November 23, 2016

An Ever-Growing Glut

A report from the New Zealand Herald. “Ron Hoy Fong, with 31 properties valued at $23 million, says the Reserve Bank loan to value (LVR) lending crackdown and the Government’s moves against foreign buyers have taken their toll on places landlords would usually buy. Hoy Fong said many people did not realise the market for some places had turned. ‘Prices are dropping in certain areas. It’s the investment properties that are just dropping right out, as much as 20 or 30 per cent,’ he said.”

“Other reports are also coming in of lower auction clearance rates, at around 80 per cent a few years ago but now down as low as 30 per cent at some major Auckland agency auctions. Barfoot & Thompson, with about 42 per cent of Auckland’s residential market, reported lower sales volumes in October, falling from March’s 1341 to 778 last month, the second lowest this year.”

The Australian Financial Review. “Melbourne developers are selling too many housing lots to the Chinese and are running into funding trouble, BRW richlister Nigel Satterley has warned. Mr Satterley said it was his understanding that between 4000 and 5000 lots – about 20 per cent of the market – were being sold into the Chinese market every year.”

“‘Developers are over-selling house and land packages into China. Some of these deals will not proceed because of tighter bank funding to overseas buyers,’ Mr Satterley, chief executive of the Perth-based Satterley Property Group, the country’s biggest privately owned developer, told The Australian Financial Review.”

“In Perth, where Satterley started out 36 years ago, the market is extremely tough, Mr Satterley said. ‘Activity is down 20 per cent. Everything has come off. Offices are 30 per cent vacant. Retail vacancy is at 28 per cent and there are 11,500 rental properties on the market.’”

From Bloomberg on Malaysia. “While Chinese home buyers have sent prices soaring from Vancouver to Sydney, in this corner of Southeast Asia it’s China’s developers that are swamping the market, pushing prices lower with a glut of hundreds of thousands of new homes. They’re betting that the city of Johor Bahru, bordering Singapore, will eventually become the next Shenzhen.”

“‘These Chinese players build by the thousands at one go, and they scare the hell out of everybody,’ said Siva Shanker, head of investments at Axis-REIT Managers Bhd. and a former president of the Malaysian Institute of Estate Agents. ‘God only knows who is going to buy all these units, and when it’s completed, the bigger question is, who is going to stay in them?’”

“‘I am very concerned because the market is joined at the hip, if Johor goes down, the rest of Malaysia would follow,’ said Shanker, who estimates that about half the units in Iskandar may remain empty. ‘If the developers stop building today, I think it would take 10 years for the condos to fill up the current supply. But they won’t stop.’”

The Press and Journal on the UK. “New research into Aberdeen’s housing market suggests the prospects for a long-term recovery are good, though sellers’ price expectations are currently creating a glut. Fiona Gormley, head of residential property for Savills in Aberdeen, said people looking to sell relatively quickly ‘may wish to consider setting significantly reduced asking prices.’ And she warned: ‘The lack of adjustment in pricing, coupled with a continually decreasing number of transactions, is leading to an ever-growing glut of properties that are currently available to buy in the Aberdeen area.’”

The National on Dubai. “The market for luxury property in Dubai continues to weaken as the number of high-level jobs has declined, with prices for Burj Khalifa apartments 15 per cent lower year-on-year and prices at Palm Jumeirah falling by 12 per cent, according to Cluttons. ‘While Dubai’s economy is still diversified, it’s the senior level jobs that have been lost,’ said Faisal Durrani, the head of research at Cluttons. ‘Also, the rate of [job] replacement and creation has slowed down.’”

From Nigeria Today. “Due to the economic downturn, Governor Akinwunmi Ambode of Lagos State has slashed price regime of houses under Lagos Home Ownership Mortgage Scheme, Lagos HOMS, to allow residents apply for the scheme specifically when rent-to-own scheme commence December 9. Vanguard gathered that the scheme which commenced under the previous administration was yet to be fully subscribed, even with the introduction of raffle and other strategies earlier.”

“With the reduction, two-bedroom flat, which was N7.2 million has been reduced to N3.5 million, while the one bedroom reduced to N2.3 million. Also, the room and parlour unit has also been reduced to N1.5 million.”

Seeing A Slowdown, Definitely

A report from the Miami Herald in Florida. “The number of existing home sales in Miami-Dade County took another plunge in October, dropping 22 percent compared to October 2015, according to the Miami Association of Realtors. Condo sales took a big hit, as developers pump new inventory into the market. Sales for existing condos fell to 983 in October, down 30 percent year-over year. October also saw a drop in home sales in Broward County. The number of residential transactions there fell 13 percent year-over-year. Brokers have warned that as sales slow down, sellers will need to lower their asking prices for luxury homes.”

The Chicago Tribune in Illinois. “Home buying in the Chicago area plunged sharply in October, continuing a downward trend in sales that began over the summer. October’s decline was the worst since an 8.5 percent plunge in November 2014. ‘We are seeing a slowdown, definitely,’ said Doug Carpenter, president of the Illinois Realtors. Yet he thinks there is pent-up demand and ‘hopefully there will be a pickup now that the election is over.’”

The San Francisco Chronicle. “After months of rents shooting up almost unilaterally across the nation, finally a slowing down. Zumper’s national rent index for November, 2016 looks back at October. The data show that almost half of all US rental markets either experienced no change or experienced a decrease in the median price for one bedroom apartments. That includes the perennial most pricey markets of San Francisco and New York (so, still pricey; just slightly less so).”

“‘Among the top ten rental markets, we saw declines in both of the most expensive markets, San Francisco and New York, a trend that continued from [September], and half of the twenty priciest saw falling rents, including cities like San Diego, and Miami, and Honolulu. The market for two bedroom apartments seems to be slowing down even faster, as prices fell in nearly 60% of rental markets.’”

The Baltimore Brew in Maryland. “Oaktree Capital Management cashed in during the U.S. housing crisis, buying up distressed assets at bargain prices. But critics say the holders of Oaktree’s mortgages are suffering because the Los Angeles-based investment firm misused a federal program to buy up the properties. One of those people, a 64-year-old nurse from the Cylburn neighborhood in Park Heights, stood in City Hall yesterday alongside of several City Council members and union and community allies.”

“When Sandra Cohen’s income plummeted after the private duty patient she cared for died in 2009, she tried unsuccessfully to get the Bank of America to modify her loan. Cohen said she was thrilled when Oaktree’s servicer, Selene Finance, bought the loan, lowering her payments to $800 a month. ‘I was excited. I thought I was back on track. I could afford $800,’ she said. ‘Little did I realize that in the year 2054, I’d have a balloon payment attached to my mortgage – $76,000. What’s my family going to do? Finance that after 40 years? I will never own this house.’”

“As of June, 40% of Oaktree’s Baltimore loans have been foreclosed, with another 20% in the process of foreclosure, according to a report by UNITE HERE Local 7, which organized the event along with United Workers. ‘This is the sheer definition of predatory lending,’ said Councilman-elect John T. Bullock (9th District).”

“In a statement emailed to The Brew, Oaktree disputed UNITE HERE’s information. ‘For perspective, more than 55% of the Baltimore loans purchased by Oaktree-managed funds were already in foreclosure at the time of purchase, and the average loan was more than two years in arrears. HUD was seeking partners capable of injecting new capital and expertise into these difficult situations and helping borrowers retain their homes, and we’re proud to have been able to do so.’”

“Sandra Cohen, meanwhile, is pushing to get some relief after what she said was deceptive behavior by a lender under a federally managed program. Seeking a lawyer, she said her experience has left her bitter. ‘When the banks got bailed out, the loans got sold, [but] our interest didn’t come down, the principal didn’t come down,’ she said. ‘Instead of anything coming down, we had fees attached, attorney fees, corporate advance. Corporate advances!’”