike any other bubble because it’s being driven by international capital, whereas previously London property bubbles were driven by mortgage lending,’ said Peter Rees, a professor at University College London and former City of London planning officer. ‘I have no idea how this bubble is going to end.’”

Bloomberg on Dubai. “Dubai’s housing market is in the doldrums as falling oil prices, weaker currencies in Europe and Russia and an abundance of properties on the market damp demand. Home prices dropped by 12.2 percent in the 12 months through June, the biggest decline among 56 residential markets tracked by broker Knight Frank. ‘Gone are the days where we see queues of potential investors lining the streets waiting for their opportunity to buy,’ Matthew Green, the Dubai-based head of United Arab Emirates research at CBRE.”

The Guardian. “In the mining town of Port Hedland, 1,500km north of Perth, modest prefabricated homes called fibro shacks, which were changing hands for more than A$1m four years ago, are now failing to find a buyer at a third of the price. Pilbara boasted salaries two-thirds higher than the national average and almost 80% of workers were flown into their jobs from Australia’s big cities. Now, mortgaged to the hilt on homes that lost value almost before the paint had dried, the mineworkers that remain are accepting longer hours and lower wages in an effort to keep up with the repayments.”

“Their plight resonates thousands of miles away in Calgary, Canada. Oil, not iron ore, has been the foundation of that city’s prosperity. But fears that China’s appetite for natural resources is waning are sapping confidence; and as oil prices have plunged, another property boom could soon turn to bust. ‘There’s a lot of people here that have been losing their jobs from the energy sector,’ says Ann-Marie Lurie, chief economist at local estate agency CREB.”

“Official figures showed last week that Canada’s economy has now slipped into recession. Herbert Emery, a professor of economics for the school of public policy at the University of Calgary says: ‘Politicians have been trying to keep us at ease to avoid a downturn in spending. The sensitivity is, now that this is official, it will make things worse.”

The Daily Telegraph on Australia. “Home loan king John Symond has a stark warning for investors: Sydney is in danger of a crash in apartment prices. The business buccaneer whose Aussie Home Loans shook up the big banks is worried too many apartments are being built, which could spark price drops of up to 20 per cent over the next three years. ‘If half of these apartments within a 5km range (of the CBD) hit the market, there’ll be a huge glut,’ he told me. ‘I’d say be very, very cautious in buying apartments off the plan because you can’t control the future.’”

The South China Morning Post. “A slumping stock market halved Shanghai’s luxury home sales last month and threw into doubt prospects for the traditional September-October peak season. As trillions of paper wealth were wiped out in the stock plunge, the once sizzling luxury housing market in Shanghai has bit dust. Sun Hongbin, chairman of luxury home builder Sunac China, said during an interim result briefing: ‘There will be some impact,’ but quickly added, ‘no matter whether you lose or win (in a casino), you’ll still buy homes.’”

“The Tianjin-based developer has nine high-end projects in Beijing at different stages of development and is rolling out more launches. ‘We are not in a hurry,’ Sun said. ‘If you want profits, you cannot sell (at the moment),’ he added.”

The Globe & Mail in Canada. “Some Canadian banks allow wealthy Asian investors to skirt Chinese law by helping them bring in large amounts of money that is often used to buy real estate in Vancouver. Financial institutions in the area have flagged more than 8,200 suspicious transactions since January, 2012, the year China began cracking down on citizens they suspect of corruption. Ninety-six per cent of those transactions were also facilitated by the banks, however, even though the vast majority of that business involved suspected money laundering, according to FinTRAC, the federal agency responsible for tracking money laundering.”

“A recent B.C. court case heard that CIBC regularly helped wealthy clients move large amounts of money out of China – using several transactions and multiple third parties – even though the bank is familiar with Chinese law. That testimony came in an ongoing wrongful dismissal suit by Guiyun Ogden, who was a top-tier financial adviser with CIBC’s Imperial Service unit. Ms. Ogden managed a $233-million (Canadian) portfolio for wealthy Chinese clients in Vancouver. She helped a client move $500,000 (U.S.) out of China by using friends and relatives to send 10 wire transfers into 10 different CIBC accounts overnight. Ms. Ogden then transferred the money into another account for her client to use as a down payment on a $5.7-million (Canadian) Vancouver mansion.”

“‘I have seen the bank transaction forms, where $50,000 has been wired out multiple times by several people at one bank in China,’ said lawyer Christine Duhaime, an internationally accredited expert on money laundering who has testified before parliamentary committees. ‘There is so much money that is being made out of immigrants coming from China to Canada, I suspect no one wants to rattle that cage too much.’”

Bits Bucket for September 9, 2015

Post off-topic ideas, links, and Craigslist finds here. Please visit my Youtube channel which you can also find here: