September 12, 2016

The First Time It’s Never Been A Sure-Fire

A report from the New Zealand Herald. “Auckland property speculators are on-selling homes on the same day of purchase for huge profits, sometimes without even setting foot inside. Incredibly, one Auckland house was sold three times in a single day with its value surging by nearly $80,000 in less than 24 hours. Other astute buyers have ‘flipped’ their new purchases for instant profits worth tens of thousands of dollars, with one speculator pocketing $100,000 the same day they bought and sold a Papatoetoe house. One investor who buys and sells Auckland properties - sometimes on the same day - has defended the practice, labelling it ‘easy money’ in a rising market.”

“‘If you can swing a property deal once a week and make 20 or 30 grand, why would you not do that?’ said seasoned Tauranga-based investor Ian Stevenson. ‘Big money is chasing good profit here but it’s the market’s rise that’s driving it because they’re not fixing the Auckland problem.’”

News Limited on Australia. “Australia has roughly ’six weeks’ to prevent a housing market collapse caused by the banks’ crackdown on foreign investor lending, a US defence think tank has warned. The Washington-based International Strategic Studies Association argues ‘changes in local banking policies’ could see foreign direct investment in the property sector ‘decline markedly.’ ISSA president, West Australian-born Gregory Copley AM, told the ‘banks’ caution is precipitating the market collapse.’”

“‘The banks clearly believe Australian real estate values will decline, so they are attempting to avoid that risk. They’ve learned from the US collapse that seizing real estate collateral is a no-win scenario when the volume is great and the market slow. In so doing, they precipitate the market collapse but are less exposed to it,’ he said.”

“NAB chief economist Alan Oster described the ISSA’s prediction of an imminent collapse as ‘garbage.’ ‘One of the big problems of apartments is most of them, we don’t know who’s funding them,’ he said. ‘If the big banks don’t know who’s funding them, then the bottom line is, basically the main risk is somewhere else. What the banks were trying to do with the tightening of apartment lending, particularly to foreigners, was make sure that if people were having trouble offshore they didn’t end up in the Australian banking system. To get any sort of problem you’ve really got to have something going wrong in China and then everybody selling their apartments at the same time. If they do that then it’s not an Australian problem, that’s a global problem.’”

The National Mirror on Nigeria. “Quite unexpectedly, house rent has crumbled to an all time low, under the weight of the current recession in the economy, and this has left people to wonder what was actually happening. Could it be that Nigerians have suddenly become more frugal in their spending habits in view of the bleak economic realities?”

“Alaoma John, resident of Wuse, observed that uncertainties about the future of the economy were responsible for the perceived fall in rent across the territory. ‘Many families who lived here before now have already moved to places where they could find low-cost accommodation at a discount even a three bedroom flat for less than a million Naira for a year. They prefer that to luxury homes just because of the bad economy right now,’ he said.”

“In his words, ‘Many families who have been living in these high brow districts are finding things tough these days, especially where their breadwinners who could be civil servants, businessmen or contractors were owed salaries for several months, had poor returns on business, had not been fully mobilised for contracts done.’”

“An estate developer, who preferred to be simply addressed as Engineer Ajani informed us that a bedroom flat that he had advertised for rent after much renovation work somewhere in Lugbe had not been taken by any tenant for over 10 months till date just because he left the rent at N350, 000 for a year without the option of staggered payments.”

“Barrister Adeyemi Moshood, corroborated the first respondent when he said that several houses all over the place, especially in Maitama, Asokoro and Wuse had been vacant for up to thirteen months now after their last occupants moved out. ‘Just drive around town, from Wuse to Maitama to Asokoro, all you will see would be the tags which hang around these houses, saying, ‘House For Rent,’ or ‘Vacant Accommodation, Please Call This Number…,’ and so on.’”

From CBC News in Canada. “Income properties used to be a pretty safe investment for many Calgarians, but the city’s rising vacancy rate is making some landlords nervous. Mark Hawkins, president of, says landlords need to reflect the economy in their rates. ‘Because the market is very different than it was a year, what it was two years ago, the economy is way different here, so people have to react to that and adjust their prices,’ he said.”

“In addition to dropping rental rates, landlords should also consider other incentives, he added. ‘Being flexible on some other terms, like an early move-in date or not a year’s lease, maybe an eight-month lease, can be more important to the renter than a reduction of the rental rate.’”

“Ryan Kostel, who manages several rental properties in the city, says the energy sector downturn has changed the market. His parents invested in rental properties years ago, and they never had a problem finding tenants — until now. ‘I mean, I’ve only been helping out for the last few years but still, this is the first time it’s never been a sure-fire,’ he said.”

The Spike In Supply Was Not In Response To Demand

A report from Golf Digest. “The headlines for golf’s health, notwithstanding Tiger Woods’ declaration that he intends to take the game up again competitively next month, have been disturbing. ‘Golf is back in the Olympics. Too bad no one plays it anymore,’ a Washington Post headline said a few weeks ago. ‘Why golf has gone the way of the three-martini lunch,’ Dow Jones’ MarketWatch declared last week.”

“‘Is the sky falling? Is this a death knell? No,’ Jay Karen, CEO of the National Golf Course Owners Association said. ‘The angle on golf tends to be so negative on this stuff because we were on a rise forever, a decades-long rise. When we’re not performing as the industry used to at a high-water mark, there is this jump to a conclusion and I don’t think it’s the right one.’”

“Yet there is no denying that the number of courses have declined substantially in recent years. Both Jeff Woolson, managing director of CBRE’s Golf and Resort Group and Karen cited the same reason, economics 101, supply exceeding demand. ‘Golf courses got overbuilt,’ Woolson said. ‘There really wasn’t any feasibility given to would this golf course be successful if we put homes here? Will they sell? Not one thought was given to the viability of the golf course.’”

“‘We can’t get around the fact that you have to look at why so many courses built in the ‘90s and into the millennium, that it’s true courses were built to sell more houses,’ Karen said. ‘That’s not a highly sustainable market for the golf industry. We do have this strange anomaly of this golf economy, that the spike in supply was not in response to demand.’”

The Real Deal on California. “The Malibu Golf Club, which went bankrupt for a second time last year, has sold in a receivership sale for $30.5 million. The 18-hole property on a 650-acre site in the Santa Monica Mountains Recreational Area, sold to Shinhan Golden Faith International Development Limited, a holding company with major shares held by M.O. Company of Beijing, according to the Panama Papers. Dick Fuld, the former CEO of Lehman Brothers, bought the $100-a-round golf club with his partners in Malibu Associates for $33 million in 2006. The partners buried themselves in debt while attempting to give the course a restoration makeover and entitling it for development.”

“Malibu Associates defaulted on a $46.7 million loan from U.S. Bank, which tried to seize the property, according to a report last year by the L.A. Business Journal. The partners filed for Chapter 11 protection last April.”

From CBS New York. “A proposal to turn part of a golf course into housing is driving a wedge between residents in Nassau County. CBS2’s Carolyn Gusoff reported The Woodmere Club – a private country club – said it needs the money as opponents fear overdevelopment. The country club has been a South Shore jewel for more than a century, but hard times are prompting the private country club to sell off nearly a third of its 33-acre golf course to generate income.”

“‘It’s beautiful here, it’s picturesque and they’re going to put up townhouses? Everybody is up in arms,’ said Woodsburgh resident Nicole Spivak.”

The Coeur d’ Alene Press in Idaho. “A more colorful chapter could be opening up in the saga of the embattled Idaho Club. The Jack Nicklaus-signature golf course and its remaining housing parcels are slated to go on the block during a Bonner County sheriff’s auction, which may seem a pretty gloomy and windswept turn of events. The golfing and housing development fell on hard times around 2008 amid the housing market collapse and the attendant cratering of the national economy. The course also lost its centerpiece clubhouse to an electrical fire.”

“Insurance proceeds from the fire did not go back to Pend Oreille Bonner Development, the Idaho Club’s developer. They went to various parties with liens or security interest in the project, according to court records that fill four banker boxes in the Bonner County Courthouse. The course and two dozen undeveloped parcels went to tax auction in 2014, although Idaho Valiant stepped in and paid $1.7 million in unpaid taxes. Valiant does not expect any new bidders to emerge during the sheriff’s auction.”

“‘It’s extremely unlikely that anyone’s going to show up and bid more than $21 million for the purchase,’ said Boise attorney Rick Stacey, counsel for Idaho Valiant. As a result, Valiant expects to make a credit bid at the auction based on the judgment that it is owed in order to acquire the development.”

“While the fairways and greens appear to be in good condition, there are small glimpses of the Idaho Club’s initial unraveling on other parts of the course — inconsistent or absent yardage markers, Porta Potties in lieu of flush toilets and a lack of other minor amenities duffers might expect to encounter at a top-shelf course. Golfers still pass by the stone ruins of the clubhouse upon leaving the 18th green.”