January 19, 2016

An Oversupply Of Almost Everything

Domain News reports from Australia. “The latest property snapshot for the Pilbara region in Western Australia’s north-west shows how big its real estate downturn is, with the mining mecca of Port Hedland’s average advertised house sale price the lowest since December 2006. Karratha’s​ too has fallen from $897,380 at its peak in the March 2013 quarter, to a low at the September 2015 quarter of $484,134, a drop of more than $400,000 in two years. “I think what occurred occurred is because of the widespread notoriety of extraordinary well-publicised cases three or four years ago, of tin shacks getting a million dollars, we saw speculators move in and it wasn’t really reflective of a natural housing market dynamic,’ said Domain chief economist Dr Andrew Wilson. ‘It was more about a commodity that was scarce and spectators taking advantage of that.’”

“He described the result as a ‘casino market’ where speculators could make a profit depending on when they got out. However these latest figures show the music has well and truly stopped and some speculators have no chair left to sit on. However these latest figures show the music has well and truly stopped and some speculators have no chair left to sit on.”

The Hong Kong Standard. “More price-slashing deals in the mass homes market are expected in Kowloon after an estate agency’s index tracing local prices saw the biggest fall in five weeks. In Tseung Kwan O, where the new home supply is concentrated, a two-bedroom flat at Tseung Kwan O Plaza was sold for HK$5.188 million, or HK$11,427 per square foot, after HK$1 million was cut off the asking price in four months. In Mei Foo, estate agency Hong Kong Property said homeowners are more willing to cut prices, with some even dropping as much as 15 percent.”

“Centaline’s Centa-city Index slid by 1.05 percent last week, showing prices in both the mass market and of luxury homes are on a downward trend. Meanwhile, Hong Kong Ferry (0050), a subsidiary of Henderson Land (0012), has priced its project Harbour Park at Cheung Sha Wan. One of the 50 units in its first batch is priced below HK$3 million at HK$2.967 million after discounts. Otherwise the average per-square-foot price is between HK$13,300 and HK$16,000. The developer said it is priced close to the secondary homes nearby.”

The Business Times on Singapore. “Good class Bungalows, the creme de la creme of the landed housing market, have turned out to be somewhat of a bright spot in 2015. At least 34 transactions totalling S$730 million in Good Class Bungalow (GCB) Areas were sealed in 2015 - up from 28 deals adding up to S$626 million in 2014. Realstar Premier Group managing director William Wong estimates that GCB prices retreated 10 to 15 per cent in 2015. ‘A good GCB in a location such as Dalvey/Holland which used to be able to sell at S$30-32 million a year ago will probably be able to fetch S$25-27 million at best now.’”

“He attributes the price drop to generally weaker economic sentiment globally as well as in Singapore. ‘Also owners are more realistic in their pricing especially for those who have not been able to find a buyer after putting their property in the market for more than a year. Coupled with the fact that there are quite a few GCBs transacted below S$20 million, this has somehow brought the overall asking prices of GCBs a notch down.’”

The Malaysia Star. “The property sector is deluged with an oversupply of condominiums and commercial buildings. Speculators are in for a hard time if they have been over geared as tenants are hard to find and unwilling to pay normal rental rates. Developers are switching as fast as they can to affordable housing and landed terrace houses but with higher cost of construction, margins will be thin. Survival and holding power is the name of the game. The year 2015 reveals an oversupply syndrome of almost everything.”

“Yes, the ringgit will continue to be weak. No worries, lower consumption will reduce imports as supply adjust to reducing demands. Importers will be forced to reduce operating costs. More retrenchments or right-sizing moves are on the horizon. Exporters will cash in on higher forex earnings. Yes, cost of funds will definitely go up. No worries, trade customers automatically will ask for longer credit terms or just simply stop paying. Banks will enjoy higher credit card usage as consumers turn to alternate financing due to shortage of cash.”

“High margin business with high delinquency but opportunities abound. Yes, more write-offs on non performing property loans. No worries, they are easily recoverable due to the active auction market as there are still many cash rich investors looking out for good buys.”

The International Business Times on the UK. “You could probably sum up the London property market’s recent performance like this: the bottom has fallen out of the top and there is no top to the bottom. Changes to the tax regime, such as a stamp duty increase on high-value homes, have hit the most expensive properties hardest. Sales and house prices in prime central London areas are dropping. But prices in much of the rest of the city continue to boom and reports say demand is surging in some outer areas.”

“In Kensington and Chelsea, City of Westminster, Camden, Hammersmith and Fulham, City of London and Camden, the average property price dropped 8.7% over the year in November 2015, according to a house price index compiled by LSL Property Services. Individually, Westminster saw the steepest drop of 14.4%, to £1,385,797. Why?”

“For a while now, prices look to have topped out in prime central London areas, so investors have looked for bigger returns elsewhere in the city. And the stamp duty increases have made it markedly more expensive to buy properties over £1.5m (€2m, $2.1m) in value, which is making some buyers think twice, or at least demand lower prices from sellers.”

The Calgary Herald in Canada. “Data from the Canadian Real Estate Association show Fort McMurray MLS sales last year fell by 43.5 per cent from 2014 levels, while the average sale price declined by 6.2 per cent — both the biggest annual declines in the province.”

“‘Edmonton’s market traditionally follow’s Calgary’s market by 12 to 18 months and is normally less volatile thus not experiencing as deep of lows and highs of peak. Edmonton has also enjoyed the more consistent in-migration and lower unemployment rate due to the many infrastructure and large construction projects on the go across the city,’ said Don Campbell, senior analyst with the Real Estate Investment Network. ‘Conversely, due to the less diverse economies of the smaller centres in the province, we always witness dramatic swings of the market pendulums as layoffs and economic stagnation hit these smaller cities much more quickly and with much more fervour.’”

Bits Bucket for January 19, 2016

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