July 28, 2016

Thinking The Market Is Going To Go On Forever

The Business News Network reports from Canada. “Foreign investment accounted for about 10 per cent of Vancouver real estate transactions over a five-week span, according to data released Tuesday by the British Columbia government. Of the $8.8 billion-plus in Metro Vancouver real estate transactions collected between June 10 and July 14, more than $885 million came from foreign purchases, according to the report. Vancouver purchases accounted for 73.3 per cent of all foreign real estate transactions in B.C. over that time frame. The latest data on foreign investment comes a day after B.C. Finance Minister Mike de Jong announced a new 15 per cent property transfer tax on foreign nationals purchasing real estate in Metro Vancouver. That additional tax is set to take effect on Aug. 2.”

“The 10.9 per cent of Vancouver transactions involving foreign nationals marked a lower percentage than the numbers posted in Burnaby and Richmond, B.C. which saw 15 per cent and 19.1 per cent respectively in total investment from foreign nationals. Brendon Ogmundson, economist at the B.C. Real Estate Association says the unintended consequence of the tax implementation is the timing,as the long weekend fast approaching. ‘There’s a lot of deals currently underway that could fall through simply because they were agreed to under certain terms and now all of a sudden, a buyer may be subject to a pretty significant tax hit,’ said Ogmundson in an interview with BNN.”

The Globe and Mail. “Vancouver’s surprising new property-purchase tax for foreigners has generated a storm of coverage in Chinese-language media both in Vancouver and in China itself, with articles warning of dramatic new costs, analyzing the political motives of the B.C. Liberal Party and predicting a host of negative outcomes. But it was journalists and commentators in Vancouver who were the toughest on the new tax and who gave it the most coverage.”

“In the Sing Tao Daily, one article warned that foreign buyers would be able to hide their identities by asking local residents to buy properties on their behalf. Another article criticized the tax, which was much higher than anyone expected. ‘Increasing the tax to cool down the real estate market has limited effects,’ it said. ‘It won’t achieve its goal of reducing housing prices dramatically.’”

“The Ming Pao Daily News echoed some of that and went further. It ran one story about a Chinese buyer looking for contracts being abandoned by offshore buyers because of the new policy. Another story talked about the likelihood that buyers will shift their attention to Toronto, Vancouver Island or Vancouver houses priced under $2-million. ‘The new policy will have a strong impact on houses over $4-million, which are always favoured by offshore buyers,’ said Yongci Lyu, a realtor in Vancouver.”

The Daily Herald Tribune. “Grande Prairie’s current real estate market is great for those looking to buy a home, said Curtis Burbee. ‘In a typical week right now, there’s a lot more new listings than solds,’ the vice president of the Grande Prairie and Area Association of Realtors told the Grande Prairie Rotary Club. ‘That says a lot about our market. It is a buyer’s market right now where… the new listing inventory is outweighing the number of buyers out there.’”

“While it’s hard to predict how long the area will remain in a buyer’s market, Burbee said realistically it could be close to 12 to 18 months. ‘Stay positive. It’s a buyer’s market and the economy changes from buyer to seller’s (market) consistently like I said over that seven to 10-year cycle so it’s no new news and for buyers it’s great news,’ he said.”

The Innisfail Province. “After dodging the bullet for more than 18 months from the provincewide economic downturn, the home resale market in Innisfail, Penhold and Bowden is now bending from recessionary blows. The number of home sales in all three communities, along with total sales volumes, has dropped significantly for the first seven months of the year when compared to statistics from the same period in 2015. As well, there has been a sharp increase in the number of active residential listings, creating a buyer’s market but also reflective of increased worry over the economy.”

“‘It takes a while for everything to trickle down. Consumers were feeling the pain earlier and I think they are just continuing to feel it,’ said Sandi Gouchie, president of Central Alberta Realtors Association. ‘We talked to people and they were ready to hold on for a little while, but now some people just can’t hold on anymore.’”

The Rocky View Weekly. “The slumping economy has impacted Cochrane’s housing market, according to data from the Canada Mortgage and Housing Corporation (CMHC). Since the start of 2016, Cochrane saw 161 new starts of all dwelling types – down from 572 over the same period in 2015. ‘We’ve seen a decline in housing construction, and we’ve seen that right across the Calgary region,’ said Richard Cho, principal of market analysis for the Calgary area with CMHC.”

“Rocky View County realtor Dave Swanson said though a large inventory of higher-priced homes remain on the market, the overall market remains stable. ‘Our whole country is built on the middle class, and the middle class is, for the most part, working. I think the market is good. We’ve seen a little bit of downturn in pricing, but it’s so minimal,’ he said. ‘The multi-million dollar stuff, that stuff is dropping by 30 points. (But) if you want to move up, now is the time to move up. Interest rates will never be much better.’”

“Swanson attributed the decrease in starts in Cochrane to homebuilders overbuilding to forecasted demand. ‘Everything goes in a cycle,’ he said. ‘When those guys overbuild, they’re thinking the market is going to go on forever.’”

Oversupply, Falling Demand And Weakening Yields

The New Daily reports from Australia. “A Sydney real estate boss has branded young city dwellers ‘generation selfish’ for refusing to cut back on widescreen TVs, Netflix, fashionable clothes and craft beer to get a footing in the property market, unlike thriftier generations of the past. Malcolm Gunning, founder of the Gunning agency, issued the blistering call-to-arms accusing young people of failing to make necessary sacrifices. ‘More and more we are seeing a victim mentality associated with the high cost of property, yet this ‘generation selfish’ sees widescreen TVs, designer clothes, international holidays and eating out as everyday essentials. They simply won’t do what is necessary to cut their lifestyle in order to save a deposit,’ he said. ‘If you were serious about buying a house, you would compulsively save and you’d have to cut things out of your life.’”

The International Business Times. “The gradual recovery of Australia’s house prices could be stymied by a property funding crisis. The crisis is triggered by new borrowing rules imposed by local banks on foreign and Australian purchasers of apartments. The Australian Financial Review reports that Shanghai-based financiers have been complaining that funding of the Chinese clients from Australian banks were frozen. Their only recourse is to foreclose the property or borrow at usurious interest rates from private financiers.”

“The problem is not limited to Chinese buyers of Australian apartments. Local clients of Australian financiers, mostly Asians, have also complained of their settlements being deferred by three months to find alternative sources of funding. Because all deals have been frozen, discloses Mark Yin, agent with Home Tree Group, based in Shanghai, financiers are now scouring for new financing from all over the world.”

The Australian Financial Review. “Trips to Europe and luxury Asian resorts are on offer to off-the-plan buyers of Melbourne apartments as rising supply and falling demand increases pressure on developers. Buyers of two or three bedroom apartments in the south-eastern suburban complex selling for up to $810,000 are offered flights and accommodation in Europe worth $10,000. Buyers of one bedroom apartments, which cost about $350,000, are offered flights and accommodation in Bali, or Fiji, worth $5000.”

“DealCorp managing director David Kobritz said the offer was an alternative to usual promotion packages such as rent guarantees, window furnishings, furniture or technology packages. ‘We just felt it was something different,’ he said. ‘It has been a long, cold, wet winter and we thought it might just help persuade someone on the verge of buying.’”

“Some property developers around Melbourne’s central business district and Docklands are pushing back settlement for off-the-plan buyers by up to three months to enable them more time to refinance their purchase, according to financiers and developers. Oversupply, falling demand and weakening yields are expected to push down apartment prices by between 8 and 15 per cent, particularly in Melbourne, where new apartments continue to flood onto the market, according to BIS Shrapnel.”

The Gold Coast Bulletin. “A Taiwanese businessman who four years ago put his lavish Gold Coast mansion on the market at $16 million has sold it for half that amount. James Tsai’s 2638sq m Sanctuary Cove home has been bought by Chinese buyers in an $8 million deal that has already settled. The house was intended for Mr Tsai’s family and was completed in 2011 but, after his adult children opted against living in Australia, he decided to remain in Taipei.”

“Last year he sold another Sanctuary Cove home for $1.5 million and in 2012 was sued for failing to settle the $1.395 million purchase of a 38th-floor apartment in the Hilton Surfers Paradise. The mortgagee resold the apartment for $780,000 and the court action subsequently was discontinued.”

“The buyers of Mr Tsai’s Sanctuary Cove mansion, Feng Kou and Aiyi Wei, have a home that barely has been lived in, overlooks the Coomera River and has a 78-metre frontage to a private harbour.”

From Domain News. “Perth property prices continue to plummet despite hopes they may stabilise this year, with the median house price now at its lowest point since March 2013. House prices sunk 1.7 per cent to a median of $568,132 in the June quarter, the sixth consecutive fall for the city. Over the past year, Perth house prices have fallen by 5.6 per cent, the worst in the country, bar the volatile Darwin market.”

“‘After looking like the market might bottom out, Perth recorded a sharpish decline in the month and an even sharper decline in the June quarter,’ Domain chief economist Andrew Wilson said. ‘House prices in Perth are the lowest they’ve been in three years and they are still falling.’”