The Signs Of Excess Are Visible Everywhere
A report from the Guardian. “From New York to London, the air seems to be getting a little thinner at the dizzy heights of the property market. The collapse of a 78-story ’shadow-maker’ condo development in an exclusive enclave of the Upper East Side of Manhattan is sending shockwaves through the city’s real estate market. And in London the decision to hold back the sale of apartments in the landmark Battersea power station development has also rattled already nervous buyers, sellers and developers. Projects in Miami and New York have also benefitted from the EB-5 visa program – the ‘crack cocaine of real estate,’ according to one Manhattan broker – that puts foreign nationals on a path to US citizenship if they invest between $500,000 to $1m in a US project.”
“The net result of EB-5 investment, warns one real estate agent, has been to boost real estate values to the point that it is only affordable to institutional investors and pension funds. ‘They’re the only people buying and this is going to blow up our economy again.’ For this and other reasons, failure of the Sutton Place shadow-maker may be a harbinger of things to come.”
The Telegraph on China. “Elite global banks have begun to warn clients that China’s latest credit-driven boom is nearing its peak and will lose momentum by late summer, dashing hopes for a genuine cycle of fresh economic growth and commodity demand. China’s reflation drive has been explosive. New home sales jumped 64pc in March from a year earlier. House prices have risen 28pc in Beijing, 30pc in Shanghai, and 63pc in the commercial hub of Shenzhen.”
“The signs of excess are visible everywhere as the Communist Party once again throws caution to the wind. Cement production jumped 24pc in March and infrastructure investment rose 19pc. Yang Zhao from Nomura said the edifice is becoming more dangerously unstable with each of these stop-go mini-booms. ‘Structural problems and financial imbalances are worsening. We believe this debt-fueled growth is not sustainable,’ he said.”
Bloomberg on Turkey. “At first glance, the world’s best-performing housing market bears few of the usual hallmarks of a bubble about to pop. Reliance on mortgages is low, and Turkish homeowners reliably repay their loans, helped by house prices that rose faster than in any other country last year. The risk, at a time when construction has grown to make up a bigger share of the country’s investments than in China, is with the builders rather than the buyers.”
“The share of Turkey’s borrowing represented by developers is higher than at any time in the last decade, and represents almost a fifth of all corporate loans, according to the nation’s banking association. An increasing portion of those debts is going bad, with the industry’s portion of non-performing loans nearly doubling in the past five years. ‘Mortgages are not the problem,’ said Ercan Uysal, a banking analyst at Istanbul-based research firm Integras. ‘Developer leverage is.’”
The Daily Telegraph on Australia. “Renting a Sydney home is getting easier — and cheaper. A rush to construct new properties and bulk buying from property investors has ramped up the city’s supply of rental housing, putting prices in the deep freeze, new research shows. Landlords in some suburbs are now advertising their homes at reduced rent to bait tenants. Landlords renting houses in suburbs as far afield as Naremburn, Little Bay and Chester Hill have also slashed rents, with some advertising homes at $100 lower than last year. Some of these areas, like Mascot and Auburn, are construction hot spots where a glut of new properties have become available, particularly units.”
“Taj Singh recently took advantage of the weakening market by negotiating a $40 discount off the weekly rent of a new Baulkham Hills flat. ‘I knew there had been a lot of new developments nearby and that market rent had fallen a bit in the area, so it was getting harder for landlords,’ Mr Singh said.”
The South China Morning Post on Hong Kong. “Hong Kong’s first real estate agency offering 0 per cent commission for clients is finding it tough to survive in the city with its weakening housing market. Online real estate agent Candid Properties, saw staff numbers drop to four from 15 in six months. ‘The market is bad, there are fewer transactions and fewer foreigners coming to Hong Kong,’ said Alastair Hoyne, the chief executive of Candid.”
“Hong Kong home sales dropped 39 per cent in the first quarter compared with the previous three months, to an all-time low of 6,221 in the first quarter, according to Jones Lang LaSalle, an investment management company specializing in real estate. Transactions are very weak, Hoyne said, in both second home and rental market as more owners are taking a ‘wait and see’ attitude rather than cutting prices.”
The Dawson Creek Mirror in Canada. “Construction of new homes in Dawson Creek dropped drastically from 2014 to 2015, according to new data from BC Stats. In 2014, construction started on 297 new houses in the city, compared to last year when 83 new homes broke ground. It’s the second-largest drop among municipalities in the province. The Mile Zero City is sandwiched between the District Municipality of Equismalt, which at 81 per cent had the largest drop in housing starts, and the City of Quesnel, which saw a 71.4 per cent drop in new home construction in 2015.”
“The downturn in oil and gas, which has pushed unemployment in Northeast B.C. to a provincial high 9.7 per cent, is partly behind the drop in new builds. But a large number of investment properties are wrapping up construction in Dawson Creek, which is also playing a role, says Dawson Creek realtor Kevin Kurjata. What he calls ‘the duplex party’ that began in 2012, is officially over.”
“‘We’re oversupplied because for the first time in the city’s recent history, we had a company show up that had the ability to pre-sell investment properties to buyers from the Lower Mainland and Southern Alberta, primarily, based on the (2012) rents,’ Kurjata said, referring to Western Canadian Property Group.”
“In 2012, average rents for two- and three-bedroom rental properties in Dawson Creek sat at $1,048 and $1,242 per month, respectively. ‘When people are making a lot of money off of a relatively low-priced product like a townhouse in Dawson Creek for $220,000 that you are able to rent out for (almost) $2,000 a month, it looked pretty juicy.’”
“According to Fort St. John Realtor Roland Cataford of Century 21 Realty, the slow residential growth trend extends north of the Peace River as well. ‘In 2015, things were growing a little bit,’ he said, adding it was the tail end of a building boom brought on by optimism for liquefied natural gas (LNG) development. ‘Where we are now, there’s been a huge change.’”
“Not only is new construction down, but sales have also dropped off by around 70 per cent, he said. ‘Everybody kind of needs LNG to go through just to keep the bottom from falling out,’ he said. ‘A lot of what I am seeing right now is people saying ‘I got laid off, I need to sell.’ Those are tough ones because people are kind of feeling like they are up against a wall.’”
