August 5, 2016

Investors Are Reeling As Excess Supply Bites

The Khaleej Times reports on Abu Dhahbi. “More housing units are expected to be vacant in Abu Dhabi in Q3. This will have ‘a more dramatic impact’ on residential rental demand, said property advisory company JLL Mena. ‘Job cuts by the oil and gas sector is leading to a decline in population growth,’ the report said. Approximately 4,000 units are expected to enter the market by the end of 2016, mainly within Reem Island, Rawdhat and Saraya, although based on past trends, a proportion of these could experience delays at handover. David Dudley, international director and head of the Abu Dhabi office at JLL Mena, added ‘Over recent years, prime residential prices went up at 25 per cent per annum which was unsustainable. As the market softened during 2015, prices have remained stable but transaction volumes have dropped significantly, which is starting to put pressure on sales prices.’”

The National on Saudi Arabia. “House prices in Saudi Arabia’s biggest cities continued to decline in the three months to the end of June, as falling oil revenue continued to put pressure on the kingdom’s economy. Property broker JLL’s data showed that villa prices in the Saudi capital Riyadh stood 5 per cent lower during the second quarter than they were during the same period a year ago, while apartment prices were 1 per cent lower. In Jeddah, the kingdom’s second city, year-on-year villa prices were down by about 4 per cent and apartment prices fell by 5 per cent.”

“The government’s National Transformation Plan, announced on April 25, includes a target to double the contribution of the property industry to the country’s GDP to 10 per cent, as part of a wider plan to reduce Saudi Arabia’s dependence on oil. Official targets include plans to make it cheaper for Saudi nationals to buy their own homes by building more houses and providing grants and more easily accessible mortgages. Knight Frank estimates that 30 per cent of Saudis own homes compared with a global average of 70 per cent.”

The Peninsula on Qatar. “Qatar’s real estate prices have witnessed a steady decline during the second quarter of 2016 compared to the previous quarter, after reaching to its peak for this year in March 2016. ‘The rentals for housing units in Thumama, Al Wukair and Matar Qadeem (Old Airport) areas have declined by nearly 10-20 percent, but the property owners continue to demand the same rentals they leased during boom time. Many of them prefer to keep their properties vacant rather than leasing at a lower price,’ said the promoter of a real estate leasing company, who did not wish to be named.”

From Nigeria Today. “Job losses have also become regular occurrences in the economy. Royal Dutch Shell Petroleum Development Company, Addax Petroleum Development Company and other key operators in the oil sector sacked thousands of their workers within the first quarter of this year. No thanks to the falling oil prices and the need to stay in business. SPDC had announced its plan to offload 10,000 members of staff and direct contractor positions in 2015 and 2016. There were also thousands of job losses in the banking, insurance and manufacturing sectors.”

“The Vacancy Factor Index shows a 72 per cent rise in the number of vacant properties based on the housing stock as at January, last year, within highbrow neighborhoods of Lekki, Victoria Island and Ikoyi. These areas are proximate to the central business district or downtown areas of the Lagos metropolis. Ruling out a quick recovery for the real estate sector because that market has a time lag to return to equilibrium, Rewane said: ‘We expect demand for housing locally to shrink further initially due to lower disposable income and a move from prime areas to more affordable locations.’”

The Standard Media on Kenya. “Investors in several neighbourhoods in Nairobi are reeling from a slump in home prices and rent as excess supply bites. Selling prices in Kilimani have dropped more than 5 per cent since last June to lead in the slump that has also been witnessed in Donholm, Eastleigh and Ridgeways, according to real estate consultancy HassConsult. A dip in prices is a reflection of slowing demand, further compounding concerns that developers who borrowed to fund for-sale projects could be coming under distress.”

“Implications of the supply-demand showdown have already been captured by the Central Bank of Kenya, which reported bad loans in the real estate sector had jumped by nearly half in the three months ending March.One of the reasons for the slowing uptake is that home sellers may have priced themselves out of the market. The average closing price for a residence in Nairobi has jumped seven-fold in 10 years, while rent has risen just three-and-half times, according to survey.”

The Namibian. “Namibian property owners have been hit by the Angolan economic crisis as most of their tenants from Namibia’s northern neighbour struggle to pay rent, and some have been forced to vacate. Angola’s economy, which heavily depends on oil revenue, has recently been hit by a crisis due to a plunge in global oil prices. While it was difficult to get a place to rent in recent years, many places in Windhoek’s central areas are empty as Angolans, who had a reputation for paying anything landlords demanded, now find it difficult to pay the rent which has steeply gone up over the years because of the artificial demand.”

“Many Angolans living in Namibia paid high rentals over the years as their country was awash with US dollar bills, which when converted to Namibia dollars, made high local rates appear petty. But the plunge in global oil prices made a huge impact on the Angolan economy as limited US dollars came into circulation. Places visited by The Namibian such as Dorado Park, Windhoek West, Windhoek North and Hochland Park, which were previously mostly rented out to Angolan students, have vacant rooms.”

“‘All these flats are empty. Angolans are either leaving, or moving to Katutura,’ said a security guard at a block of flats in Dorado Park, where at least four units which were all occupied by Angolan nationals before are empty now.”

“The latest statistics from the Angolan Industrial Association revealed that Angola had lost some 60 000 jobs in the past 12 months due to the falling international oil prices. According to Jose Severino, AIA chairman, the statistics which were released on 12 June showed that most of the job losses occured in the civil engineering and oil sectors, with state revenues reduced by half from June 2015 to May 2016.”

“Over the years, Namibians have blamed the Angolan US dollar boom for making landlords in Windhoek charge exorbitant rents. Real estate agent Esther Nicodemus said the sector has been feeling the pinch of the Angolan crisis lately. ‘Most of my clients were those people (Angolans). It has really been hard lately,’ she stated.”

It Got To The Point Where It Didn’t Matter

It’s Friday desk clearing time for this blogger. “A new report finds the Bay Area city with the highest percentage paid over asking price for homes from April through June was Oakland. In the second quarter of 2016, San Francisco-based Paragon Real Estate found that home sales in Oakland closed around 17-percent over asking on average. Oakland’s median home price has risen $400,000 in the past five years to $644,000, but still remains at about half of the price of an average home in San Francisco. ‘We’re talking about ferocious, even frenzied competition between buyers. The over-bidding has been quite dramatic,’ Paragon’s Chief Market Analyst Patrick Carisle told KCBS.”

“Carlisle said he expects Oakland’s market to cool off a little in the next year, as San Francisco’s market did in the last year.”

“Despite a slight uptick in listings, realtors said the Portland metro area is still an extremely hot housing market in the final stretch of summer. Experts did note a brief lull in the market for a couple weeks in the end of July. In this stretch, Nick Krautter of Keller Williams Portland said his team did notice some homes actually drop in price, and fewer buyers competing for the same house. ‘There’s some buyers that are not actively looking right now, and so the competitive offer situations have cooled a little bit,’ Krautter said.”

“First-time home buyer Kathryn Green said she had to increase her budget to buy a home in Portland. They’d already lost two homes in the three months they’d been looking. ‘It felt a little bit like being in a pressure cooker,’ Green said. ‘Especially being a first-time home buyer. Like you want it? Yes or no? And it got to the point where it didn’t matter. It was like say ‘yes.’ ”

“Green said she was able to offer asking price for the home she just purchased. She was also surprised there weren’t any other offers on the house, although she said she didn’t waste any time deciding. ‘We got it the second it popped up. We looked at the pictures and we were like ‘boom,’ Green said. ‘You’re writing the biggest check of your life, and you’re doing it from the internet and from pictures.’”

“The number of metro Denver homes for sale increased 10 percent from June to July, but decreases in the number of new listings and the number sold in July indicate what could be the beginning of a seasonal market plateau. Those drops in new listings and homes sold were accompanied by decreases in both average and median home prices, according to a the Denver Metro Association of Realtors. ‘It’s an affordability issue,’ DMAR Market Trends Committee member Steve Danyliw said of the cost of buying a home. ‘Prices have gotten so high. Wages aren’t keeping pace with home prices.’”

“While the fundamentals of a balloon bursting aren’t there, Danyliw said, the housing market will have to start slowing down. ‘Price reduction was a common term seen in the luxury market, as sellers made adjustments in response to an overall slowdown,’ DMAR Market Trends Committee member Jill Schafer said in the report.”

“Winter has come early for Greater Downtown Miami’s condo market. A new report from the Downtown Development Authority shows pricing for existing condos in the area has fallen for the first time in five years, marking what could be a return to stability after years of overheated sales and skyrocketing values. Integra Realty Resources report shows another 5,508 rental units are under construction and expected to open within the next two years, with 8,483 more apartments in the proposal pipeline for the greater downtown area alone.”

“Plus, resale inventory is flooding the market, with more than 3,000 acting listings as of May this year, all while sales volume is falling sharply. For the first six months of 2015, buyers picked up 750 condos in the downtown area. In the same time period this year, sales volume hit only 550 units. Landlords are already setting aggressive rents to combat the increased supply, according to the report. ‘In the balance of supply and demand in real estate, the good news is that affordability may come back in vogue,’ Integra wrote.”

“New York’s condo slowdown is upending the market for one of the most coveted assets in tightly packed Manhattan: land. Sales of parcels for development are plummeting as builders, seeing signs that a once-hot property market is cooling, offer prices that sellers won’t agree to. ‘Land is always one of the first asset classes to drop in value when a market is transitioning,’ said Robert Knakal, chairman of New York investment sales at Cushman & Wakefield Inc. It’s ‘indicative of the perspective that developers have of what the market is going to be like two or three years from now.’”

“A real estate research firm estimates that 20 percent of Las Vegas homeowners owe more on their homes than their value. Homeowner and developer Michael Hutchings said his home is still underwater even though he has paid to stay in his home for the past decade. After he decided to sell and got an offer much lower than the value of his home, he is questioning the banks’ process when it comes to selling homes negative in equity. Hutchings said his bank, Bank of America, immediately accepted an offer instead of negotiating better options.”

“‘You need to re-appraise the home or counteroffer so that we can get a little closer and they said: no we are willing to let it go,’ said Hutchings.”

“Amos Latteier, a tech worker in Vancouver, British Columbia, is talking about what everyone in Vancouver can’t stop talking about: the city’s skyrocketing property values and its seemingly endless construction boom, where one luxury condo after another has been built, is being built, will be built. It is a story that should now sound familiar to Seattleites. ‘All property holders in Vancouver literally won the lottery,’ Latteier says. ‘I missed making my million. I just did. I go to parties and I can see people looking at me and saying: ‘He missed making a million.’”

“A few minutes later, I’m in a cab heading back to my hotel. My driver, a Steve something, excitedly explains that he has a piece of land right by the Georgia Viaduct. It’s a 25-foot-wide plot just off a main street. And it’s across from a fire hall. These, in his money-mad mind, are amenities. He wants three million for the plot. But he fears he will only get a million. He is also upset about the ’socialist government’ intervening and changing things before his dream comes true. He needs the money so badly. This is the only game in town. It’s now or never. He says all of this as he turns this way and that, in the maze of condo towers.”