December 8, 2015

It Will Be Hard To Get The Goldilocks Adjustment

Bloomberg reports on Vietnam. “Just six years ago, when Indochina Land sold condominiums in a Hanoi high-rise, buyers hauled sacks filled with dong, accompanied by policemen, to finalize their home purchases, says Tony Diep, managing director of investment firm Indochina Capital. Indochina Land is the real estate division of Indochina Capital Corp. ‘You’d have stacks and stacks of cash sitting on the conference room table and three money-counting machines going at the same time,’ he said. ‘Mortgages are much more popular now and easy to get.’”

“The rapid popularity of mortgages, coupled with ample home inventories, is raising concerns about credit risks and whether it increases the risk of a bubble. ‘The next real estate bubble is coming,’ said Diep. ‘I’m seeing a speculative fervor with long lines at showrooms, and prices are climbing higher than they should be. Many people aren’t buying to live in these units.’”

The Malaysian Star. “The slowdown in the current property sector has seen transactions, be it primary or secondary, winding down within the Klang Valley this year. Johor-based KGV International Property Consultants (M) Sdn Bhd director Samuel Tan Wee Cheng says there has been an oversupply of high-rise properties. ‘Prices of landed properties are too high for the younger generation. Serviced apartments of about 900 sq ft, priced at RM500 (S$167) per sq ft or thereabouts are still within their means.’”

“Landserve (Johor) Sdn Bhd executive director Wee Soon Chit concurs that high-rise residential sub-sector in Johor has been affected this year. ‘Concern about an oversupply situation as well as occupancy issues have seriously impacted demand for this sector. The presence of giant developers from China like R&F Properties, Greenland and Country Gardens developing huge waterfront projects certainly have also caused concerns. It is a buyer’s market now and some of the developers are said to be willing to give up to 20 per cent price discount - especially on the high-end products.’”

3 News on New Zealand. “There are more signs Auckland’s housing market is cooling down, and there are fewer houses selling at auction. Valuer QV says it’s happening city-wide. ‘Some reports are down from around regularly 85 percent of properties at auction selling across Auckland, now possibly under 50 percent and as low as 30 percent selling,’ says QV national spokesperson Andrea Rush.”

“Naveen and Reeny Monteeiro got no bids on their west Auckland home last week. ‘We were actually told that there would at least be a couple of bidders, but you know at the last minute, they actually changed their minds,’ says Mr Monteeiro.”

Reuters on Australia. “Australia is attempting to let the air out of a housing bubble without also deflating a vital source of economic growth or stressing a deeply-indebted household sector. It’s a balancing act few others have pulled off and there is scant room for error as the country is already struggling with the aftermath of a once-in-a-century mining boom. Adding to the stakes are record levels of household debt.”

“The Reserve Bank of Australia (RBA) has made clear its reluctance to cut interest rates again for fear of overheating the market. But neither do they want home prices to fall in a way that would stress over-leveraged owners and potentially deal a damaging blow to the economy. ‘This leaves a sense that it will be hard to get the goldilocks adjustment the RBA would like, which stabilizes risks without snuffing out the growth contribution from housing,’ said Ben Jarman, an economist at JPMorgan.”

Domain News on Australia. “When David Martin sold a house within 48 hours of it being listed and posted a picture of the pleased seller on Facebook it generated a lot of agent envy. Two days to sell the house in Butler, in Perth’s northern suburbs, is a lot faster than the usual turnaround of seven weeks. The slow sales generally, are the result of the gradual downturn in the real estate market over the past 18 months according to Domain State Manager WA Jeroen van de Peppel​. ‘There are 16,000 properties on market now compared to 12,000 18 months ago; so there’s more to choose from,’ he said. ‘It is a buyers’ market out there and I don’t think sellers are attuned to that yet. They have to understand that it’s not as good as it was.’”

“Van de Peppel urged sellers to go to market via auction, open-to-offers or an end-date sales. ‘As soon as put a price you are going to limit the number of people showing interest; leaving the price off may generate more interest than putting on an unrealistic price,’ he said.”

The Nikkei Asian Review on China. “China as a whole is facing an economic slowdown, but things are worse in the country’s northeastern corner, where a high reliance on natural resources has turned into a vulnerability. A large banner hanging down a side of a building tells passersby that condo prices have been slashed by 100,000 yuan ($15,630). Sales began last year on this block of 13 condominium buildings on the outskirts of Dalian, Liaoning Province. There are residents, but the development has a certain emptiness to it; more than 90% of the 440 units are unsold.”

“‘We only have a handful of residents here,’ a security guard at the property said, almost in a conspiratorial whisper.”

The Calgary Herald in Canada. “Calgary Real Estate Board chief economist Ann-Marie Lurie says several signs pointed to conditions favouring the buyer in November. Among them was a sales to new listings ratio of 0.58, which is a 27 per cent dip from a year ago, and supply extending to four months’ worth. ‘The apartment sector has been there for some time,’ says Lurie of elevated supply. ‘This the first time we have seen the entire city push above four months, which is really what we would say is that buyer’s market area.’”

“Inventory on homes of all kinds was 5,316 in November, which is 31 per cent higher than the same month a year ago. ‘Earlier in the year there was a pullback in listings, enough that it helped keep the market fairly balanced,’ Lurie says. ‘Now we’re not seeing the same pull-off.’”

The Associated Press. “The Canadian dollar, also known as the loonie, this year has dropped to its lowest level against the U.S. dollar in more than a decade. The loonie has slid 25 percent against the U.S. dollar in the past three years and now is worth, in the ballpark, of 75 cents. Canadians have slowed down making inquiries about Brendan and Valerie Wyck’s three-bedroom luxury condo in Fort Myers, which they rent out by the month at a cost of $110 a night, although inquiries from the United States and other countries haven’t diminished, said Brendan Wyck, who lives in a Toronto suburb and purchased the condo four years ago.”

“The Wycks also take a financial hit when they have to exchange dollars to pay for their homeowners’ association fees. ‘It gives one pause, but because we bought with the long term in mind, we’re biting the bullet and grinning and bearing it until the Canadian dollar comes back,’ Wyck said.”

Bits Bucket for December 8, 2015

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