The Money Started Leaving
A report from Fairfax New Zealand. “The Government may be denying the hot-property interest of Chinese investors but real estate agents are opting for the reverse tactic in a wave of new marketing material being sent out to homeowners. Ray White’s Mt Albert branch in Auckland recently posted a flyer to local residents about a ‘new generation of Chinese investors’ looking to make their ‘presence felt’ in the property market. The company claims it can connect vendors with ‘Chinese clients looking to buy in New Zealand.’”
“It comes after a Barfoots market newsletter in March, headlined ‘Chinese buyers coming back to Auckland property market.’ It quoted property coach Ron Hoy Fong predicting a huge increase in house values. ‘The market is going bananas after May. I anticipate we’ll jump back up to the 50 per cent over capital values this year,’ the newsletter said. Ray White agent Susan Woods-Marwick said the flyer was solely aimed at those who might be interested in selling their house. ‘My flyers aren’t for the Chinese buyers. My flyers aren’t directed at buyers at all. My flyers are directed at the vendors.’”
The Business News Network in Canada. “More homeowners in the oil patch are falling behind on their mortgage payments as Canada’s housing agency warns crude prices remain the most significant threat to the market. The number of Alberta and Saskatchewan homeowners falling 90 days behind or more on their CMHC-insured mortgages continued to move higher in the first quarter, according to the Canada Mortgage and Housing Corporation. In Alberta, the arrears rate hit 0.35 per cent as of March 31 from 0.25 per cent a year earlier. While the rate is still low, it has increased 40 per cent in one year. In Saskatchewan, the arrears rate was 0.70 per cent at the end of the first quarter – up from 0.48 per cent a year earlier. That’s an increase of 45 per cent.”
“Meanwhile, fresh concerns were raised Monday about foreign money and the potential to derail the Vancouver and Toronto markets. Sherry Cooper, chief economist at Dominion Lending Centres, notes Vancouver home prices have ’surged exponentially with the rising outflow of Chinese capital looking for a home.’ To a lesser degree, the same is true in Toronto, Cooper wrote in a note to clients. That said, ‘A slowdown in the volume of Chinese capital moving into Canadian housing is a meaningful risk factor for the hottest markets in Canada,’ according to Cooper.”
Channel News Asia on China. “China’s US$50 billion replica of Manhattan in the northern port city of Tianjin still lies mostly unfinished and empty nearly a decade after construction began. Several reports have labelled the development in Yujiapu a ghost town. It is being billed as China’s version of the Big Apple. But 8 years after construction began, many of the buildings appear unfinished. Some construction sites have been abandoned, while the streets are deserted.”
“A newly-built shopping mall lies just a short walk away from a brand new train station connecting Yujiapu to Beijing. But there are hardly any shoppers. Restaurants in the mall are struggling to stay afloat. The Hexiangan hotpot restaurant started operations in January. On most days, it is raking in only about US$300 a day. Its manager Mr Lin said: ‘We had high hopes for the future of this place when we selected this site, but we didn’t think it could be as bad as this.’”
The South China Morning Post on Hong Kong. “Homes in Hong Kong are among the world’s most expensive, but getting a foot on the property ladder has become surprisingly easy recently, thanks to aggressive mortgage tactics by developers desperate to push sales in a falling market. Offering home loans of up to 80 to 95 per cent of a flat’s value, without the need for proof of income, has become the sales tool of choice for many developers, allowing buyers to bypass strict guidelines on mortgages offered by banks but sparking concern that buyers may be setting themselves up for defaults and the loss of their homes should the economy remain sluggish.”
“‘Developers provide a solution for those who cannot pass the banks’ mortgage stress tests. Recently, about half of the new flats sold have gone to buyers without regular incomes,’ said Louis Chan Wing-kit, Centaline Property Agency’s managing director for residential.”
“These buyers, whatever their jobs, either had insufficient savings to make the down payment of 40 per cent of a flat’s value under banks’ standard mortgage lending requirements or were those able to pay upfront but whose monthly salaries failed to meet banks’ requirements, he said. He expected some developers could even offer 100 per cent mortgages if the market deteriorated further.”
Bloomberg on Taiwan. “Taiwan’s home prices, which have fallen in the past year ending a decade-long bull run, are poised to extend declines as the economy contracts and a new presidential administration focuses on equitable wealth distribution.”
“Home values in Taiwan dropped 1.2 percent and transactions declined 15.5 percent since the first quarter of 2015, according to data from the Interior Ministry, while capital Taipei was the world’s worst property market in the year ended March among major cities tracked by Knight Frank LLP. Taiwan unveiled measures targeted at speculators after home prices as much as tripled since 2004 amid low mortgage rates. The central bank in 2010 started limiting the amount of funding property buyers can borrow, while a transaction tax of as much as 45 percent, which takes into account both land and home values, took effect this year.”
“Sentiment started slowing in late 2014 and in 2015 ‘the money started leaving,’ Billy Yen, Taipei-based managing director at DTZ Cushman Wakefield, said, referring to wealthy Taiwanese who started to invest outside of Taiwan. In the wake of the new policies geared toward more affordable housing, would-be buyers found ‘the government is no longer friendly to the market,’ Yen said.”
The Media Max Network on Kenya. “Is the property market as lucrative as we are being made to believe? Of course developers and those selling plots want to make everyone believe so. But the bitter reality is that the property market is cooling off. Recent real estate market development indices by Kenya Bankers Association and Hass Consult have been pointing to a slow down. This is manifested in a drop in demand for houses and reduction in rents due to an oversupply in certain segments of the market.”
“While these indices often give a short-term view of things, if looked at in the long term by studying trends, you can see the warning signs. The verdict from anyone, including lay investors, is that ‘you can’t go wrong with land.’ But these people are not telling first-time investors that most of the prime land that delivered the quick riches has shrunk and the remaining small swatches will cost you an arm and a leg. Now investors have moved into agricultural land far off Nairobi and other towns, buying farm land then parceling them into smaller plots. These are the people who are making a killing.”
“The smaller plots are sold at prices that give them over 500 per cent returns. Sellers will use any infrastructure nearby – be it a school, college, road or even factory – to squeeze premium price. But looking at most of the land on sale, some very many kilometres from the nearest town (in Nairobi the distance is reaches even 70km), you can easily see land is over-valued.”
“People who are buying as short-term speculators to double or triple their investments in a year or so are getting so disappointed. At times they can’t even get interested buyers if they wanted to get their money back.”