July 1, 2016

This Is Madness, Is It Not?

It’s Friday desk clearing time for this blogger. “Since the beginning of this year, data from the CoStar Group shows investors and developers have traded a little over $4 billion worth of multifamily properties in South Florida alone, and most of those deals were struck in suburban parts of Fort Lauderdale, West Palm Beach and Miami. ‘Right now it’s a tale of two different markets,’ Greg Ward, the managing director of the Atlantic | Pacific Real Estate Group told TRD. Apartments in dense urban cores like downtown Miami are fetching rents of $2 per square foot and up, he said, while communities in more suburban areas are in the $1.50 per square foot range. But there are much larger differences in those two markets than just rents. Ward said there are ’significant’ oversupply issues in many core markets.”

“The latest numbers from Marcus & Millichap show 6,740 new apartment units are set to open in Miami-Dade County by the end of this year, the largest annual influx of new inventory in the last 17 years. Much of that new construction is in the Greater Downtown Miami area.”

“McWhinney’s newest apartment community in Fort Collins will have all the Class A features renters have come to expect, plus a host of amenities revolving around it. Although Fort Collins is seeing increased multifamily construction, David Jaudes, McWhinney VP-multifamily, said McWhinney’s other community within the city, Trails at Timberline, ‘is performing extremely well.’ Absorption of new units, while not quite keeping pace with deliveries, also has been very strong.”

“‘We understand that there is a, perhaps temporary, oversupply in the market, but McWhinney is a long-term owner, and that’s how we approach all of our projects,’ Jaudes said, noting the new supply includes a number of student, affordable and senior apartments in Fort Collins.”

“Dave Stockert, president and CEO of Post Properties joined REIT.com for a CEO Spotlight video interview at REITWeek 2016. ‘Certainly there is more supply of apartments than we might typically see in other housing cycles, but it’s more than offset by the fact that the rest of the housing business is really undersupplied,’ he said. He noted that Houston is Post’s most challenging market. While the company is bullish on Houston long-term, ‘it’s going to be a tough couple of years,’ he said.”

“Manhattan apartment sales are tumbling, according to new market data, and several brokers said it is a sign that a significant correction is underway as buyers hold back. Sales in the second quarter were down more than 10% compared with the same quarter in 2015, the slowest pace since the recession year of 2009. Sales of co-ops fell by 26% and sales of lower priced apartments going for less than $1 million were down 20%, according an analysis of city records by The Wall Street Journal. ‘I think it is a correction, a serious correction,’ said Hall F. Willkie, president of brokerage Brown Harris Stevens.”

“The slowdown, which began in the second half of last year among high-price apartments, deepened and widened this year. Many brokers said asking prices were set too high after a run-up in prices a few years ago. ‘The luxury market has been choking on quite a bit of overpriced inventory,’ said broker Donna Olshan. ‘Fantasy and aspirational pricing just doesn’t cut it.’”

“A Chinese bank is suing to freeze and recover the Metro Vancouver property assets of a Chinese citizen who allegedly ‘fled China’ with an unpaid $10-million dollar loan. A petition filed in B.C. Supreme Court by China Citic Bank alleges that Shibiao Yan and his family lied to the bank about managing a business and owning assets in China when they applied for a loan in June 2014. The suit alleges that Yan and his wife were living in Vancouver and buying B.C. homes without disclosing the information to Citic. Citic’s suit says that the bank located four B.C. homes worth $7.2 million.”

“Property records obtained by Postmedia in connection to the lawsuit show that Yan bought a number of homes in the summer of 2014, and that Yan obtained mortgages from Canadian banks including Bank of Montreal and HSBC. Two of the mortgages Yan took out from HSBC appeared to be for about 100 per cent of home purchase prices, land title records indicate.”

“Lim Guan Eng (LGE), if he’s a kopitiam boss or a roast pork seller, would not get the attention (and trouble) he’s getting now. In fact, nobody would care that he had struck a good deal getting himself a bungalow for RM2.8 million – a crazy discount to market value. At 10,161 square feet, his bungalow in Jalan Pinhorn, Penang, was a steal at RM276 per square foot.”

“Unfortunately, Mr. Lim is no ordinary Chinese Ah Pek but the Penang Chief Minister. The worse part – he’s the leader of an opposition party DAP (Democratic Action Party) who commands 90% of Chinese votes. Therefore, whenever he buys or sells something, the price must be ‘ngam-ngam (precise)’. He can neither buy a bungalow below nor above market price.”

“If he buys a real estate ‘below’ market price, then he is being rewarded for helping the seller on certain project. If he buys a property ‘above’ market price, then he is cleaning dirty money through money laundering. That’s how the perception game is being played. Heads Guan Eng loses, tails Guan Eng also loses. This is madness, is it not?”

“The Hong Kong government is expanding land supply amid muted demand from the city’s biggest developers, signaling that prices have more room to drop. Builders including Sun Hung Kai Properties Ltd., the city’s largest by market capitalization, Cheung Kong Property Holdings Ltd. and Henderson Land Development Co. have been absent from the list of winning bidders for the eight parcels of land tendered by the government in the first half, as average land prices fell.”

“The rising supply comes as Hong Kong’s home prices have declined 12 percent from a peak in September. Developers have been offering discounts of up to 20 percent on new developments and other enticements including mortgages of up to 123 percent to help spur sales. In an indication of the pressure on land prices, a parcel in Tai Po, in the New Territories district, in February sold for 70 percent less per square meter than a similar transaction in September. ‘Now that we have seen the peak of residential prices, sitting with too much land on the balance sheet is not the ideal strategy,’ said Cusson Leung, a property analyst at JPMorgan Chase & Co.”

“Foreign workers are leaving Indonesia at an increasing rate due to the slump in commodity prices that has forced resource companies to slash jobs at a time when the government has also introduced tighter regulations on expatriates in Southeast Asia’s biggest economy. As a result, rents on upmarket homes in Jakarta have plummeted and enrollment at international schools has fallen.”

“The gloom is evident on the streets of Kemang, a ritzy neighborhood in south Jakarta where opulent homes are now festooned with ‘for-rent’ signs. The rental price of one house there, with a garden and swimming pool, has fallen by a third to $3,000 per month, says property broker Julizar. ‘I’ve been trying to market this house for six months but there has been no taker.’”

“The value of South Hedland’s taxpayer-underwritten Osprey Village has plunged $42 million in a year, prompting a fiery debate in Parliament on the involvement of Government in the property market. Parliamentary figures reveal the affordable housing project, which the Government spent $115.3 million acquiring, was valued last July as $51.3 million, down from $93 million in 2014. The figures also reveal the village is less than half full, with 123 of the 293 units currently tenanted.”

“Shadow housing minister Fran Logan said the investment loss was scandalous. ‘A scandal of epic proportions on the basis that nearly $300 million of taxpayers money invested into service worker and key worker accommodation in South Hedland, most of which are empty,’ he said. ‘We’ve now been left in South Hedland alone with three investments that are now worth less than half of what taxpayers put into it. We will never get a return. We won’t even be able to sell them.’”