June 11, 2017

Left High And Dry

A report from CBC News in Canada. “A record-breaking number of homes were listed for sale in the Hamilton area last month, according to new data from The Realtors Association of Hamilton-Burlington (RAHB). In a statement, RAHB CEO George O’Neill said that two months ago, realtors were talking about the low inventory of listings — yet now, they’re already talking about a record for new listings. In April, the provincial government announced measures to try to help cool Toronto’s extreme housing market growth, with an additional focus on the Greater Golden Horseshoe. He wonders if even just the talk of controls contributed to people deciding what to do. ‘Our members reported seeing a shift in the market even before the announcement,’ O’Neill said. ‘It’s possible that sellers read and heard that changes were coming and decided to act sooner rather than later.’”

The Canadian Press. “Home sales in the Greater Toronto Area plunged 20.3 per cent last month compared with a year ago, according to the latest data from the country’s largest real estate board, a sign that recent efforts to cool the searing market are having the desired effect. The average selling price for all properties in May was $863,910, up from $752,100 the same month last year, the Toronto Real Estate Board said. But that was down from $919,614 in April, the first month-over-month drop this year. The move came as listings rose 42.9 per cent from a year ago, when they were at a record low, according to the real estate board.”

“‘Certainly there are a lot of people sitting back right now wondering what’s happening with the new housing plan and kind of taking a breather just to see how it affects the market,’ said Brian Elder, a sales representative with Royal LePage Real Estate Services. ‘It definitely will pick up again. But to the degree it was before? I don’t know. I suspect it won’t get quite that heated.’”

The Edmonton Journal in Canada. “Growing supply and decreasing demand are helping create a buyer’s market for new homes in the Edmonton suburbs, show new figures from a real estate consulting firm. The number of ’spec’ homes built before they’re sold rose to 2,430 last winter from 2,156 in the summer of 2016, while sales dropped about 20 per cent to 1,263 over the same period, according to Intelligence House research.”

“That gave the city an oversupplied 2.3-year backlog of new homes, Intelligence House co-owner Alex Ruffini says. ‘Technically, if you have too much supply in the market, that tends to drive prices down or you see lots of promotions … Builders are more willing to give more discounts or give deals,’ he says. ‘(Having 2.3 years) is not tremendously oversupplied, but the power is on the demand side right now.’”

The Sydney Morning Herald in Australia. “Here’s a simple graph that tells an amazing story – the owners of Sydney’s housing don’t want to sell. The graph, by analyst Peter Wargent using SQM Research figures, effectively blows away much of the wishful thinking by wannabe Sydney buyers that prices are about to be significantly lower. Barring international calamity causing global financial markets to seize up, we would only get markedly higher interest rates if the economy was growing markedly faster and unemployment markedly lower. Mark that down when it happens, but no one would advise holding your breath.”

“As for the state government’s efforts to toss a few grand the way of first home buyers – it increases their buying power, increases demand when supply remains the key issue. Vendors will be pleased. SQM’s Christopher warns that prices are pushed around by relative movements – listings being up or down a bit can be felt – but the scale of the shortage of listings means the fundamentals of the market aren’t about to change enough to matter. Yes, Sydney housing is very expensive, but people who want to live here are prepared to pay it.”

From The Australian. “Singapore’s Banyan Tree has slashed the price of entry-level apartments in its Australian flagship development by more than $100,000, as stresses show in the Brisbane unit market. Prices of the ground floor eastern-facing apartments in the $150 million development have been cut from the original price of $900,000 to $795,000 in a bid to spur sales. Construction on the 76-apartment complex is expected to start midyear, about a year later than the initial timeline.”

“CBRE Brisbane managing director Paul Barratt said there was strong ‘investor caution’ that would lead to further price adjustments. ‘Buyers are cautious about their belief in capital gain so unless a project represents compelling value a lot of investors are in sit and watch mode, but they risk missing out on the best buying in many years,’ he said.”

The Daily Telegraph in Australia. “Desperate landlords in the Queensland capital are increasingly resorting to desperate measures to secure tenants, as the impacts of the city’s long-predicted apartment oversupply is finally being realised. Theresa Fitzgerald, principal of Theresa Fitzgerald Property Management, in the exclusive inner-northern riverside suburb of New Farm, said it was not uncommon to see apartments of a decade or so old sitting vacant for six weeks.”

“‘Some of them just cannot accept it. If the average rent they were getting was $520 a week and they get an offer of $490, some just can’t accept it,’ Ms Fitzgerald said. ‘They were getting good money a year ago but rather than accepting less, it sits empty for weeks.’”

From Smart Company on Australia. “Hundreds of creditors are owed $12 million following the appointment of liquidators to Brisbane-based apartment builder CMF Projects, with real estate analysts warning more SMEs could be caught up in future troubles that are looming in the property sector. Managing director at Market Economics Stephen Koukoulas tells SmartCompany there’s already a ‘time risk’ building apartments due to approval processes, and with negative stories and developments starting to emerge about the apartment sector in cities like Melbourne and Brisbane, it’s likely SME suppliers will be left ‘high and dry.’”

“The prospect of more tough times for apartment builders across the country will have a broader macroeconomic impact, says Koukoulas. ‘But there are going to eventually be people left high and dry, and you get that downward spiral occurring. You get this cascading down the chain,’ he says.”

“While some have clearly ‘made a fortune’ from the apartment boom, sub-contractors and suppliers who might be caught up in the slowdown are largely powerless to the prevent the possibility they might lose jobs or payments, Koukolas believes. ‘That’s their bad luck, really… just bad luck,’ he says.”