Evidence Is Mounting That There Never Was A Shortage
A report from the Business News Network in Canada. “The average price of a Toronto home likely tumbled more than $100,000 in June from the frenzied peak prices of earlier this year, according to one Toronto realtor. The greater Toronto housing market took a sharp turn following Ontario’s 16 new measures to rein in the region, as listings skyrocketed and sales plunged. The average price should be ‘down around 12 to 15 per cent from the peak prices in April,’ John Pasalis, broker at Realosophy, told BNN in an email. A pullback of that size would mean the average price for June could be down some $110,000 to $138,000 from the April peak.”
“Before the abrupt turnaround, the greater Toronto market bore the hallmarks of an ‘unsustainably red-hot seller’s market,’ Lauren Haw, CEO and broker of record at Zoocasa, told BNN in an email. ‘We expect freehold sales to be down over 40 per cent and condo sales to be down more than 20 per cent compared to last June,’ said Haw. ‘This will feel severe versus 2016 numbers, but keep in mind 2016 had the highest year of [Toronto Real Estate Board] sales ever.’”
The Irish Independent. “The number of new and second-hand houses changing hands has collapsed in recent months, with only 324 transactions being registered in the first half of June. There are almost 48,000 vacant second-hand properties in Dublin and the surrounding counties. So why aren’t more of them changing hands? Lorcan Sirr, lecturer in housing studies at DIT, believes that the most recent downturn in transaction volumes may be at least partially due to the disappearance of cash buyers.”
“‘People see prices rising and they shove their own houses onto the market,’ he said. But will these new vendors have realistic price expectations or will their properties linger unsold for months on the market instead?”
From Standard Media in Kenya. “By the year 2020 when The Pinnacle is completed at a staggering height of 300 metres, three out of the five tallest buildings in Africa will be in Kenya, placing the country at the apex of the continent’s renewed battle for the sky. Unfortunately, the impressive streak of real estate development in Kenya that has defied predictions by doomsayers on an impending bubble burst has now hit a down cycle. This has left investors in a tricky situation and, although few of them would openly admit it, the increasing size of unoccupied space is now haunting a sector credited for pushing the country’s economic growth when the rest of Africa is in trouble.”
“And the signs are everywhere. The building with red drapes next to The Pinnacle’s site, more than 10 storeys high, does not have a single tenant more than a year after opening and it is alleged the owners are looking for a buyer. ‘There is still the right market for a good product at the right price,’ says James Hoddell, chief executive of real estate firm Mentor Management. ‘What is going on in the property market is what has been happening in the whole world. I think it is good for the buyers.’”
From Outlook India. “Our cities have changed beyond recognition—the last two decades have seen a feeding frenzy of construction, a permanent flux in the landscape. As urban spaces tried to cope with everyone’s idea of a ‘dream house’, the concrete mixers never stopped churning. Till now, that is. 30% is the average minimum fall in real estate prices in most parts of the country since 2015.”
“‘Residential real estate is going through its own pain and has been in decline since 2013,’ says Anshul Jain, MD (India), Cushman & Wakefield. ‘From 2010 to 2012, the market was overheated and many projects were launched nationwide. Prices doubled in three years and reached an unsustainable stage. Many new developers came into the market, but did not have the ability to deliver. There are no end users in the market now as the trust factor has gone away.’”
The Malaysian Star. “As dusk falls over the Klang Valley, it is easy to spot unoccupied units in the towering blocks which remain in pitch darkness. Many of these units have been sold, but remain unoccupied. The owners may have tried to rent or to re-sell them. This is a recurring theme in the property investment market, when over-investment or speculative purchase by investors hoping to make a quick disposal for capital gains do not materialise. This situation is not unique to Malaysia. It is happening in China, in parts of the US, Britain and other global capitals.”
“The overall property market slowdown has resulted in the rising number of homes hammered out in the auction market, says Socio-Economic Research Centre executive director Lee Heng Guie. Properties are long-term investments and the ability to hold is important. ‘The weak holders and investors, facing financial difficulties to service their mortgage repayment due to low rental income, or were unable to sell in an oversupply market, may be subject to foreclosure by the banks. And so the property enters the auction market,’ says Lee.”
“Market misjudgments and the imperfection of market information create an oversupply. The availability of easy credit also fuels excessive speculative investment demand, driving house prices beyond the economic fundamental. As such, we have to go back to basic and economic arguments to intervene in the supply and demand market dynamics, says Lee.”
From Radio Australia. “For at least a decade, an Australian housing shortage has been a gospel truth amongst economists and policymakers, fingered as the major cause of Australia’s high home prices. But the evidence is mounting that there never was a shortage and, even if there was, that it will soon be eliminated by the stubborn east coast building boom that refuses to wither.”
“Australia still has a massive dwelling surplus nationally. Using an admittedly simple, but conservative, methodology, it seems that in my lifetime the nation has built at least half a million dwellings more than it needed to house its growing population. Amid lingering doubts about the sheer size of this apparent national dwelling surplus, I turned to Lindsay David and Philip Soos of LF Economics. They use a more sophisticated methodology for their housing supply and demand analysis, but their results are very similar.”
“Philip Soos observed that, over the past two decades, the periods of greatest excess housing supply had occurred while prices were rising, while periods of undersupply coincided with weaker price growth or falling values. It makes perfect sense. Here’s why. ‘Rising prices provide incentives to developers and builders to construct supply and offer it to the market,’ he explained. ‘We saw in the 2000s with the United States, Ireland and Spain, they went on absolute building sprees and yet, all the while, their economists were saying high prices were caused in part by shortages and that obviously wasn’t the case.’”
“It is almost impossible to maintain the argument that a housing shortage is the major reason that Australian home prices have almost doubled over the past decade having more than doubled over the decade before that. If a housing shortage isn’t the problem, a dwelling construction boom isn’t going to be the solution to Australia’s housing affordability woes.”
“The real answer probably lies in the level of speculative demand and ability to pay more for properties facilitated by record low interest rates, financial deregulation and investor subsidies such as negative gearing and the capital gains tax discount.”
