The Housing Bubble

A report from the Washington Post. “London: They are not hard to spot, if you know where to look, especially at night - the floors of swanky, new apartments, most of the windows dark, almost all the time. The zombie flats. Owned, but empty. There’s enough empty property here to be given a name in the British news media: the ‘ghost mansions’ of ‘lights-out London,’ the streets where it is alleged that 7 in 10 addresses are second - or third or fourth - homes. The blight of conspicuous empty homeownership is a big story in London - and around the globe. The ‘empty home’ phenomenon has gone viral in hot postal codes around the world - and it is especially visible in cities such as Miami, Hong Kong, Vancouver, B.C., Dubai, Singapore, San Francisco and Sydney, where foreign buyers and their shell companies gobble up units as investment properties and piggy banks.”

“In Manhattan, the New Yorker had a look at Census Bureau numbers, which revealed that in midtown - from 49th to 70th streets, between Fifth and Park avenues - nearly 1 in 3 residences are unoccupied at least 10 months a year. Newsweek estimated in Paris ‘one apartment in four sits empty most of the time.’ In Jerusalem, the deputy mayor said the number of ghost flats is triple the official estimate - and bemoaned the impact on young families searching for a bit of living space.”

From Better Dwellings in Canada. “Toronto real estate inventory has been increasing over the past few months, and we wanted to see what kind of sellers we’re looking at. An analysis of properties listed for sale in the City of Toronto show that over 6% were bought less than 18 months ago. While some have ask prices that might prove profitable, we estimate 1 in 3 of these listings are currently looking at a loss.”

From Bloomberg/Dubai. “Dubai residential property prices and rents are set to fall further as losses of high-paying jobs and dwindling household incomes boost vacancies across the city, according to Phidar Advisory. ‘The false start of early 2017 is over and the cracks are starting to show,’ Jesse Downs, managing director at Phidar, an advisory firm specialising in real estate, wrote in a report. ‘Sales volumes of completed properties are at a six-year low and vacancies are rising across the city.’”

The Vanguard in Nigeria. “In spite of the cheering news that the country is getting out of economic recession, the bleak outlook of the housing sector of the nation’s economy will remain a major cause for concern for real estate developers and the survival of their businesses in the country. This is because developers have been churning out housing units in different parts of the country without corresponding demand for them. This has subsequently led to the astronomical increase in the number of unsold housing units across Nigeria.”

From Reuters on Brazil. “A Brazilian land developer controlled by U.S. buyout firm Carlyle Group LP investment vehicles has appointed turnaround specialist Ivix Value Creation to help it reverse mounting client lawsuits and avoid filing for bankruptcy protection. The move is intended to help Urbplan find a way to avoid restructuring a pool of asset-backed securities and credit worth 450 million reais ($144 million) and recover from a period of weak housing activity, they said.”

“Their first task, they told Reuters, will be reviving confidence among creditors that Urbplan will repay them. ‘We are not here to carry out an autopsy of the company, which means we’ll do whatever it takes to avert Urbplan’s bankruptcy protection,’ said partner Nelson Bastos.”

From The Australian. “Mortgage belt suburbs in western Sydney are starting to show signs of stress, topping a list of areas across the state where homeowners are having the most difficulty keeping up with their loan repayments as the housing boom starts to slow. The worst performing postcode in NSW is Ashcroft, 29km southwest of Sydney’s CBD, according to a ranking by ratings agency Moody’s of suburbs where homeowners are more than 30 days behind in their mortgage payments.”

“Carnes Hill in the city’s southwest was ranked third, Fairfield was eighth and Bidwill in Sydney’s northwest was ninth. The ranking follows a five-year bull run in the housing markets of Australia’s east coast capitals, where dwelling prices had soared on average about 80 per cent in Sydney, according to CoreLogic.”

“The western Sydney mortgage belt suburbs were home to a noticeable proportion of first-home buyers who often bought in house and land communities being developed in the city’s growth corridors, said Savills Australia head of residential research Sophie Chick. ‘You’re seeing people moving into new homes so you don’t have that existing equity. So when you have a look at the distribution of people there (in these new communities) they’re all new buyers to the area, so they’re more likely to be taking out mortgages,’ Ms Chick said.”

Fromm Stuff New Zealand. “Former Block Australia contestant Carlene Duffy, who walked away with just $10,000 from her auction, said it will take the losing Block NZ contestants ‘months to get over the shock and devastation’ of falling short at auction. ‘I would just give it time, because it probably took us a few months,’ Duffy said. ‘This whole experience, you sort of feel like you are in a bubble and it’s very insular, but if give yourself time and once the shock wears off, you can re-evaluate where you go from here.’”

“Carlene and her husband Michael Duffy were fan favourites of The Block Australia’s 2014 ‘Glasshouse’ season, which saw an abandoned 1980s office building transformed into multi-million dollar apartments, but were gutted when 14 weeks of renovations yielded them just $10,000 at auction.”

From The Spinoff. “For the last six years The Block NZ has been both New Zealand’s most successful reality franchise, and the most illuminating cultural artefact of this era. The show features four teams racing to complete a renovation or build of adjacent houses, with each retaining the profit from the sale, while those who get the largest profit also get a $100,000 cash prize.”

“For five years the show rode the surging Auckland housing market ever higher. Back in 2012 houses in bourgie Takapuna went for between $789,000 and $961,000 – figures which seem almost quaint today. Gradually the median lifted: it was $983,000 the following year, rocketing to $1,429,000 on moving to Pt Chev in 2014, before posting $1,327,500 and $1,425,000 in Sandringham and Meadowbank respectively.”

“Every year the show’s contestants profits grew a little fatter, rising like the market from a little over $300,000 combined in year one to peak last year with the four teams splitting a Lotto-like $1,081,000. And, for mystifying reasons which can be known only to the contestants, Mediaworks, the IRD and our legislators, all that money was tax-free.”

“Which is to say that The Block NZ functioned as a perfect advertisement for our housing market: vastly expensive but only going up; everyone made tonnes of money; no one paid tax. Truly, this reality TV captured our era better than any big budget drama could ever dream of doing. Until, last night, it all broke down. We’ve been told the market will crash or stall since before 2012, but last night we watched it happen on live TV. It was gruesome viewing. Auctioneers in bright yellow ties, coated in sweat looking out at motionless audiences. We watched three-part tragedies unfolding before our eyes.”

“It was wrenching television, watching ‘people not make much money,’ as host Shelley Ferguson put it, and no one on screen was in any mood to celebrate. Worse than the timing was the constant push to bigger and bigger houses, which mirrors that of the market as a whole. Our house-size has risen over the past few decades from around 100sqm to closer to 200sqm. But the bigger and richer they are, the less liquid, as we saw last night.”