June 21, 2017

How Communities Became Commodities

A report from Bloomberg on Brazil. “Brazilian banks are wrestling with a growing pile of assets they’d rather not own: at least 13.8 billion reais ($4.2 billion) of cars, real estate, equipment and other collateral seized when borrowers defaulted on their loans. The total surged 42 percent in the first quarter from a year earlier at eight of the nation’s biggest lenders as fallout from the worst recession in Brazil’s history continues to weigh on banks’ finances, according to the companies’ financial statements.”

“‘With more time, banks can now hold off on selling those assets until they manage to get a better price,” Eric Barreto, a professor at Sao Paulo business schools Insper and M2M Saber, said in an interview. ‘But in the event of a liquidity crisis like we had at the end of 2008, those banks with a lot of real estate assets may face troubles.’”

From Postmedia News on Canada. “Alberta’s boom and bust economy has left Calgary with record numbers of newly built homes and condos that sit vacant as a massive stockpile of housing goes up for sale at the end of a recession. More than 2,000 new housing units were unoccupied in the Calgary area last month, the biggest inventory on record, driven largely by construction of apartment-style condos, according to the Canada Mortgage and Housing Corp.”

“Many of the residential developments causing the glut broke ground in 2014, which marked the end of a boom with a dramatic slide in oil prices, triggering a prolonged recession. Todd Hirsch, chief economist at ATB Financial, said the major housing glut shows ‘we’re not ‘quite out of the woods’ after a bruising recession.”

From CNBC on Israel. “Israel will hold a lottery starting Saturday night to sell 15,000 apartments at reduced prices under a program to help ease starters into the housing market. One prominent critic of government policy on the subject warns that such measures at a time when prices are already showing signs of falling can lead to a rout in the market.”

“‘They take steps to curb the market but if the market is starting to fall, it will exacerbate the fall,’ says Elli Kraizberg of Barl Ilan university’s Graduate School of Business Administration. ‘Now when you find that the market is starting to fall, to prevent a 30 percent fall in the market, they should take steps that are the opposite of what they’re doing.’”

From Newsday. “President Robert Mugabe has stopped renting a luxury property in an opulent United Arab Emirates suburb, a top government official confirmed. While Mugabe’s spokesperson, George Charamba told the Sunday Times that the Zanu PF leader had been renting the property, in 2015 it was reported that First Lady Grace Mugabe had bought a house in the same neighbourhood for around $1 million, according to a Dubai estate agent, who claimed to have sold her the property.”

“The estate agent, who claimed he sold the Emirates Hills house to Grace, told the Sunday Times ‘anyone with a pile of cash could buy a villa in Dubai in no time, with few questions asked.’ ‘If you’ve got money in the bank, you can do a money transfer. If the money is in cash, which means it’s not legit, we have to find other means. But it’s not a problem,’ the agent was quoted saying.”

“Other famous residents of Emirates Hills include Asif Ali Zardari, husband of assassinated former Pakistani President Benazir Bhutto, who in 2004 was jailed eight years for shady arms deals and money laundering, and former Thai Prime Minister Thaksin Shinawatra, deposed by the military in 2006 before being charged with tax evasion in absentia.”

From Open Democracy on the UK. “This isn’t a story about the Grenfell Tower disaster. The causes of that are complex, and we don’t yet know them all. But it is the story of what’s happening to the homes and lives of ordinary people in London. It’s a story about how communities became commodities. And as criminal money pumps ever more air into the London housing bubble, driving up the prices in generally expensive areas, it’s no wonder that, to some, the relative value of the lives of the ordinary people who live there seem to diminish by comparison.”

“Writer Roberto Saviano is well-known world-wide as the leading expert in the Calambrian mafia. Saviano has written about crime in Italy and about international drug money. Of all of the places he’s researched, he holds particular contempt for one. Speaking last year, Saviano said: ‘If I asked you what is the most corrupt place on Earth, you might tell me, well it’s Afghanistan, maybe Greece, Nigeria, the South of Italy and I will tell you it’s the UK.’”

The Dhaka Tribune on India. “According to a rough estimate of industry insider, on average prices of flats have seen 25% to 30% fall in the last couple of years after the bubble burst in 2012. A large reason for the drop in sales in recent years was that prices had remained artificially high in the decade and half before that because of the unregulated use of ‘black money’. Policy Research Institute of Bangladesh executive director Ahsan H Mansur said that ‘Huge black money invested in the property business was one of the reasons behind the creation of housing bubble for the last few years, and it was bound to burst sooner or later.’”

“Seeking anonymity, an economist said that a huge amount of black money is still being pump into housing sector. He argued that prices of flat remains high and beyond the reach of people only for allowing black money in the sector. According to law, untaxed money holders can legalise the money through construction or purchase of residential buildings or apartments by paying a 10% tax. Despite the criticism surrounding the opportunity to whiten black money, the Real Estate and Housing Association of Bangladesh wants investment of black money in the sector without questions being raised about its source.”

“The realtor platform claim that the number of unsold flats still remain above 10,000.”

The South China Morning Post. “The market has cooled sharply since March 17, when Beijing’s municipal authorities tightened rules such that those who had paid off previous mortgages would no longer be classified as first-time buyers. In addition, new caps on mortgage lending meant second home buyers had to put up a minimum payment of 80 per cent. A majority of prospective buyers were priced out due to the higher purchasing threshold.”

“Housing agents say transactions have slowed dramatically as sellers are reluctant to compromise much on price while buyers are sitting on the sideline waiting for bigger bargains. Meanwhile, more than 80 per cent of Beijing owners are reducing their asking prices, while just three months ago, 80 per cent were raising prices, according to property agent Homelink. In a reversal from three months ago, when home prices were rising regardless of layout, design, and building age, buyers now have a lot more negotiating power.”

From Your Investment Property on Australia. “Mainland Chinese investors are turning their backs on the Australian property market due to a series of measures designed to cool one of the world’s hottest real estate markets. This dip in foreign investment heightens the risk of a damaging correction in house prices. The federal and state governments’ latest moves targeting foreign investors mirrors similar measures imposed in other favoured destinations of Chinese investors, including Vancouver, Singapore, and Hong Kong. However, there are fears that our governments’ latest measures could push an already unstable market over the edge.”

“Sutono Pratiknya, a Sydney-based property sales consultant, said the new measures have sent a clear signal that overseas investors are no longer welcome. ‘We used to do five property tours a month, picking up a dozen investors from the airport and showing them our latest offering. Now, there’s nothing,’ Pratiknya said.”

“‘The fact is that a lot of developments hinge on foreign investment,’ said David Bare, the NSW executive director at the Housing Industry Association. ‘Applying these measures when the market is starting to cool is going to have a much greater effect than it might’ve 12 or 18 months ago.’”