The Housing Bubble

A report from Reuters on South Korea. “South Korea will raise capital gains taxes on owners of multiple homes and impose fresh mortgage curbs to rein in speculators who policymakers blame for stoking a housing bubble in main regions across the nation. The latest measures — the third set of steps in 10 months — are the most stringent on record and signal government worries that rampant household debt could imperil the economy if left unchecked. ‘By far this is the strongest measure to curb buying frenzy,’ said Lee Mi-yun, an analyst at Real Estate 114 Inc., a real estate research agency. ‘Those with multiple homes are likely to stay in wait-and-see mode, as the proposed changes needs to go through the parliamentary hurdle.’”

From Newshub on New Zealand. “After years of heat the property market appears to be suffering from a winter chill, as new property listings plummet accross the country. July saw a record low in the number of houses being listed, caused by a perfect storm of market conditions. ‘What we’ve come off the back of is three or four years of a very hot market and generally what goes up must come down,’ realestate.co.nz spokesperson Vanessa Taylor said.”

“While it continues to be a sellers’ market across New Zealand, Auckland has seen a shift, now teetering on the edge of a buyers’ market. ‘Vendors have got to make sure they do list their property to sell, they can’t dream that ultimate figure any more,’ said Barfoot and Thompson director Peter Thompson.”

“So while we’re seeing a pre-election winter chill, there’s certainly no sign of the bubble bursting. Buyers and sellers are likely to continue to sit tight for the next eight weeks but after that, it’s anyone’s guess.”

Your Investment Property on Australia. “Australia’s looming apartment glut has prompted panicked developers to offer potential buyers significant incentives, including discounts with rental guarantees, free furniture and appliances, upgrades to fixtures, and significant stamp duty concessions. Towards the end of March, the Australian Prudential Regulation Authority told lenders to restrict higher-risk interest-only loans to 30% of new residential mortgages. Additionally, foreign investors were hit with new levies and buying restrictions, following the announcement of the 2017-18 federal budget.”

“Meanwhile, loan-to-value ratios imposed by the banks have fallen and interest rates have gone up. This has lead to panicky developers resorting to offering incentives to try and get apartments moving. Regulatory measures, combined with the Chinese government’s curbs on its citizens buying property overseas, has caused a dramatic slowdown in off-the-plan selling, according to developers. ‘Feedback from our Australian Property Conference and mystery shopping highlight a clear change in the apartment market, particularly so in Perth, Brisbane and to a greater extent in Melbourne,’ said Citi analysts David Lloyd, Adrian Dark, and Suraj Nebhani.”

From Executive Magazine on Lebanon. “In the absence of hard data, anecdotes and speculation become the basis of analysis. Take, for example, the question of whether or not there is a real estate bubble in Lebanon. From the results of a Google search for the terms ‘Lebanon real estate bubble,’ the sector seems like it is in real trouble. The alleged bubble has a Wikipedia entry, and plenty of news reports — both local and regional — over the past couple years have claimed that disaster is on the horizon.”

“The latest price-per-square-meter for residential units in the ground floor of a Beirut apartment building ranges from $2,180 surrounding the Beirut Arab University in Tarik al-Jadideh to $8,500 along the coast in Manara, according to Ramco Real Estate Advisors. Many advocates of the bubble theory point to these exclusionary prices as proof they are correct, although this aspect of the bubble argument often rings more of ideology than economics.”

“Developers with exposure to Beirut — such as Michel Georr, CEO of GCI — argue London and New York (or any other major global metropolis) are similarly exclusive and that the scarcity of available land in Beirut (with a surface area around 20 square kilometers) means higher prices are normal, if not natural.”

“While asking prices in Beirut have only come down 1.8 percent according to the latest Ramco figures, developers are offering 20 percent discounts, the organization wrote in Executive at the end of 2016. The increasingly loud talk of discounts in Beirut suggest the bubble has burst, with a price correction of 20 percent or more in the capital — even if the only semi-official index, Ramco’s, says asking prices have barely budged. What remains unclear and largely un-indexed is the price situation in the rest of the nation.”

“Will the country collapse? Assuming the bubble has now burst in Beirut, what will be the impact to the market overall and the country’s future? The quick answer: Who knows?”

From Reuters on Canada. “Canada’s long housing boom has drawn thousands into the sector, from realtors and home stagers to construction workers, and a looming slowdown threatens to trigger an exodus that could wipe out many of those jobs and force the economy to shift down. While housing has long been the main engine of Canadian growth, economists say a drop in home sales has already started to weigh on the economy and if price declines follow, consumer spending and jobs will suffer.”

“Realtors’ ranks in Canada’s largest city and hottest housing market have surged 77 per cent since 2008 to more than 48,000 - nearly 10 times the pace of Canadian job growth. Nationwide, that number has risen 26.9 per cent. By comparison, there are over 13,500 realtors in Chicago, according to the Chicago Association of Realtors.’To a lot of people, it is a get-rich-quick scheme,’ Toronto realtor David Fleming said about the real estate market. ‘But history shows when the market turns, half of the agents leave.’”

“Fleming believes many agents are already making less than minimum wage once license, membership and brokerage fees are paid, and it can only get tougher if sales continue to dry up.”