October 31, 2016

It’s All About Yield And Returns

A report from Bloomberg. “The Hidden Villa Apartments, a 61-unit complex in Beaverton, Ore., is the kind of property investors love and affordable-housing activists ignore. Built in 1968, it was acquired recently by an out-of-town developer who plans to tear up the old carpeting and roll in some stainless steel appliances. The idea is to attract the wealthier workers flocking to knowledge industry jobs in the Portland, Ore., metropolitan area and charge higher rents. Sixty-one cheap apartments gone, 5.6 million to go.”

“‘When we started out, our model was, let’s buy from the slumlords and create habitable housing,’ said Max Sharkansky, managing partner at Trion Properties, a decade-old Los Angeles-based property manager that bought Hidden Villa. The company targets deals where it can raise rents by 25 percent, often more. ‘If someone can’t afford it, they can move into something older or more vanilla and pay the lower rent,’ Sharkansky said. In the submarkets that his company targets, those kinds of apartments often no longer exist. ‘Usually the only option is to move out of the neighborhood.’”

The Real Estate Journal. “The multifamily sector is soaring across the country and the Midwest. The St. Louis market is no exception, as developers continue to bring new units to the region. Midwest Real Estate News recently spoke with Andrea Kendrick, a director with the St. Louis office of Berkadia Commercial Mortgage, and Kevin Kozminske, senior managing director in the same office, about the strength of the apartment market in St. Louis and the reasons behind its strong performance.”

“MREN: And what about acquisitions and refinances? What does Berkadia consider for these projects? Kozminske: The product we are doing a tremendous volume with is Fannie Mae and Freddie Mac. Again, we look carefully at borrower experience and the past performance of a project. We also look at the borrower’s business plan, especially if the borrower is looking to do a value-add play, if they want to finance the acquisition and repair of an apartment property. Borrowers want to acquire these older properties and renovate them. They want to push up the rents they can get with these older apartment buildings.”

“MREN: How strong is that value-add segment of the apartment sector today? Are you still seeing a lot of investors acquiring old apartment properties to renovate them and then charge higher rents? Kozminske: That has slowed down a little in the last six months as prices have continued to increase. They are trying to find that property to make this play work. That is getting harder. But there is still room for this type of acquisition, especially in the suburban markets. You can add to the counter tops, appliances and finishes and then increase the rents. There is still room for rent to grow in that space.”

From Pensions & Investments. “Real estate money managers are looking beyond the four food groups of retail, multifamily, office and industrial to provide investors with returns in a challenging investment environment. While core funds stick to the four main real estate property types, value-added and opportunistic funds can stray into niches, said David Stone Phelps, a partner in the Los Angeles office of law firm Akin Gump Strauss Hauer & Feld LLP who specializes in real estate transactions, primarily representing real estate managers, capital market clients and institutional investors.”

“‘Opportunistic and value-added funds … can have a broader focus and investment strategy including assets to be repositioned or ‘out-of-favor’ or specialized real estate. In the end it’s all about yield and returns,’ Mr. Phelps said.”

“Andrew Gibbs, senior analyst in the Philadelphia office of Aberdeen Asset Management, agreed that he is seeing many more niche opportunities. There is increased interest from investors as they search for yield, he said. Aberdeen is investing in niches including student housing, medical office and senior housing. ‘We certainly have some concerns about supply pipelines in student housing, particularly at smaller universities,’ Mr. Gibbs said.”

The Bellingham Herald in Washington. “While the local rental market remains tight, it appears rates are starting to flatten out. Monthly median rental rates in Bellingham hit $1,467 in March but have slowly trended downward, hitting $1,439 in August, according to data from Zillow. This is a trend that Bellingham real estate appraiser Tom Follis is also seeing. He doesn’t see rates going down significantly, but, at least, they’re not going up.”

“‘Rents have more or less maxed out,’ said Follis, who also noted that rates ‘rose like crazy’ in 2015. ‘I think landlords were pushing the envelope because the demand was so strong.’”

“It’s possible that the recent addition of several multifamily buildings is finally having some impact on demand. Another student-focused facility called Gather Bellingham is being built on North Forest Street. It will add 423 beds to the Bellingham inventory when it is completed this fall. Construction of other multifamily buildings in Bellingham has been strong for the past two years. According to data from the Bellingham planning department, permits have been approved for projects totaling 964 units from the beginning of 2014 through September 2016.”

From Reuters Investigates. “A third-generation farmer, Matt Gibson eyed a big expansion of his family’s business in late 2011, as grain prices soared in a searing Midwestern drought. By 2015, with grain prices at half their peak, BMO Harris Bank and others creditors sued the Gibson businesses seeking to recoup more than $30 million. The travails of Matt Gibson, 39, and his family are emblematic of a new class of ‘go-go farmers,’ a term coined by fellow Midwest growers and agricultural economists. Many, like the Gibsons, borrowed heavily to expand their farms, then borrowed more in an effort to plant their way out of a commodity price crash, according to dozens of interviews with Midwest farmers, lenders and agriculture experts.”

“Their distress could foreshadow broader economic turmoil in the grain sector, which includes corn, soybeans and wheat. ‘We’re in for a very, very rough time,’ said Jim Mintert, director of Purdue University’s Center for Commercial Agriculture. ‘It’s going to take several years to work our way through this.’”

“A Reuters analysis of federal data on agricultural lending in the grain-producing ‘I-states’ - Illinois, Indiana and Iowa - shows that delinquency rates on farmland and production loans are rising sharply. The federal government doesn’t track large farm bankruptcies, but a special category of bankruptcies for smaller farms - Chapter 12 filings - points to distress in the grain sector. In the top Midwest grain states, the number of Chapter 12 filings, limited to those with less than $4.03 million in debt, were 51 percent higher in the 12-month period ending June 30 of this year compared to the same period in 2013, according to federal court data. In Iowa, the top corn producer, Chapter 12 filings had climbed 125 percent.”

“In all, about one in three U.S. farms raising grain and other row crops, not including cotton, last year were categorized by the department as ‘highly leveraged’ or ‘very highly leveraged,’ meaning their debts equaled at least 41 percent of assets. ‘I expect these categories to get larger,’ Robert Johansson, chief economist for the U.S. Department of Agriculture, told Reuters.”

“Some lenders, eager to grow their portfolios, stopped following their own lending guidelines, said Joseph D. Roach, farmer and former agricultural banker, and other lenders and lawyers interviewed by Reuters. Grain cooperatives, equipment makers, seed sellers and other entities also extended easy credit, he said. ‘I started to notice all these bankers letting the farmers have more rope,’ said Roach. ‘They couldn’t give out the money fast enough.’”

Without Buyers, It’s Not A Seller’s Market Any Longer

A report from Post Media in Canada. “It was a question well worth asking. After watching Calgary’s rental market shift over the last year, Bridget Eastgaard and her husband asked for a break — and received a $375 monthly reduction. ‘Will you lower our rent?’ they said to their landlord, who agreed to the couple’s request. ‘I told (our landlord) there were comparable units for cheaper and the vacancy was now very high in Calgary, so we had a lot of choice.’”

“Data provided by Mark Hawkins, who owns the rental listing website RentFaster.ca, shows the average price for all Calgary properties listed on his site has plummeted from a peak of $2,137 in July 2014 to $1,426 this month — a decline of 33%, or $711. ‘It’s definitely a 180 in the market here. It’s really changed,’ said Hawkins. ‘The tides have turned. Now, there are a lot of landlords that aren’t even covering their expenses.’”

The Tribune de Genève in Switzerland. “Rents have dropped across Switzerland, declining substantially in the Lake Geneva region, according the the property consulting firm Wüest Partner. According to the firm, Swiss rents in the second quarter of 2016 were 1.6% lower than the same quarter in 2015. Geneva saw rents drop by 8.3% over the same period, while the region around Lake Geneva, known as the arc lémanique, saw a fall of 7.2%. Valais saw a similar decline of 5.2%.”

“These are the first declines in 16 years, according to the Zurich daily. Across Switzerland, rents rose by 25 percent in the ten years from 2006 to 2016. In Zurich (+38%) and Geneva (+46%) the rise was even steeper. Wüest Partner says the market has turned in favour of renters as immigration falls and the supply of new dwellings coming on to the market increases.”

The Taipei Times in Taiwan. “The new home market stabilized last quarter from a year earlier as builders lowered prices to facilitate transactions, a report by Cathay Real Estate Development C and National Chengchi University’s Taiwan Real Estate Research Center showed yesterday. Mainstream housing — mostly apartments with one or two bedrooms — had an average price of NT$10.17 million, the report said. That translated into an average asking price of NT$266,500 per ping (3.3m2), a 7.41 percent decrease from a year earlier, the report said. Price concessions stood at 17.37 percent.”

The Asian Property Report on Singapore. “Figures for Singapore’s property market in Q3 look increasingly miserable across the board, but nowhere more so than in the private residential sector, the Straits Times reports. Private home prices dropped for the 12th quarter in a row in Q3, and were 10.8 percent less than the spike in the third quarter 2013. ‘Worries over a weaker economy, news of job cuts and fears of a coming recession seem to have an adverse impact on the property market,’ Mr Nicholas Mak, executive director of SLP International Property Consultants told the Times.”

“Values and rents of offices and malls fell at a slower pace in the period from June to September, but vacancies climbed to their highest levels in recent years.”

The Vanguard on Nigeria. “Stakeholders have continued to express divergent views on the impact of the current economic recession in Nigeria on the nation’s real estate market. While some operators are complaining of low demand, over supply, falling prices and many unsold/unoccupied houses with no buyers or tenants, others see the crash in the property market as opportunities for brave investors.”

“Available sales data from housing developers and realtors showed that most of the enquiries they receive come from first-time buyers, who hardly return back after making enquiries. In highbrow areas in Lagos like Ikoyi, Victoria Island and Lekki which used to be hot cake, especially for wealthy Nigerians, most properties there are now up for ‘let’ or ’sale’ for several months without anyone making enquiries about them. The same scenario applies to Abuja.”

“The Financial Derivatives Company Limited puts the vacancy rate in the upper class real estate neighbourhoods of Lekki, Victoria Island and Ikoyi at 74 percent at the end of September. Mr. Akin Olawore, former president, Nigerian Institute of Quantity Survey, noted that the real estate sector is usually the first hit during economic recession. ‘This is because people don’t have money to pay their rent, or go into new leases. They just can’t find the money to pay now, so the default rate has gone up,’ he said.”

“‘Having vacant houses lying everywhere is not helping the economy. If you look around, you will see many houses for lease. Things are expensive now, and people are not taking up leases. If landlords have their way, they would factor in the inflation rate in their rent, if it expires within this period. But given the situation of things, they also have to reduce the price at which houses are leased or sold; otherwise we will keep off-loading many houses into the market, without buyers. It is not a seller’s market any longer,’ he said.”

October 30, 2016

This Backslide Is Historic

A report from Agriculture.com. “Just as rising farm incomes place upward pressure on farmland values and cash rental rates, falling farm incomes place downward pressure on farmland values and cash rental rates. In August, the USDA released its annual update on farmland market conditions. After a surge in rental rates that began in 2008, the national average for cropland cash rent fell 6%, to $136 per acre, in 2016. The only other decline in national cropland cash rental rates since 1998 was a 3% decline in 2007. Rental values fell the most in Minnesota, Iowa, northern Missouri, and northern Illinois.”

“Similar to cropland, the average rental rate for pasture in the U.S. also fell in 2016. While we have previously looked at changes in farmland values and cash rental rates during the boom period, 2016 will be marked as the year cash rental rates began to decline at the national level. This is true for both crop and pasture.”

The Farm Journal. “Farming this fertile Indiana ground is both Jason Wykoff’s passion and his livelihood. But after 22 years, he was forced to make one of the most difficult decisions of his career. ‘We’d been previously farming on shares,’ Wykoff says. ‘And when this lease was up, the owner wanted to go to a cash rent. We felt it was just in an area where we couldn’t survive long-term.’”

“Those 12,000 acres were a vital part of Wykoff’s business for the past eight years. He added tile, irrigation and other improvements to make it a better farm, so walking away was a decision he didn’t take lightly. Even so, nearly a year later, it’s one he doesn’t regret. ‘If we were still farming that farm in the current situation, I would have a lot of anxiety,’ he says.”

“Wykoff isn’t alone. A recent Farm Journal Twitter poll shows 57 percent of farmers are willing to walk away on any ground that can’t be renegotiated. Even more telling is ProFarmer’s annual LandOwner survey, showing farmers say if prices don’t come down, they may walk away, too. ‘According to our survey, we find that 44% of our members and subscribers are willing to walk away from a cash lease if that lease is not lowered going into 2017,’ says Mike Walsten, Editor of ProFarmer LandOwner Newsletter.”

The Capital Journal. “South Dakota State University has been doing the land value survey for 26 years and this week is reporting on it and related topics to those who lend money - or maybe don’t, now - to ranchers and farmers at meetings in Pierre, Sioux Falls and Watertown. Ag bankers have told reporters all summer across the region that they are having serious meetings with farm borrowers after two years of lower crop prices have thinned or erased profits for many. Federal officials expect net farm income to drop again, nationwide, this year.”

“The new report from SDSU says the ’sharp declines in crop prices and … beef cattle prices’ are showing up in what land is worth for grazing cattle and growing crops. Ranchers and other livestock market experts say prices for calves coming off pasture in the fall are down 40 percent or more from two years ago. Farmers are looking at prices for corn, soybeans and wheat also down 30 percent to 40 percent or more from historic highs seen three and four years ago.”

“Typically, livestock prices counter crop prices: when crop prices go down, that means feed is cheaper, which usually bolsters prices for livestock. But the past five years, livestock and crop prices tracked higher together - more or less - and in the past two years have dropped back at the same time.”

“This year’s backslide is historic: the first annual decrease since 1991, at least, which is when SDSU began its survey of about 190 experts across the state. Land values went down a lot in the early 1980s during the crisis in farm lending that drove many off the farm. But since then, it’s been a fairly nice run until 2016, as the story was higher land values every year.”

“The value of all non-irrigated ag land - crop and pasture -increased 82.3 percent from 2011-2015 statewide, from $1,374 per acre to $2,505, before sliding back 2.4 percent this year to $2,444. In the central part of the state, including PIerre, the value of all non-irrigated ag land - cropland and pasture - more than doubled from 2011-2016, up 112.4 percent, from $1,450 per acre to $3,080 in 2016, including a 1.5 percent increase this year from $3,035 in 2015.”

The Bangkok Post. “Rice farmers in some provinces have grown increasingly impatient and are imploring the government to help them after prices plunged to a 10-year low. In Buri Ram, farmers say they are in deep trouble as rice prices have dipped well below cost to five baht a kilogramme. They have asked the government to help prop the prices to at least 10 baht per kg, their break-even level.”

“Millers are now paying them only 5,000 baht a tonne for the main crop they are harvesting, citing high humidity and impurities. They claim the price is the lowest in decades, yet they have no choice but to accept it in order to repay debts and have money for daily expenses, harvesting equipment rentals, and school supplies for their children for the coming semester.”

“‘We spent 70,000 to 80,000 baht to farm on our 35 rai this year. Although the output was good, it’s questionable whether our income will cover the costs,’ said Prakong Hoopracone, 49, from Muang district of the northeastern province.”

“In Chai Nat, some farmers reportedly are putting their land up for sale because they can’t bear to lose any more money on their crops. Government spokesman Lt Gen Sansern Kaewkamnerd said on Saturday that the government was speeding up efforts to solve the problem. But he dismissed some news reports as ‘half-truths,’ such as stories linking farmland sales to low rice prices. ‘We’ve checked the facts and found that the people who are selling farmland right now are actually landlords who no longer want to rent it or those with no manpower to work the fields,’ he said.”

“Because of the restrictions and higher rice prices at the time, 80,000 farmers pledged 450,000 tonnes for loans totalling 6.39 billion baht for the 2014-15 crop year, according to BAAC data as of March 31, 2015. Rice prices around the world have fallen as a record crop is forecast for the 2016-17 harvest season, the UN Food and Agriculture Organization (FAO) said in its latest Rice Price Update. The FAO’s All Rice Price Index showed international rice prices in the first eight months of 2016 were 9% below the levels of a year earlier.

“The International Grains Council (IGC) also noted a sharp fall in export prices of Thai rice in August. ‘The market in Thailand was weighed down by sluggish international demand and increasing secondary crop arrivals, while additional pressure stemmed from efforts by the government to offload state reserves through a series of auctions,’ it said.”

October 29, 2016

Well, That Market’s Going Away

A report from NBC Bay Area in California. “Hillsborough’s most recognizable piece of real estate is now up for rent on Airbnb. The Airbnb listing on Friday shows the so-called ‘Flintstone House,’ a 2,730-square-foot home at 45 Berryessa Way, can be rented for $750 a night. The property was listed on the market for just over a year. In September 2015, the home was up for sale for $4.2 million. This past summer, the price dropped to $3.2 million. According to Redfin, the last sold price was $800,000 in 1996. Listing agent Judy Meuschke gave NBC Bay Area an exclusive tour of the home in September 2015. ‘We felt that’s a pretty good price for a landmark,’ Meuschke said of the $4.2 million asking price at the time.”

The Idaho Statesman. “A year ago, Boise developer David Hale planned on building townhouses priced at more than $400,000 on Idaho Street. The project stalled when Hale struggled to presell the homes. So Hale said he scaled down the homes, settling on 1,500-square-foot townhouses with two bedrooms and bathrooms starting at $329,900. He broke ground this week on a nine-townhouse building and plans to build a second six-townhouse building on the site. ‘I was originally going after a modern, industrial warehouse type product that you see in larger cities,’ Hale said. ‘It’s a product we don’t have in Boise yet. Boise wasn’t ready for it.’”

“The site is in the North Boise area of the Intermountain Multiple Listing Service, where the median price for a single-family home was $353,200 in September.”

From 9 News in Colorado. “Re/Max CEO Dave Liniger spoke with a small group of journalists Friday morning at Re/Max world headquarters. Q: ‘Is there something builders could be doing to catch up?’”

“A: ‘What ended up happening was that the apartment markets became very frothy. And they can make just as much money building a 100-unit apartment complex as they can building 40 or 50 single family houses…What’s happened now though is the apartment markets are peaking, and so builders are saying, ‘well, that market’s going away.’”

The Boston Herald in Massachusetts. “A national real estate developer is putting off plans for the glittering, 52-story Copley Place luxury high-rise thanks to an influx of high-end housing in Boston and rising construction costs, a move some say could be a sign the luxury tower market has hit its peak in the Hub. ‘Costs are too high and there’s too much supply,’ said David Contis, president of Simon Malls. ‘We’re going to wait for the market to moderate, and then we’ll go back and re-evaluate.’”

“Copley Tower was to join a slate of planned and current high-end residential towers, which are rapidly changing the skyline and demographics across the city’s downtown, including several planned for the Back Bay. High-rises including the Millenium Tower, Waterside Place and Seaport Square have opened in recent years, with even more proposed in recent months.”

“The decision to put off the plans could mean Boston is close to its limit on luxury housing, according to Greg Vasil, chief executive of the Greater Boston Real Estate Board. ‘If there really was a market and they thought there was a market, I think they’d pursue the project,’ Vasil said.”

From Jersey Digs on New Jersey. “Lesson: featuring a property on a mildly successful reality show will not necessarily make it easier to sell. Rapper-turned-actor Ice-T and his model-turned-reality star wife Coco have had a very tough time unloading their 2,000 square-foot penthouse condo in New Bergen. The couple originally purchased the home in 2005 for $1.5 million and reportedly spent $300,000 on upgrades over the past decade.”

“Then last year, they listed the two-bedroom condo, located in the Mirabelle On The Hudson Complex overlooking Manhattan, for $1.2 million. As we reported this past April, they then had to slash the price to $1.098 million. But it wasn’t until yet another price drop that the two were finally able to find a buyer. Now listed at $888,000, the home finally has a pending offer, though it comes with digesting a massive loss.”

October 28, 2016

The Economy And Withering Demand

A report from CoStar. “The steady addition of new apartments over the past several years appears finally to be catching up with demand. Apartment markets softened in several major markets during the third quarter, especially for those properties at the top of the market, and the impact is starting to show up in the results reported by major multifamily REITs. The National Multifamily Housing Council’s four indexes tracking market tightness, sales volume, equity financing and debt financing, all landed below the breakeven for the third quarter ended Sept. 30, reflecting softening market conditions from the previous quarter.”

“‘The growing supply of new apartments, primarily in the Class A space, appears to have finally reached a level to slow the historically high rent growth,’ said Mark Obrinsky, NMHC’s chief economist.”

“Several apartment REITs reported quarterly results this week and made note of the changes in their portfolios. Most notably, AvalonBay Communities missed its third quarter earnings target and lowered its earnings guidance for the rest of the year. ‘The softer market environment this year obviously has already started to bleed through the portfolio, which was our original expectation at the beginning of the year,’ said Sean J. Breslin, COO of AvalonBay Communities. ‘Obviously in some markets, we are seeing rents go down relative to this point last year, I’d say particularly in markets like San Francisco or a little bit in New York City. Essentially, where the shortfall is occurring is primarily in four places: it’s Northern California, the greater New York region, including parts of New Jersey, the Mid-Atlantic and then in Fairfield County (Connecticut).’”

The Boston Herald in Massachusetts. “A planned 52-story Copley Place residential tower will be delayed — and could be completely canceled — because of rising construction costs and concerns over the rising supply of luxury housing in Boston, Simon Property Group said. In an earnings call on Wednesday, Simon Property Group’s chief executive David Simon referred to ‘our likely decision to postpone the construction of the Copley Residential Tower, due to the rapidly rising construction cost and our beginning concerns around supply and demand in the Boston residential market.’”

“The tower — which was to feature 421 apartments and 121 condos, and 45,000 square feet of more retail and restaurant space — was part of a $500 million expansion, announced in August 2015. Copley Tower was to join a slate of planned and current high-end residential towers, which are rapidly changing the skyline and demographics across Boston’s downtown. ‘We do have to worry about supply and demand. And I’m not worried about supply and demand in our retail portfolio. In the case of Copley I got nervous about it,’ Simon said.”

The Real Deal on Florida. “A winter chill came early for Miami’s rental market in October, interrupting an otherwise steady rise in prices. According to a newly released report from listing service Zumper, the median rent for a one-bedroom apartment in Miami fell 2.16 percent to $1,810 per month. A surge of new apartment supply — Miami-Dade County is on track to see its largest influx of units in 17 years — could keep pushing rental costs downward.”

The Pittsburgh Post Gazette in Pennsylvania. “A long-delayed Station Square apartment project finally may be stirring to life. Dallas-based developer Trammell Crow Co. hopes to start construction of the 316-unit apartment complex at the South Side entertainment and office complex next summer after securing $3 million in state funding. The project is ramping up as some developers are shying away from building apartments in or near Downtown because of fears that the market is becoming oversaturated.”

“According to the Pittsburgh Downtown Partnership, there are currently 4,339 apartment units located in or near the Golden Triangle and another 3,630 in the pipeline, including the Station Square project.”

The Columbian in Washington. “Clark County’s tight rental market may loosen up in the next year or so. More than 800 apartment units are under construction and about 3,700 are in the pipeline, according to the fall 2016 Apartment Report from Multifamily NW. The Portland metropolitan market is described as ‘maybe not red hot anymore, but moderately warm’ due to thousands of newly completed apartments becoming available.”

“Clark County’s incoming supply of apartments pales in comparison with Portland’s. In Portland, there are more than 7,000 apartments under construction and more than 15,000 proposed. ‘No one wants to miss this market, so as soon as they can get a shovel in the ground, they’re going to do it,’ said Patrick Barry with Barry & Associates. ‘Real estate is a cyclical market. It’s going to decline eventually. It’s just a matter of when.’”

The Houston Chronicle in Texas. “Houston’s economy and withering demand for new apartments dominated the conversation Friday morning on Camden Property Trust’s third-quarter earnings call. The Houston-based real estate investment trust that builds and manages multifamily complexes across the country said revenue growth in Houston was down 1.1 percent in the third quarter and another drop is expected for the last three months of the year.”

“The company said it was tracking 23,000 new apartment units to open in Houston this year and 10,000 will open next year. Many new complexes developed in Houston by merchant builders — those who build to sell — are now offering three months of free rent on new leases. Camden doesn’t offer free rent but bases rental rates on daily demand.”

“That’s supply is expected to far outpace demand. Camden’s President D. Keith Oden said about five new jobs creates demand for one apartment. If 20,000 jobs are created this year, there could be demand for 4,000 apartments. ‘We’ve got 23,000,’ Oden said. ‘Therein lies the problem.’”

Relying On Investors Without Real Demand

It’s Friday desk clearing time for this blogger. “Real estate experts watch the Naples market because it holds clues to the resilience of wealthy buyers. Realtors estimate that 25% of the home-sale market in the Naples area is new construction. Homebuilders have been building and selling speculative homes in recent years, though some have offered incentives as sales slowed this year. Homebuilders have adjusted their prices lower, says Ross McIntosh, longtime Naples commercial real estate broker who has arranged land transactions for homebuilders. Homes that sell well today are in the $300,000 range, not the $500,000 category that was hot a few years ago. ‘I don’t think anyone can put their finger on what caused that,’ says McIntosh. ‘Prices people are willing to pay has eroded substantially.’”

“Some builders are responding to the shift in the market, building homes in the $300,000 to $350,000 range. ‘Buyers who delayed buying decision have been rewarded,’ McIntosh says. ‘The die is being recast on the new-housing side.’”

“Is the Bay Area housing market losing steam? Could be. With more buyers saying ‘no’ to mile-high prices, September sales of single-family homes were up a modest 2.3 percent — a far cry from the red-hot market of the last several years. And even more revealing, June-through-September sales for the nine-county region were down 5.1 percent from the same period of 2015. The numbers mirrored the observations of brokers and agents, who cited push-back from buyers after years of bidding wars and spiraling prices.”

“‘Buyers are kind of digging their feet in and saying, ‘We’ve hit a threshold of pain in terms of affordability and you’ve got to say no,’ said Jennifer Branchini, past president of the East Bay Association of Realtors. ‘It’s going to be a big issue going forward. It’s not going away.’”

“It’s a good time to buy for anyone looking to purchase a high-end home in Thunder Bay. Canada Mortgage and Housing Corporation analyst Warren Philp said there’s an over-supply of houses priced at more than $300,000 on the market, adding overall the resale market appears to be a balanced one. ‘We no longer have a seller’s market, we have a balanced market and arguably in parts of the reseller’s market in Thunder Bay, we’ve got a buyer’s market conditions … Which means there are little to no price increases, and in fact, some price adjustments are taking place, especially at the high end of the market,’ Philp said.”

“To sell their 10-bedroom home, celebrity chef Jamie Oliver and his wife may have to first undo what they’ve done. Six years ago, the couple bought adjacent townhouses in North London’s Primrose Hill neighbourhood and combined them into one very large home. The couple, who have five children, now plan to move and are listing the property for £9.95 million, or about $15.7m. Amid a slump in London’s luxury market, the Olivers’ house has failed to sell — despite a $3m price cut earlier this month.”

“So now they’re planning to revert the house back into two properties likely to list for around $7.9m to $9.5m apiece. But while high-net-worth buyers can afford to create these urban mansions — and some still do — the decision may haunt them when it comes time to sell. That’s because market demand for these vast homes has softened significantly. The average sale price of homes in the £10m-plus bracket has fallen 10.4 per cent in the past two years, according to estate agents Savills.”

“On October 1, seven property investors and four industry experts joined the Property Investor Roundtable Luncheon jointly organized by Knight Frank and Property Club Singapore. ‘My friends are having 20 percent decrease in rent,’ said Investor A. ‘Mine are 30 to 50 percent. One of my properties the rent drops from $18,000 to $10,000,’ echoed Investor H. ‘Many MNCs are moving their staff out of Singapore because of cost. No market can rely only on investors without real demand. Investors need rental income.’”

“Debbie Lam, Consultancy & Research Manager at Knight Frank, told the property investors that there are currently over 21,000 unsold units. Given buyers can clear about 7,000 homes a year, it will take at least three years for the market to absorb all the unsold units. ‘The questions we need to ask are: What is the rate the market is buying these unsold units? Who is going to rent or buy them? At what price?’”

“Apartment rents in popular central Doha districts such as Al Sadd, Bin Mahmoud and Al Mirqab are finally starting to come down, according to a new real estate report. Some properties are now up to 10 percent cheaper than last year. The change comes following an exodus of people from Qatar earlier this year, DTZ Qatar said in its Property Times report for Q3 of this year. Additionally, in recent months, more ‘affordable’ apartments have convinced residents to relocate to areas like Ain Khalid and Muaither.”

“A glance through the latest housing index – both the locally compiled index and international index – reveals that consumers worldwide are feeling the pinch in their pockets. There is simply no money as the world economy exhibits signs of continuous slowdown. And Namibia is no exception. There are cautions that things would get tighter in the months to come. For Namibians this could translate into some people being no longer able to afford mortgages, those who were thinking of buying houses may find themselves putting it off until the burden on their pocket eases.”

“In Oshikango, for instance, house prices fell by nearly 53 percent. A house that in 2014 was priced at N$1.1 million is now priced at N$425 000. In Oshakati, a house that was priced at N$964 100 in 2014 is now priced at N$539 900. It was not long ago that the FNB Housing Index of 2015 declared Oshakati as Namibia’s town with the highest house price increases in 2014 – as well as for the last five years. An Oshakati house that cost N$486 300 in 2009 was priced at N$964 100 in December 2014, while as a similar house in Windhoek priced at N$472 000 in 2009 was priced at N$900 000 in December 2014.”

“FNB Housing Index author Daniel Kavishe says a comparison of Namibia’s first quarter house price index growth data with the latest report from the Knight Frank House Price Index ranks Namibia at number six in the world. Which is good news, seeing that Namibia was at one point ranked as the most expensive country, up there with Hong Kong.”

“Nevertheless, property price growth across the world has started to cool with increasing economic and political uncertainty creeping in.”

“A federal grant was supposed to create four homes in the inner city to help kick-start revitalization, but there’s a problem. The money for the program ran out and the homes were never finished. There are four homes for sale in the Blue Hills Neighborhood, but they’re not attracting any buyers. Construction stopped because the money from a Housing and Urban Development grant ran out. Anthony Bolton, who has lived in the neighborhood for six years, is concerned the project will never be finished. ‘There was a lot of work and then there was nothing,’ said Bolton.”

“The houses are intended for buyers with low incomes and are listed at $125,000, but that’s not enough to drive a sale. ‘I think it’s a waste of money. They could be using the money for something else instead of wasting it on houses they’re not going to finish,’ said neighbor Lakeisha Ridge.”

October 27, 2016

Kicked From Full Steam Ahead Into Reverse

A report from The Australian. “One of Australia’s largest developers, Mirvac, revealed the number of apartments failing to settle had increased in recent months, raising fresh fears about the sustainability of the nation’s apartment market. More than 20 per cent of Mirvac’s pre-sales are to mainland Chinese. BIS Shrapnel residential property manager Angie Zigomanis said settlement risk was rising across the new apartment market as banks tightened lending standards, especially for foreign ­buyers.”

“‘The buyers who are settling now probably bought their apartments two years ago and in that time in Melbourne and Brisbane the prices have been flat or in some areas may have gone backwards,’ he said. ‘At that time, the buyers may have planned to borrow 90 per cent of the purchase price but prices could have gone down and wiped out that deposit and they’ve got to find effectively another 20 per cent.’”

From The Advisor. “Mortgage brokers are in no way shocked by tighter credit controls on certain suburbs announced by one major bank this week, which they expect will continue into 2017 and beyond. Media reports over the weekend revealed that NAB had compiled a ‘blacklist’ of more than 100 postcodes across the country where buyers will need to pay as much as a 30 per cent deposit to secure a mortgage.”

“Perth-based broker Bianca Patterson of Calculated Lending, who was crowned Broker of the Year at the 2014 Better Business Awards, told The Adviser that she is not concerned about NAB’s announcement, but feels disappointed for those who own properties in areas where the bank has capped LVRs at 70 per cent. ‘It will have a direct effect on those investors. My advice to investors buying in areas that are quite speculative is that this is one of the risks. With properties that offer greater returns there are greater risks,’ she said. ‘[NAB’s announcement] was to be expected.’”

News Corp Australia. “It’s a great time to be a tenant with vacancy rates hitting a record high in Brisbane’s middle ring. It’s the first sign that suburbia is losing the battle to keep tenants as owners of rampaging levels of new inner-city apartments up the ante. REIQ chief executive Antonia Mercorella said the middle ring was being hit by a triple whammy.”

“‘Inner-city property managers and landlords are particularly sensitive to the oversupply question at the moment and rents have become extremely competitive, luring tenants from the middle ring into the inner ring,’ she said. ‘Also, a significant level of development has come online in the middle ring and some agents have reported that without being able sell, many of those properties have been put into the rental pool.’”

The Northwest Star. “In news that will surprise few home owners in the North West, a new report says the Mount Isa property and rental market has weakened by over a third in the last three years with the likelihood it may not have bottomed out. The Herron Todd White ‘Townsville in Focus August 2016′ mainly looks at Townsville but also has a section on Mount Isa’s market and the prognosis is not good.”

“‘The Mount Isa property market has been progressively weakening over the last three years, with average sale volumes remaining low and prices tending to soften,’ the report said. ‘The median house price trend has lowered from a trend level of $383,200 in the June quarter of 2013 to $248,600 during the June quarter of 2016, an apparent reduction over the three years of 35%.’”

“‘During the June 2016 quarter the median house rent came down to $355 per week while the median unit rent reduced to $215 per week,’ it said. ‘House rents have reduced by 37%, and unit rents by 43%, over the last three years.’”

From ABC News. “Western Australia’s slide to the bottom of the economic ladder in Australia has seen the state’s property market kicked from full steam ahead into reverse. But while property professionals see the post-mining boom market to be a readjustment to more ‘normal’ price levels, a looming apartment glut has many analysts concerned about further pain in that sector of the market.”

“‘We’ve had a lot of development of apartments in the inner city ring and that’s where the developments sites have really gone from being feast to famine, they were red hot a couple of years ago, not so much in mind today,’ said Gavin Hegney, an independent property valuer. ‘People are bailing out of their investment properties, saying I’ll just quit the investment property, I don’t like this investment property anymore. So that usually spells when you’re at the bottom of the market, from here we should see some hope,’ said Mr Hegney.”

“Mr Hegney believes the price falls in Perth are a sign of things to come for the east coast capitals. ‘Off the plan sales creates demand for two properties, when the real demand is only for one. When people move into their new apartment they have to move out of their rental accommodation or sell their existing home,’ he said. ‘That’s when you get the problem and that’s what’s coming for Sydney, Brisbane and Melbourne.’”

“In those east coast capitals, a recent survey revealed there are more cranes building apartments than in major United States cities.”

“With building activity in trouble in Perth, investors are trying to offload their units. Retiree Ron Campbell is selling his investment property after 10 years. His concern is that in a falling rental market, upcoming changes to the pension asset test will mean he would be left with nothing to live on. ‘What happens there is of course the rental value drops that there’s less income coming into your wages and plus you’ve got higher water rates, shire rates, all those sort of things come into play and your income is not enough to support, especially going back to January 1, where I might not have any income at all,’ he told ABC News.”

Buyers Are Setting Their Sights Lower

A report from the Buffalo News in New York. “Amid record prices and crowded open houses, Western New York’s booming housing market has hit an unexpected stumbling block for many buyers: they simply can’t find homes to buy. Sales in July fell 9.1 percent from the prior year, according to the Buffalo Niagara Association of Realtors, and even pending deals dropped. Activity came back up in August, with a 5.7 percent gain in transactions. However, that was still much less than the 10 prior months, when sales grew at double-digit rates of as much as 60 percent from year to year.”

“After more than a year of go-go homebuying across the region, the region may just have become a victim of the very factors that drove months of frenetic activity in the first place. ‘Prices are increasing to the point that it is denying buyers an opportunity to buy,’ said David Weitzel, an agent at RE/Max North in Amherst.”

From Bloomberg. “Home prices in New York’s Hamptons fell the most in almost three years as buyers in the beachfront towns sought out less-expensive properties and shunned the middle of the market, priced from $1 million to $5 million. Homes in the area, a second-home mecca favored by Wall Street executives, sold for a median of $825,000 in the third quarter, down 13 percent from a year earlier, according to a report Thursday by appraiser Miller Samuel Inc. and brokerage Douglas Elliman Real Estate. It was the biggest annual decline since the fourth quarter of 2013.”

“Buyers in the towns and hamlets on Long Island’s South Fork are setting their sights lower as yearly bonuses for New York City’s financial employees — the lifeblood of the Hamptons market — are poised to disappoint in 2016. Incentive pay at hedge funds may fall 5 percent to 15 percent this year because of lackluster returns, while bonuses for fixed-income sales and trading may fall 10 to 15 percent, according to an August report by compensation consultant Johnson Associates Inc.”

“‘Wall Street is not having a banner year and I don’t think there’s an expectation that compensation for this year will be higher than last year,’ Jonathan Miller, president of Miller Samuel, said in an interview. ‘I do think there’s just a little bit more caution.’”

The Village Voice. “On the heels of new legislation that will penalize anyone who advertises entire apartments on the home-sharing service Airbnb for less than thirty days at a time, the company valued at $30 billion summoned a few of its hosts and held a small protest outside of Governor Cuomo’s New York City office Wednesday morning, claiming that the governor and New York state legislators were helping to make the city’s affordable housing crisis even worse.”

“Michelle Yates, a Bed-Stuy resident for eighteen years, who has previously worked in the construction and real estate industries, is encouraged about the changes she’s seen in her neighborhood — which has seen its white population increase sevenfold. ‘People are losing their homes because they pulled money out of their homes thinking it was an ATM while sitting on a high-interest mortgage. It has nothing to do with Airbnb. Nothing to do with real estate prices. I don’t believe any of that,’ Yates told the Voice, in response to the counterprotesters chants that Airbnb was hurting minority communities.”

“Assemblywoman Linda Rosenthal, who championed the new legislation, was on hand to shout against Airbnb. ‘More than 50 percent of the units rented out on Airbnb are illegal — that’s why Airbnb is freaking out,’ Rosenthal told reporters. ‘Not because they care about New Yorkers, because this has been illegal since 2010. They’re freaking out because their bottom line has been challenged.’”

From DNA Info. “The management company taking over the Red Square rental building on East Houston Street slashed the salaries of doormen and maintenance workers by roughly 30 percent — and several staffers said they were given ultimatum to either accept the lower pay on the spot or not come back.”

“Residents at the 250 E. Houston St. apartment complex received letters on Oct. 20 announcing the purchase by 250 Houston Investors, LP under the management of Dermot Realty Management Co., along with a host of upgrades coming to the building, such as apartment renovations and added amenities pledging to ‘[elevate] your living experience.’”

“But the change comes at a price for longtime workers at the residence. A maintenance worker who did sign the new contract said he felt he had no choice. He accepted the impromptu demotion, from the position of super to sweeping and mopping floors as a porter, which cut his $18 hourly pay down to $11. ‘They threw us in a room and said, ‘Sign this or you’re fired,’ the employee recounted. ‘They said, ‘You don’t do maintenance no more.’ They took the keys off my key chain. They said, ‘You just sweep and mop.’”

“Two longtime doormen said they received similarly steep pay cuts — from between $17 and $19 per hour down to $12 per hour — which they accepted due to a lack of other options. One doorman said he felt ’stuck,’ explaining he and his colleagues ‘had no choice.’ ‘We have families,’ he said. ‘How can we take care of them?’”

From Bisnow. “NYC’s always been a city of cranes, but never has this been more apparent than today. Development remains strong, and construction spending and employment are hitting record levels. Can developers finance record levels of construction? Is there anything they can do to slow rising costs? GFI Development president Steven Hurwitz says he’s already seen prices begin to cool as the loss of the 421-a has slowed residential development and the frozen land market slows the pipeline.”

“‘Contractors are starting to see that and are growing hungry,’ Steven says. Unskilled labor is much easier to find, and companies have ’staffed up so much that they now have a lot of mouths to feed.’”

October 26, 2016

The Market Is Just Saturated

A report from the Dallas Morning News in Texas. “Prospects for the 2017 U.S. commercial property still market look good, to hear the majority of real estate folks tell it. Certainly Dallas is in the biggest building boom it’s seen in almost three decades. But a lot of the industry’s executives are looking over their shoulders, fretting about everything from rising interest rates to a flood of capital coming into the U.S. property sector. ‘There is maybe a little more caution in the market,’ Andrew Warren, head of research for Pricewaterhouse Coopers, said Wednesday at a Dallas meeting of the Urban Land Institute, the country’s largest commercial real estate organization.”

“Some of the worries for the development business Warren red-flagged included rising construction costs, the potential for higher finance costs and affordability concerns for the housing markets in many U.S. cities, including Dallas. The increase in players in the business and the flood of money coming into the markets are also causing some heartburn for commercial builders and investors.”

“Commercial property transaction totals, which were the highest since the Great Recession in 2015, are expected to decline slightly this year and more in 2017 and 2018, according to a ULI forecast. ‘Transactions are down this year so far — still at a very strong level but not as great as we had last year,’ said Dr. Ken Rosen of the University of California at Berkley. ‘The consensus is the rate of increase in prices is going to slow dramatically.’”

The Miami Herald in Florida. “First came Porsche. Then Armani, Fendi and Missoni. Now Aston Martin is the latest luxury brand to gun for a piece of South Florida’s condo market. The British car maker announced Wednesday that it will partner with wealthy Argentine developers on a 66-story condo tower called the Aston Martin Residences at the mouth of the Miami River in downtown Miami. The licensing deal marks the auto company’s first venture into real estate.”

“In today’s struggling luxury market, Miami developers are more likely to cancel condo projects than unveil them. A strong dollar and weak global economy have starved the region of foreign buyers. But Argentina’s Coto family, which paid a record $125 million two years ago for the vacant waterfront land next to the Epic Hotel, says it has enough horsepower to get the 390-unit project going.”

“The big question: Will Miami’s luxury market have come back to life by the time the Cotos start selling units? ‘The market is in great turmoil right now,’ said Jack McCabe, a South Florida real estate analyst. ‘Many countries that have been feeder markets for South Florida are in recession, especially in Latin America. The developers are starting a sales campaign at a very difficult time for global economies.’”

“In mainland Miami, average sales prices for luxury condos plummeted 29 percent year-over-year in the third quarter of 2016, according to a report from brokerage Douglas Elliman. The number of luxury condo sales fell by a quarter. And units languished on the market for an average of 129 days, compared to 52 days last year. Banks and other lenders have taken note.”

“‘There’s been a slowdown in construction financing, not just in Miami, but in other major markets,’ said Jonathan Miller, a housing analyst who authored the report. ‘This has been a four- or five-year development boom that’s occurred across the United States. I think some lenders are realizing that and taking a breath.’”

The Wall Street Journal on New York. “A three-bedroom unit on the 62nd floor of One57, a newly built condominium towering over New York City’s Central Park, has sold for $23.5 million, or 25% under its original sale price of $31.7 million.”

“According to Noble Black of Douglas Elliman Real Estate, who had the listing with colleague Emily Sertic, the apartment was first listed for roughly $41 million with another firm in 2014, almost immediately after the seller closed on the purchase from builder Extell Development. It has since seen several price reductions, and was most recently asking $25 million. The seller’s identity is shielded by the entity Escape From New York LLC.”

“The buyer is Chinese billionaire Liu Yiqian, according to Jeremy Hu of Compass, who represented him in the transaction. An investor who lives primarily in Shanghai, Mr. Liu is known for his large art purchases. The sellers never officially moved in to the apartment, deciding to put it on the market instead, Mr. Black said. They had planned to move in, he said, but their circumstances changed during the lengthy period between contract signing and closing, and the apartment was too small.”

“Mr. Liu feels he got ‘a good price’” on the condo, Mr. Hu added, noting that the high-end real estate market has faltered in recent months. At 1,004-feet high, One57 made headlines when a penthouse closed for $100.5 million in late 2014, setting a new record for New York City apartment sales. But with the high-end Manhattan market now much softer, a number of the 94 original units are still for sale, and Extell in March reduced its projected sellout value of the tower to $2.56 billion, a markdown of $162 million from its 2013 projections.”

The Union Tribune in California. “Prices grew modestly in San Diego County’s housing market in August, capping a slow summer, said the S&P CoreLogic Case-Shiller Indices. Adjusted for seasonal variation, the regional index of home prices was 5.8 percent higher in August compared to a year ago. However, compared to July, the market appreciated by .21 percent, or an annual rate of just 2.5 percent, continuing a pattern that began in June. Most of the year’s price increases came early in the year, beginning with an annual rate of growth of 12.9 percent in January. The housing markets of Los Angeles and Orange counties followed a similar path.”

“Chris Thornberg, economist and founding partner of Beacon Economics, said the Southern California market was being dragged down by high-end homes. ‘That market is just saturated. There’s too much coming online and not enough well-heeled people to grab all of them,’ he said. ‘Everything suggest these units are sitting on the market longer and longer.’”

Compared To The Peak Of The Madness

A report from Global News in Canada. “Some sellers are cashing out of Canada’s hot housing markets as property values soar to new heights — while others may have already missed their chance. There are a few factors at play. First, there was the introduction of B.C.’s new 15 per cent tax on foreign buyers, which prompted a rapid slowdown in sales. Then in October, new federal mortgage rules were announced and quickly implemented, intended to stabilize the country’s housing market. The changes are leaving some homeowners on edge in Vancouver. ‘Some (sellers) are fearful,’ said James Garbutt, a realtor in the Vancouver area. ‘When you compare it to the peak of the madness in April, we’re off — for certain products — by about 20 per cent.’”

The Evening Standard in the UK. “Homeowners looking to sell up in the most expensive areas of central London are cutting record six-figure sums off asking prices in the wake of the Brexit vote, according to figures. In the ‘golden triangle’ of postcodes around Kensington, Knightsbridge and Mayfair an average of £171,321 is now being slashed from asking prices, up from £150,120 in the three months before the June 23 poll.”

“One three-bedroom, ground-floor flat on Belgravia’s Eaton Square went on the market in January with Hamptons International for £6.35 million. This month, it was repriced at £5.995 million. Similarly, a two-bedroom flat at Hanway Gardens, a new building in Fitzrovia, was on the market for £1.7 million at the time of the Brexit vote with Fraser & Co. Its price was cut in July to £1.6 million and again this month to £1.55 million.”

The Property Report on Dubai. “Dubai’s apartment market continues to make quarterly slides alongside the global oil price slump, data from UAE-based property portal Bayut.com recently showed. One-bed apartment rents suffered the greatest drop among all bed categories, with average prices decreasing 8 percent from AED100,000 (USD27,200) in the second quarter to AED92,000 (USD25,000) in the third quarter. The first seven months of 2016 saw a 30-percent slash on real estate sales values in Dubai, according to the Dubai Land Department.”

“To some local property developers however, the emirate’s property market is in its bottoming-out phase. ‘I think the worst is over,’ Nakheel PJSC Chairman Ali Rashid Lootah told Bloomberg recently. ‘Dubai is growing, we are seeing signs of more inquiries – serious inquiries – and I think that’s a sign of recovery. The market is maturing, we are seeing more serious, cautious investors, not speculators.’”

The News Minute on India. “Infrastructure company Marg ProperTies, wholly owned and subsidiary of MARG Ltd is in the news for the wrong reasons. Around 4000 customers who had invested in their properties are yet to receive apartments promised to them. ‘We filed a complaint -along with documentary proof- with the Central Bureau of Investigation, the Chennai Crime Branch, the Chief Minister’s Complaint Cell and the Commissioner’s Office, but we are yet to hear from them,’ says Ravishankar -an investor- while speaking to The News Minute.”

“Ravishankar invested in an apartment costing Rs. 42 lakhs and has already paid an amount of Rs. 35 lakhs, by availing a home loan from Axis Bank. He blames the bank too for not verifying the construction/sale agreement before transferring the said amount to the builders. According to him, only 30% of the project is complete, with only the exteriors in place.”

“‘Does this mean they don’t have funds to complete the project? Who will buy the rest of the apartments now?’ asked a customer who did not want to be identified.”

“The Brindavan Project in Sriperumbudur in Kancheepuram district on the other hand, has not even started. It was supposed to have been completed by 2013. The company website boasts of 1848 apartments (with 2 & 3 BHK) spread over 16.5 acres. ‘I invested in this project back in 2010 and have already paid about Rs. 10 lakhs for the apartment. No environmental clearance has been obtained the company has taken loans. If I had known then, I would never have invested in this project,’ shares advocate Hari.”

“Just like Hari, almost 600 people have bought apartments and paid 50-60% of the sale cost. ‘Only the Navratna project has been completed till date, while only the foundation has been laid for Aayush. Construction has not even begun for Four Seasons. At Maha Utsav, you are greeted by the sight of pillars,’ fumes Rajesh, an investor in the Maha Utsav and Ayush projects.”

“He paid Rs 3.5 lakhs for the Maha Utsav project and Rs. 2 lakhs for Ayush. ‘I paid the money in 2010. Around 3000 people have invested money in the Swarnabhoomi project, but only 450 have got their apartments,’ he adds. Even after filing a police complaint at the Thoraipakkam police station in July 2015 -he says- the police have not taken any action against the builders. A protest too was organized in Chennai by enraged customers and a case was also filed in the Consumer Court last year. ‘There are no judges appointed to the Consumer Court and our case has not come up for hearing till now,’ Rajesh sounds frustrated.”

“Rajesh alleged that he was being threatened by the Marg Group for repeatedly asking them to return the money he had paid for the apartments.”

October 25, 2016

We Are Having A Major Correction

A report from the Journal News in New York. “Developers who are currently building thousands of new luxury apartments in Westchester say they remain confident that their units will be quickly leased once completed, even if the rental market to the south in New York City is showing signs of cooling down. ‘We are not concerned about overbuilding,’ said Arthur Collins, president of Collins Enterprises. His firm is currently developing its third luxury rental building, to be known as Hudson Park River Club, on Yonkers’ waterfront. ‘Basically, there’s a shortage of housing in New York City. So our theory is it will take an awful lot to actually build out (here) to meet what the market demands.’”

“More than three-dozen rental projects — totaling nearly 7,000 units — are currently being built or proposed in Westchester. Rents soared in major cities across the country in recent years, including New York City, making Westchester more attractive as a less-costly alternative. But a glut of rental buildings in New York City now appears to be causing some market slowdown there.”

WTOP in Virginia. “Monthly numbers on residential real estate sales can be volatile, and median prices based on just a few hundred sales aren’t necessarily indicative of the market, but year-over-year prices have declined for two consecutive months in Arlington County and were relatively flat earlier this summer. Arlington County remains the most expensive county for housing in Northern Virginia, but Long & Foster Real Estate Inc. says the median price of a house or condo that sold in Arlington County in September was $515,000, down 10 percent from a year ago.”

‘The median price was based on 219 sales. By that metric, the number of sales in Arlington County was also 15 percent lower than last year. The 196 sales in Alexandria City last month yielded a median price of $447,500, down 2 percent from September 2015. Sales had fallen 12 percent. ‘Conservative appraisals and buyers have kept things tempered,’ said Gary Lange, managing broker at Weichert Reality in Vienna.”

The Naples Daily News in Florida. “Single-family homes in the Naples area had the slowest price growth in the state in September, a new report on existing homes says. Bonita Springs broker real estate agent Michael Burke said Collier County buyers are often out-of-towners looking for second homes, while those buying in Lee County tend to be workers looking for something affordable and practical. ‘The ‘need to buy’ market is increasing, but the ‘want to buy’ market is slacking off,’ he said.”

“Statewide, overall inventory levels and days on the market continued to creep up, while the number of cash buyers declined, Florida Realtors said. A similar trend held true for Southwest Florida. Naples appraiser Cindy Carroll said that’s good news for buyers, who can expect more selection and less competition from investors and others. And it’s also a sign that sellers need to take a hard look at their direct competition in the market when pricing their properties. But she added: ‘We should not interpret these statistics as negative. We’re exactly where we’re supposed to be in the cycle at this time.’”

The Atlanta Journal-Constitution in Georgia. “Atlanta’s price hike beat the 5.1 percent average increase for the top 20 metropolitan areas, according to the S&P/Case-Shiller House Price Index, a calculation based on a three-month average. Of course, averages can be misleading and the gains in Atlanta have been uneven. There are neighborhoods that have barely come back from the crash that followed the burst he housing bubble and the vicious recession. Some larger areas too remain burdened, especially on the south side of metro Atlanta: About 58 percent of Clayton County’s homes are underwater, according to Zillow.”

“Experts said the market had split – with a scarcity of sale listings among modestly priced homes and a surplus of homes for sale at the top end of the market. So average prices are up solidly from a year ago, the pace of that rise was already slowing and in many parts of metro Atlanta there has been a turn south. said Nancy Keenan, a Realtor with Keller Williams who handles mostly listings on the north side of town. ‘I would say that 90 percent of the homes on the market have had some price reduction,’ she said.”

“While first-time homebuyers have worried about rising prices among starter homes, the recent change has hit harder at the high end, she said. ‘For a couple months, we have seen very few sales at the higher prices,’ Keenan said. ‘A couple months ago, there were falling sales over $800,000. Now that is happening at $600,000 and above.’”

“The shift will have a larger impact in coming month – and the impact could be disappointing to sellers, she said. The ‘comps’ that are used to appraise the next round of homes for sale will be the sales this fall of these lower-priced houses. That will make it tougher for next year’s sellers to raise prices significantly – or at all. ‘We are having a major correction and it is going to hurt people come spring,’ she said.”

From Silicon Beat in California. “The message is becoming increasingly clear: Rents indeed are falling around the Bay Area. New data from the Axiometrics research firm show rents dropping in San Jose, San Francisco and Oakland. The Oakland piece is a new twist; according to other surveys, Oakland rents have remained on the rise, though at a far slower rate than over the past year or two.”

“Here’s what Axiometrics has to say about average rents falling into ‘negative-rent-growth territory’: In September 2016, San Jose rents fell year over year by 3.4 percent from $2,814 in September 2015 to $2,718. During the same time period, San Francisco rents fell year over year by 3.3 percent from $3,336 to $3,226. And Oakland rents fell year over year by 0.6 percent from $2,392 to $2,378. The Axiometrics study follows one by Abodo, the apartment search website. It showed rents dropping 7 percent between September and October in San Jose (from $2,455 to $2,293) for a one-bedroom apartment, and falling 6 percent in San Francisco (from $3,698 to $3,483). However, it showed rents still climbing in Oakland — by 5 percent, from $2,256 to $2,358 for a one-bedroom.”

“One last thought: Even though the runaway market is finally starting to cool off, most middle class folks still struggle to afford an apartment here.”

October 24, 2016

As A Construction Boom Plays Out, Appetite Has Dimmed

A report from the Guardian in the UK. “A surge in the supply of rental properties on the books of letting agents is forcing landlords to peg back rent rises, according to an industry body. The proportion of landlords implementing increases fell to 24%, its lowest level this year, said the Association of Residential Letting Agents, while the number of unlet flats on agency books rose to the highest level for 18 months. David Cox, managing director of Arla, said: ‘This month’s findings paint a really positive picture for renters. The supply of rental stock has risen astronomically.’”

From Reuters. “High-end property developers in London are restricting the supply of homes to prevent further price falls by selling entire apartment blocks to funds for rental, according to agents and investment managers. Growing numbers of flats will come up for sale in coming years as a construction boom plays out, but appetite from individual buyers for British real estate has dimmed. Sales of unbuilt and completed projects are being struck at a 10-15 percent discount to their expected market values, industry consultants said, as housebuilders strip out the cost of marketing to individual buyers and taking debt to build the projects.”

“APG Asset Management, Europe’s largest pension fund manager, is in talks with developers who seem more open to deals as they contend with the risk of not being able to sell everything in the current climate,’ said Martijn Vos, APG’s senior real estate portfolio manager. ‘If the market remains as it currently is, I feel there will be more such deals to come,’ he said.”

The International Business Times. “The number of homes sold for £1m or more in England and Wales has collapsed by 62.5% in just two years as the property market feels the effects of tax hikes, global economic turmoil, and uncertainty surrounding the Brexit referendum. ‘There will be few tears shed for estate agents or their millionaire clients struggling to sell their homes but don’t put away the man-size too fast,’ said Henry Pryor, a buying agent. ‘In fact the problems affecting the top rungs of the housing ladder could and probably will infect the lower priced properties.’”

The Evening Standard. “Some of London’s luxury house developers are showering homebuyers with drastically more extravagant gifts in the wake of the Brexit vote. Amazon Property partner Chris Lanitis says: ‘If a purchaser bought an apartment from us and liked a particular piece of art which is bespoke to the apartment, then — depending on price — the piece would either be gifted as a moving-in present or, if the art work was one of the rarer and more valuable pieces, we would liaise with the art gallery to help arrange a preferential price for our purchaser.’”

“But methods to boost sales are not limited to art, says Michael Ferris, a director at JR Capital, which buys properties for Middle Eastern investors. He reveals that one of his Saudi Arabian clients was told that £200,000 of furniture from a showroom apartment would be thrown in if he bought one of the £2.5 million-plus flats in a new zone one scheme on the river. ‘This is because the development has a large supply of high-value unsold flats and is nearing practical completion,’ he explains.”