September 16, 2015

Fear Of Missing Out Is Gone

A report from Stuff New Zealand. “Bank competition for the apartment lending market is heating up as more Aucklanders opt for high-rise homes. The price per square metre has increased a lot over recent years. City Sales managing director Martin Dunn said: ‘I haven’t touted apartments as a capital gains vehicle, ever. But in the past four or five years they have increased 50 per cent from $4000 a square metre to $6000.’ He told his sales staff in March that the apartment market would increase to $9000 a square metre in two years. ‘They laughed at me but it happened in three months, we are now regularly selling existing apartments at $8000, $9000 or $10,000 a square metre.’”

“Nine out of 10 sales still go to investors but Dunn said Aucklanders were starting to realise that an apartment was a viable alternative to a house. Auckland was maturing into a vibrant, international city, he said. ‘All of the sex shops that were opposite my office [on Karangahape Rd] have all virtually shut. What’s going to spring up there is cafes and bars.’”

The Australian Financial Review. “Auction clearance rates in Sydney and Melbourne are “falling away” in what experts said was more evidence that “we’ve seen the top of the market”. ‘Even in Albert Park – the Cinderalla suburb – where magic happens because prices go through the roof, a few have passed in with a protracted post-auction negotiation,’ Melbourne buyers advocate, David Morrell said. ‘And three months ago, properties there were exceeding reserve by 10 per cent.’”

“‘Realism has hit but where reality is – defcon1, defcon2, defcon3 – it’s hard to say. But we might have seen the top of the market,’ Mr Morrell said. ‘Premium assets will always sell … but the market is in a state of flux. It’s wondering whether things are going up or down … Fear of missing out is gone.’”

The Calgary Herald in Canada. “A report released Tuesday by the Canadian Real Estate Association showed MLS sales in the Calgary region fell by 28.1 per cent to 2,139 in August from the level a year ago. Corinne Lyall, president of the Calgary Real Estate Board, said the combination of price declines and higher inventory levels in some segments of the market are influencing buying patterns in Calgary. ‘Improved selection in these segments is giving buyers the opportunity to be discerning about their purchase decisions,’ she said.”

The Rio Times in Brazil. “The FipeZap Index, which tracks the values ​​of new leasing contracts in nine cities across Brazil was started in 2008, just as the country and especially Rio de Janeiro started to see wild growth in real estate value and rental rates. Now the index is showing a record monthly decrease in actual rent prices. In twelve months, the strongest drop occurs in Rio: 7.72 percent, almost double the second place, Curitiba, a decline of 3.98 percent. Raone Costa, an economist at the Economic Research Institute Foundation (Fipe), told O Globo that the main economic factors affecting the real estate market are income and credit. Costa said that the economic situation of the country reinforces the downward movement as a trend.”

The Business Standard on India. “Retail customers’ expectation of offers this festive season from banks and financial institutions could result in a letdown. For, most lenders are postponing such offers; some have ruled out any such scheme. ‘Considering that sentiments are subdued and the real estate markets are in a slowdown, banks have been going a little slow on introducing the festive season offers, especially around home loans. People are expecting prices to come down and there is a lot of inventory. As a result, there are no buyers and banks have been slow in launching these offers,’ said the head of retail lending at a public sector bank.”

Today Online on Singapore. “Sales of new private homes plunged 69 per cent last month as developers refrained from launching new projects. ‘There is an inertia to commit by buyers … due to ongoing measures and/or an anticipation of further price declines,’ said Mr Ismail Gafoor, chief executive of PropNex Realty.”

From MarketWatch. “On a visit to Shenzhen last week, there was no obvious sign of an economy in a generational slowdown. Bold new skyscrapers were still going up and there was still a lengthy line at the taxi rank. But what did stand out was the price of everything. Even a beer in a 5-star hotel came with sticker shock, some 20% higher than Hong Kong. One business associate told me he was advising a client to hire employees in Hong Kong, rather than Shenzhen. This would save money when all costs, including both wages and local government taxes, were considered. This might be anecdotal but it chimes with a lengthening list of manufacturers who report they are looking elsewhere to expand.”

“If you look across China’s economy, the dominant theme today is either falling prices or herculean efforts by the government to prevent them sliding. Earlier this year the focus was on protecting the property market from deflating, which culminated in a 3.2 trillion yuan municipal government debt for bond swap. Thereafter came the government’s controversial intervention to prop up stock prices. After that it was the currency’s turn.”

“One area where price falls have been impossible to hide or arrest is at the factory gate. In August, the producer price index slumped another 5.9%, marking the 42nd consecutive month of declines. The culprit here has been overcapacity across a range of heavy industries. Yet, with few companies exiting or going bankrupt, prices keep sinking.”

“Perhaps at some stage, the penny will drop that China has just gotten too expensive after years of unbridled credit expansion, a property and stock bubble, and a banking system where no one ever goes bust or calls in bad loans. It looks an impossible task for China to keep so many prices artificially high — particularly as money exits and the fault lines of distress keep spreading. One way or another the China price needs to come down. It could be through the currency, the stock market, or inflated real estate — but most likely all three.”

Bits Bucket for September 16, 2015

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