April 29, 2016

People Are Starting To Get Nervous

It’s Friday desk clearing time for this blogger. “Marfa is stuck way out in the high desert. On the map, the town measures just 1.6 square miles. Surrounding it is cattle range—an openness that seems as impossible to build on as the ocean. Because so much of the town is low, the sky so big, the streets wide, and the surrounding country so vast and empty, Marfa doesn’t feel crowded. Unless, that is, you need a place to live.”

“This week I spoke with Brad Bingham, who’s 29 and works in town. He just went through a hunt for housing. Second homers, Brad says, are a big crimp on the housing market here. ‘A lot of the houses here are vacation homes that have been fixed up real nice, but they just sit vacant for the majority for the year, not rented to anybody, nothing. Maybe they’re airbnb’d – but not even that, really.’”

“Southwest Florida’s cash buyers paid a premium for homes in the first quarter, and that’s troublesome news, according to a new report. This is a disconcerting development for Southwest Florida, according to RealtyTrac VP Daren Blomquist, especially since it is combined with a declining share of cash buyers. ‘This combination is concerning because it shows a pattern where cash buyers are inflating the market above what traditional buyers using financing are willing and able to pay, even while those cash buyers are a shrinking share of the market,’ he said.”

“Another red flag is that institutional investors have fled Southwest Florida for less expensive markets in the state and elsewhere, Blomquist noted. In the Naples area, RealtyTrac said, there were no recorded sales to institutional investors during the quarter. It was the only city tracked that saw no sales to institutional investors. ‘Certainly demand from the big institutional investors is dwindling in both Lee and Collier counties, down to less than 1 percent of all sales in both markets in the first quarter,’ he said.”

“Home sales spiked in March and prices rebounded, with 1,022 Coachella Valley homes selling for a median price of $295,000, according to CoreLogic DataQuick. According to the California Desert Association of Realtors, inventory dropped slightly from February to March. But there were still 6,467 units on the market in March, up about 46 percent year-over-year, according to CDAR’s data.”

“Michael McDonald, principal with local research firm Market Watch LLC, said he sees rising inventory across all sectors of the market, which generally means prices will be stable or drop. As of April 1, McDonald said the Coachella Valley had more than eight months of inventory on the market. A ‘balanced market’ generally has about five months of inventory. ‘The time to sell a house is long enough that people start getting nervous,’ McDonald said.”

“A cool-down in Manhattan’s apartment-rental market is hitting the bottom line of Equity Residential as the landlord is forced to offer concessions to tenants who suddenly have a lot of competition to choose from. At Equity Residential’s Prism building, a rental-and-condo tower near Madison Square Park built in partnership with Toll Brothers Inc. and completed last year, the new owner of a condo listed it for lease at $800 less than Equity Residential’s units there, said Chief Operating Officer David Santee. ‘There’s some crazy stuff going on in New York,’ he said.”

“Dubai rents could fall by as much as 5 per cent this year, with the biggest drops in prime areas including Dubai Marina and Palm Jumeirah, according to Cluttons. The consultancy said that rents in prime areas are likely to fall by up to 7 per cent, driven by a decline in demand for luxury apartments. High-end, one-bedroom apartments in Dubai Marina, Downtown Dubai, Palm Jumeirah and DIFC have dropped by almost 10 per cent year-on-year. ‘Weaker demand as job creation rates slow is fuelling the declines in the rental market, which has remained exceptionally resilient in the face of some very challenging local and macroeconomic conditions over the past 12 to 18 months,’ said Richard Paul, the head of residential valuations at Cluttons.”

“Using new sales caveats from 2012 onwards as a proxy, there are at least 9,600 shoebox units island-wide that have recently been, or will soon be, completed. Singapore landlords of shoebox units have lost about $600 per month, or a quarter of their rental income, as rents plunged from their peak in 3Q2013. Monthly rents for shoebox homes, defined here as those measuring 500 sq ft or less, dived 23% from $2,792 in 3Q2013 to $2,139 on average in 1Q2016. On a y-o-y basis, the high-end segment performed the worst, with shoebox rents falling 8% compared with 4% in the city fringe and 5% in the mass market. This is likely due to a temporary spike in the supply of shoebox units in recent years.”

“Property foreclosures in Hong Kong continue to mount as home prices deflate, and analysts warn there could be more borrowers failing to pay mortgages on time as the downtrend continues. On Thursday, one high-end luxury apartment sold in a foreclosure auction 20 per cent below the price paid by a mainland company to acquire the property less than two years earlier. The owners made the first two monthly mortgage payments but fell into arrears on the third month after purchase. Eva Lee, a property analyst at UBS, said the slowing economy in Hong Kong and China was a factor in the property market cooling, bringing on a wave of foreclosures.”

“Hong Kong’s housing prices have slumped about 11 per cent since peaking in September, and are expected to fall a further 19 per cent through to the second quarter of 2017, according to Nomura estimates. ‘For sure there would see more foreclosed properties, unless the market turns around which is not likely in short term,’ Lee said.”

“The government of China’s northernmost province Heilongjiang said it aims to reduce a housing glut to a ‘reasonable level’ by 2018 through restricting land sales and offering subsidies to rural folk looking to buy homes in urban areas. Heilongjiang is one of the many Chinese provinces hit by huge housing overhangs as economic growth slows. Harbin, Heilongjiang’s capital, would need 25.88 months to clear all its inventory, according to Shanghai-based data provider CRIC.”

“You probably think your rent is eye-wateringly extortionate, but compared to this toilet in north London, we can guarantee your place is a steal. Builder, James Atherton from Highgate is seeking a tenant to cough up £3,000 per calendar month to rent his standalone washroom inside a block of flats. The budding-landlord is hoping to get flush quick by filling what he considers to be an obvious gap in the rental market.”

“He told the Camden New Journal that his loo would appeal to bus drivers who pass his block on their daily routes. ‘The bus drivers in Highgate don’t have a toilet,’ he explained. ‘I thought they might be interested in buying it, or maybe three of them could rent it.’”

“The bathroom is said to have been unused for years and is in good condition. However, Mr Atherton is clear that tenants or buyers are responsible for the upkeep themselves. Mr Atherton’s proposition comes as numbers from the Office for National Statistics (ONS) revealed that UK tenants now spend up to a third of their disposable income on rent. Renters in London spend even more than that, with 34.4% of their disposable income going on rent.”

“A surge in house prices over the last 10 years has also seen millions of young people pushed off the property ladder. In fact, even those in their late thirties are struggling to buy. This certainly explains the crappy (pun absolutely intended) situation in Highgate. While he’s set the monthly rental price at a simply staggering £3,000, he says he would be open to a cool £20,000 for a 20-year lease. What an absolute bargain!”