January 5, 2016

The Carnival Came To An Ugly End

The Calgary Herald reports from Canada. “Calgary’s resale housing market lost close to $3.5 billion in MLS sales in 2015, according to data released Monday by the Calgary Real Estate Board. CREB’s chief economist Ann-Marie Lurie said the ratio of sales to inventory will ultimately impact house prices. ‘When we start hitting above four (months of supply) is when we start to see what we call really buyer’s market conditions,’ said Lurie. CREB said the inventory level was at the highest December level recorded since 2008. Inventory levels were notably up in both the apartment and attached sectors, which neared the highest December total on record.”

“There were only 878 MLS sales in the city in December, which was down by 18.2 per cent from December 2014. ‘December showed that buyers in this market are continuing to be much more cautious as the impact of further oil price declines weighs on their confidence,’ said CREB’s president Corinne Lyall. ‘What we found as well is that sellers weren’t clamouring to take their homes off the market. Many of them kept them on. So we had higher inventory levels than we’ve probably seen since 2008 in December.’”

The Times of Israel. “Jerusalem municipality is set to double property taxes on homes whose owners live abroad, in a bid to reduce the number of so-called ‘ghost apartments’ in the city. Jerusalem’s real estate market is notoriously expensive, with housing prices continuing to rise faster than average incomes. One cause for the rising costs are thousands of foreign residents who purchase homes in the city, but spend only brief periods in the apartments on visits.”

“‘The addition of thousands of ghost apartments to the market will dramatically increase the supply of apartments available for rent by young people, and will lower rent prices in the city,’ said Jerusalem Mayor Nir Barkat.”

The Sydney Morning Herald in Australia. “Major banks have lopped tens of thousands of dollars off how much they are prepared to lend home buyers, according to new figures that highlight the toughening in mortgage lending standards. A couple with combined income of $120,000 purchasing an investment property can now borrow up to $80,000 less from a major bank than they could a year ago, calculations from mortgage broker Homeloanexperts.com.au found.”

“In recent months, these tougher policies are thought to be a key reason for a sharp slowdown in the housing market, which has resulted in lower auction clearance rates and a dip in prices in Sydney and Melbourne. Mortgage broker Christina Parnham, said the reduction was mainly because banks were requiring that prospective borrowers be tested against how they would cope with higher interest rates. ‘You’re going to have to be able to service the loan at about 7.5 to 8 per cent,’ she says.”

“At the same time, banks have adopted more conservative assumptions about how much money customers will need to live on. Now they are being forced to use more sophisticated indexes for measuring how much people need, and these are generally tougher. Some banks are also taking a closer look at individuals’ specific circumstances to determine their spending patterns, after the corporate watchdog said many banks were wrongly assessing customers’ living expenses. These tougher credit standards from banks caused the value of new housing investor lending to drop 20 per cent in the September quarter, and the share of loans going to investors was the lowest in two years.”

The Phnom Pen Post in Cambodia. “The construction and real estate industry is huge and growing at a breakneck speed, as towering cranes and high-rise buildings emerge across Phnom Penh. With a flood of foreign investment over the course of the last two years, the World Bank has announced that construction is Cambodia’s most dynamic engine of growth. ‘These luxury units are more like investment vehicles for wealthy locals and long-term foreign residents, [who hope] of reselling them in two to three years at a significant gain,’ said Saraboth Ea, managing director of Maxem Property. ‘In the short to medium term, there will be an oversupply of these units and we suggest people reduce their investment in these types of units until we have a clearer picture of the market in 2018.’”

The Malaysia Chronicle. “Malaysia’s property market which has been on a steady decline since 2014 is expected to continue its downward trend this year, industry experts said. ‘Property speculators who have bought into high end condominiums in hope of flipping it for profit will be suffering this year because there are no demands for their properties and there is a glut of such properties,’ said Real Estate and Housing Developers Association (Rehda) Penang branch chairman Datuk Jerry Chan, referring to condominiums that are priced between RM600,000 and RM900,000. He predicted a better renters’ market as the speculators, who are unable to sell, will be forced to rent out the premises at lower rates to cover the instalments for the properties.”

The South China Morning Post. “Construction on the Venice Impression in Anyang, Henan province, started in 2009 during China’s boom days and hopes for the project were high. The mall would be not only the largest in the region, it would give those living in the inland Chinese city a taste of luxury. At least, that was the vision. Today the project appears little more than a complex skeleton of cement and steel. ‘It’s over, it’s over,’ said Wang Teng, who said he had lent about 300,000 yuan (HK$357,000), his life savings, to the developer in 2010 for a promised annual interest rate of 18 per cent. ‘Money invested here is all washed away.’”

“He is just one of the 200,000 creditors to Chaoyue Group, a developer and local coal-property conglomerate. Chaoyue’s boss was arrested in November on criminal charges of ‘illegal fund-raising,’ leaving an estimated unpaid debt of 4 billion yuan, local media reported. The Venice Impression is just one of several ‘rotten-tail’ projects in Anyang, and Anyang is just one of hundreds, if not thousands, of Chinese cities and towns with an oversupply of property.”

“Back when money was easily available and China’s economic boom seemed unstoppable, local residents rushed into such schemes in search of high returns. The unlucky ones found themselves involved in developments that were little more than Ponzi schemes. ‘It was like smoking opium,’ said Li Jianjun, a taxi driver in Anyang. ‘You put down 100,000 yuan at Chaoyue or Zhenyuan, and you took 2,000 yuan a month in interest payments – nobody wanted to work.’”

“Zhenyuan was another private company based in Anyang that has since been toppled by its unpaid debts. The carnival came to an ugly end. By the end of 2011, many schemes had collapsed, forcing angry investors to protest on the streets. Billions of yuan evaporated. ‘It’s just wrong to expect [your] money [will come back],’ said Zhang, who was stood at the gate of another unfinished project in Anyang. He was unwilling to give his full name. ‘People were just thinking too much about money – a man just needs one bed to sleep on and three meals a day.’”

The News Paper on Singapore. “He took out loans and mortgaged his three-bedroom condominium unit to invest in property overseas, thinking that he could get rich quick. But Mr Lim ended up over $600,000 in debt and with a $400,000 mortgage when the overseas developer went missing in 2011. Two years ago, Mr Lim approached Credit Counselling Singapore, which helps people with debt problems. They helped him negotiate a monthly payment plan of $8,000 to creditors for a term of seven years to pay off his debt.”

“Mr Lim is also servicing a mortgage of about $2,200 at an interest rate of around 1.8 per cent. Mr Lim’s family of four live on a tight budget and an increase in mortgage rates is the last thing they need. But following the United States’ Federal Reserve’s decision to raise interest rates last month, home loan and mortgage rates in Singapore are also set to rise. ‘I hope the increase (in interest rates) is not steep, one per cent a year is still all right and we can stomach that,’ said Mr Lim. ‘But if it’s three per cent… I will probably have to ask my children to chip in more.’”

“His youngest child will complete her university education this year and he hopes that she, too, will be able to help out financially when she enters the workforce. He said: ‘I’m their father, I will feel bad asking them (to contribute more money) for this mistake. Our budget is very tight and we’re already stretched to the limit. We have already cut down to the bare bones, no restaurants, less entertainment and less shopping.’”

Bits Bucket for January 5, 2016

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