December 27, 2016

Staring At Empty Premises And Counting Their Losses

A report from the Australian Financial Review on the UK. “Never before in the history of London has there been so much uproar about so many buildings – many of them skyscrapers, and most built or approved during Boris Johnson’s eight-year reign as London’s Mayor. Investigative financial journalist George Turner – who fought an unsuccessful campaign to prevent the controversial high rise redevelopment of the Shell Centre on the south bank of the Thames – believes the high-rise horse has bolted. ‘Luxury apartments are stacked high and left vacant while housing is now unaffordable for most Londoners,’ he wrote. ‘Warped by financial interests, our planning system guarantees property developers huge profits but fails to deliver the buildings and services we need.’”

“Architect Barbara Weiss co-founded Skyline Campaign in February 2014. “There were 236 high rise buildings either built, approved or in the pipeline when we launched Skyline Campaign,’ Weiss explained. “Now there are 436: that’s 200 extra skyscrapers in two years. Around 75 per cent of the new skyscrapers are residential. That’s new for London. They’re being built very cheaply. Corners are being cut. And they are going to be very difficult to demolish once they have gone past their use-by date.’”

“‘We’re building ghettos of the wealthy in the sky,’ Weiss complained. ‘These towers are symbolic of how divided London has become. Sydney and Melbourne are being similarly trashed. It’s an international disease.’”

From The National on Dubai. “Dubai rents are set to decline further next year with more than 20,000 new homes entering the market, brokers say. After having fallen by up to 5 per cent this year in parts of Dubai, rents should drop by another 4 per cent in the suburbs next year amid the supply influx, according to the Core Savills 2017 forecast. Jesse Downs, managing director of Phidar Advisory, expects prices and rents across Dubai to weaken next year as the slowing economy forces companies to downsize, dampening demand.”

“She said banks continue to cut staff and the new jobs which are created are in lower paid industries – something which she says will depress rents, in turn depressing sales prices. ‘It seems stakeholders forget to ask the simple question: who will live here and why?’ Ms Downs said.”

The Daily Nation on Kenya. “The rapid growth of real estate saw Nakuru voted the fastest growing town in the region by UN Habitat. However, the current shortage of tenants for most of commercial and residential units seems to indicate that the anticipated economic growth was overstated. Some landlords are beginning to realise that investing in the town might have been a hasty decision. Many landlords in the central business district (CBD) are staring at empty premises as property agents count their losses.”

“A spot check by DN2 found that in most buildings, occupancy was concentrated on the ground and first floors, while the rest are largely empty. The situation is the same in residential areas such as Racetrack, Shabab, Naka, Section 58, Kiamunyi, Barnabas and Freehold.”

“According to Skylight Commercial Agency Managing Director Mr John Kiritu, the inflated landlords are to blame for the situation. ‘Some of the rents charged in the CBD are not affordable. For instance, two years ago, an office measuring 10ft by 10ft on Kenyatta Avenue was going for between Sh4,000 and Sh5,000 per month. It has now shot up to between Sh15,000 and Sh20,000,’ Mr Kiritu offered. ‘With so many building coming up, it is up to the landlords to review their rents if they hope to get new tenants.’”

The Bangalore Mirror in India. “The final quarter of 2016 has bad news for real estate players as the supply of new residential inventories in most metros including Bengaluru has exceeded the absorption rate, showing a slowdown in the industry. ‘Post-demonetisation, the affordable housing segment will get a much-needed boost. Confined to the fringe areas of metros, this segment is expected to get a boost as land prices will plummet in the next few years, especially in far-flung areas around Indian metros, as well as tier-II and tier III cities,’ said Anuj Puri, Chairman and Country Head, JLL India.”

The Gladstone Observer in Australia. “Sellers desperate to offload their Gladstone properties are offering massive price drops on homes on the proviso that buyers snap it up quick. The vendor discount in Gladstone, used to measure the difference between the original asking price and the eventual sale price, is the state’s second biggest at 10.6%, only beaten by Mackay at 11.4%. The discount has increased slightly in the three months to September from 9.6% in the June quarter. It was up from 8.1% in 2015, meaning the average buyer can expect to see $106,000 reduced from a $1 million home.”

“Real Estate Institute of Queensland Gladstone zone chairwoman Vicki Brown said she’d noticed a drastic ramp up of sales in October. ‘As you know it been a pretty bad year, but the last month has been crazy busy,’ she said. ‘The prices haven’t gone up, but we’ve sold a lot of houses and rented a lot of houses.’”

“Ms Brown said she’s sold to investors from Brisbane, Sydney, Melbourne, and Darwin, but a large portion of homes have been handed over to first home buyers that previously rented in Gladstone. ‘Tenants are buying now because it’s very affordable for them.’”