The Housing Bubble

A report from the Illawarra Mercury in Australia. “Unaffordable housing has surged to the top of the list of undecided voters’ concerns in western Sydney, according to new focus group research. And while the problem angered younger voters unable to buy a home, it also troubled an older generation who feared for their children’s future. ‘I live in drive-by shooting territory and a dump costs a million dollars - are you joking?’ said an older female voter in a western Sydney focus group. Another added: ‘It used to be a dream, a million dollars. Now it’s nothing.’ A third said: ‘My daughter has to wait ’til I cark it to buy a house.’”

From Korea Joongang Daily. “The Ministry of Land, Infrastructure and Transport and other parts of the government announced curbs on mortgage lending and regulations on the real-estate market to crack down on speculation. Kim Hyo-jin, an analyst at SK Securities, said the policies will help stabilize the market in the short term. But he doesn’t agree that housing prices are too high. ‘I don’t think there is a big bubble in the Korean housing market and expect the prices will continue to rise, especially in the Seoul region, following many reconstruction projects,’ he said.”

From The Edge Malaysia. “‘It’s very quiet these days, I hardly have any clients now,’ says a lawyer who specialises in real estate transactions. He and property agents now have time on their hands. The empty commercial blocks and unlit units in high-rise condominiums — which have mushroomed in recent years, especially in the Klang Valley — confirm their negative sentiment.”

“Looking back at the property boom that peaked in 2011 to 2012, some blame the slowdown on macro prudential measures imposed on the market. Yet, there is no denying that property prices have risen above what the average Malaysian can comfortably afford.”

From The Times of Oman. “Muscat landlords are taking hits in rent prices in order to keep their tenants from moving out, in a market that has dipped, according to experts. One landlady said: ‘I sent every tenant a new contract with a OMR50 a month reduction, without them even asking, because I want to keep the building fully occupied. The location is nice and two years ago there was no issue and I was asking OMR700 or OMR800 for a two-bedroom apartment. Now some apartments lay empty for a long time and I’ve reduced the rental to OMR450 a month. I know of villas in Qurum that were on the market for OMR2,000 two years ago and are now lying empty, even though the rent has been cut to OMR1,000.’”

From STV News in Scotland. “One of Donald Trump’s closest Scottish allies urged the billionaire’s sons ‘not to spend another penny’ in Aberdeen. Hotelier Stewart Spence tried to persuade Eric and Donald Jr to delay investing while the city rides out the oil downturn. They were handed control of Trump’s Scottish golf interests when their father became US president, although he still owns the courses.”

“‘Because there is such a downturn in Aberdeen… I just couldn’t see them getting a return on investing more money than they’ve already invested,’ said Mr Spence, who owns Aberdeen’s five-star Marcliffe Hotel. ‘The property register has 5000 houses for sale, why do you want to build more houses?’”

From AFP on Brazil. “Plagued by violence, white elephant sports facilities and corruption scandals, Rio de Janeiro today is unrecognizable from the feel-good city greeting the world at the Olympics exactly a year ago. As soon as the athletes packed their bags and cameras stopped rolling, barely hidden problems erupted. Taxi driver Iran Oliveira, 41, pointed to cracks and damp in the walls and a bathroom where nearly all the tiling has come off. He was assured that he’d have title to the new apartment. However, under the details that he only understood later, he will not have the right to sell the property until the city has finished making payments on the property of 90,000 reais ($30,000).”

“That’s meant to be complete in 10 years but due to the economic crisis payments are already in arrears. ‘We were ripped off,’ said Ze Riveiro, another evicted resident of Vila Autodromo.”

“Meanwhile, the nearby athletes’ village — a brand new tower complex that was planned to be sold after the Games as luxury apartments — sits virtually unused. Just 10 percent of the apartments have sold, according to Brazilian media reports.”

From Business Review Canada. “Toronto’s housing market has been showing some alarming behaviour of late, as figures from the Toronto Real Estate Board reveal that the average cost of a home in the area fell $173,000 between April and July. However, although this 18.8% fall might be causing panic and confusion for some, the descent in house prices isn’t actually as surprising as it might first appear. Whilst an average price drop from $919,499 to $746,216 seems scary, it must be noted that Toronto’s house prices rose at an equally alarming rate previous to this.”

“With a significant amount of uncertainty about how long this 23% rise in house prices would last, listings surged in the previous month by 65.3%. However, whilst supply has increased, demand has dropped, as the Ontario government implemented measures to prevent a continual rapid house price rise in Toronto, including a 15% tax on foreign buyers. These things combined explain why there has been a 41.7% drop in housing sales in the Toronto Area in July.”

The Toronto Star in Canada. “The real estate industry is downplaying a third consecutive month-to-month decline in Toronto-area home prices that saw the average cost of a home drop $173,000 between April and July — from $919,449 to $746,216. The short-term price decline could make some owners ‘a little tense’ if they are thinking about selling, said Christopher Alexander, regional director at Re/MAX Integra.”

“But, he said, homeowners need to remember that, ‘Last year was a record year across the board.’ ‘Yes, sales are way down (but) prices have only fallen 5 per cent from June to July, which is exactly what we had last year, and listing inventory is only up 5 per cent. So I don’t see a flood of extra inventory to distract buyers from making quick decisions,’ said Alexander.”

“‘We’re now back to a normal summer,’ said Oakville agent Tracy Nursall of Sage Real Estate. But for buyers looking for more space, this is the move-up market they’ve been waiting for, she said. ‘If you lose 5 per cent on your townhouse and you’re going into a detached that has also lost 5 per cent, the dollar difference is significant. It’s just that people are still clinging like a spurned lover to the old March market,” said Nursall, referring to the first-quarter peak when home prices averaged $916,767.’”