May 2, 2017

The Difficulty In Escaping From Old Ideas

A report from Metro News in Canada. “It is like a tap has been switched off. That’s how realtor Louise Sabino describes the housing market in the wake of the Liberal government’s provincial plan aimed at cooling Toronto’s scorching property prices. ‘I think it’s shocking that it did make the impact so fast,’ the Royal LePage Signature Realty agent said.”

“Agents like Sabino are already advising their clients on selling in a market that is far different from the frenzy that was making headlines even three weeks ago. The pause may be welcome for buyers. But it’s frustrating for sellers, who have, for months, been primed for bidding wars and over-asking-price offers, Sabino said. She cited an offer presentation on Tuesday that drew a single bid. Although it was higher than the property’s listed price, it came with conditions for financing and a home inspection. ‘We haven’t seen that for months,’ Sabino said.”

From The National on the UK. “For overseas investors in luxury London developments, tumbling sales and slowing value growth of new-build and established homes makes for dismal reading – and it does not look like improving any time soon. Years of overpricing is hurting the market in ultra-prime areas such as Mayfair, while new luxury developments are suffering even more.”

“‘The struggling performance of the new-build market in Inner London will certainly be beginning to worry developers,’ said Naomi Heaton, the chief eecutive of of LCP. ‘It has already been reported that Battersea Power Station has reached a ‘critical stage’ and has written down its projected investment returns from 20 per cent to 8.23 per cent. As is now being seen, in areas such as Battersea-Nine Elms, there is a saturation of over-priced, over-supplied ‘commodity style’ property, which leads to a softening market, particularly during times of instability.’”

The Daily Telegraph in Australia. “Sydney’s property price frenzy is beginning to die down. The main drivers of the slowdown have been a push by banks to tighten investor access to credit and a drop in foreign purchases, which have dampened demand. A stream of new housing, mostly units, has also hit the market, easing buyer competition for homes. The result is that apartment prices have already been falling in pockets of the city’s inner south, Homebush region and the Greater Parramatta area — areas where developers are releasing a slew of new housing, with more projects still in the works.”

“The biggest fall was in Hillsdale, a suburb in the Botany area roughly 7km south of the CBD, where the median price of a unit dropped 21.8 per cent over the past year. Median unit prices also fell by more than 10 per cent in Sydney Olympic Park and Auburn, while prices in Mascot and the Sydney CBD fell roughly 7 per cent. Nicholls & Co Estate Agents founder Cameron Nicholls said more property owners, particularly investors, were cashing out of the market after deciding it had peaked. ‘A lot of people think Sydney’s (price growth) cycle has ended, so they want to take out their money and buy in a place where the cycle is starting,’ he said.”

The Japan Times. “The Bank of Japan is keeping a wary eye on the steep growth of bank loans to finance the construction of apartment buildings and other rental homes. The BOJ is concerned that the active lending may cause an oversupply of rental homes and an increase in vacancies, resulting in defaults by borrower landlords, officials said. The central bank is concerned that if banks extend loans to construction projects that do not pay due heed to real demand, including rental homes constructed in inconvenient locations, a housing bubble could be formed, the officials said.”

“Demand for rental homes is likely to slow down in view of the dwindling population. ‘If the housing supply continues to increase at the current clip, numerous landlords are expected to have difficulty finding tenants and managing their apartment buildings,’ said Kazuyuki Fujii, a senior official at Tas Corp., a Tokyo-based real estate information company.”

The Real Deal. “Anbang Insurance Group has quickly gone from industry darling to cautionary tale. The Chinese insurer lost major mojo in the U.S. in the wake of two splashy deals that fell through, the Starwood Hotels portfolio and Kushner Companies’ 666 Fifth Avenue. And it’s facing a fair bit of drama back home, too. On Wednesday, WeChat went nuts with talk of Anbang chairman Wu Xiaohui being detained over alleged financial irregularities at the firm.”

“The troubles reportedly rose from a $14.5 billion loan Wu obtained from China’s largest private lender. Anbang eventually put out a statement rubbishing the rumors and said everything was business as usual. On Thursday, Wu also granted a rare interview to a Chinese state media outlet, in which he defended the firm’s flurry of overseas deals. And then on Sunday, the firm said it would sue Caixin, a Chinese investigative magazine that reported on potential financial irregularities at the insurer.”

“Ludwig Chang, the former boss at China Orient Asset Management, a top state-owned asset management firm, predicted that the Chinese government’s increased scrutiny of overseas real estate transactions would be felt by Anbang and those of its ilk. ‘Some insurance companies, who shall remain unnamed, have had two or three failed transactions,’ Chang said. ‘I think those are the handiwork of the new insurance regulatory regime.’”

From The Irish News. “Next Monday marks the 10th anniversary of the restoration of the Northern Ireland Assembly, memorable in many people’s minds for being a beacon of what could be. A decade on, our political representatives have not learnt the lessons of the past.”

“The feel good factor in Northern Ireland at that time was palpable. The economy was booming, employment was plentiful and the housing market was buoyant. However, just like the local political accord the foundations were built on quick sand with easy credit and over exuberant lending funding the boom with banks chasing profits and consumers believing the good times had arrived. Locally the fallout of the property crash was economically devastating and far reaching.”

“There is growing concern that the housing sector in the Republic is in danger of overheating with mortgage lending governance brought in after the crash being overridden to support increased demand within the market. House prices have risen by 5 per cent in the first three months of the year and are expected to rise by as much as 8 per cent to 10 per cent by the year end. Housing Minister Simon Coveney has denied that the Government’s tax break policy for first time buyers is contributing to the rises with claims the Central Bank, following Government pressure, is easing mortgage lending rules to accommodate demand.”

“But relaxing the rules on lending is a concerning development following the catastrophic economic implications that were a consequence of irresponsible lending by Irish banks a decade ago. The great British economist John Maynard Keynes said: ‘The difficulty lies not so much in developing new ideas as in escaping from old ones.’”

“In the process of escaping from the mistakes of the past, whether it’s Westminster, the Dáil or the Northern Ireland Assembly, it would be inconceivable and certainly unforgiveable to repeat them.”