The Housing Bubble

A report from Better Dwelling in Canada. “Toronto real estate sales were down in the million plus range in August. TREB reported 965 sales over a million dollars, down 37.66% from the same month last year. This was due mostly due to soft demand in the detached market, where sales above a million are down a 42.67%. Detached and condo apartments combined showed 12,808 active listings in August, up 54.68%. Breaking that down, TREB reported 9,215 active detached listings at month end. This is up 117.48% when compared to the same month last year.”

“The back half of 2017 is going to be very different from the first half. Be careful how numbers get thrown at you if you’re an investor. In the first half of 1999, investment grade Beanie Babies were up 2,400%. In the back half of 1999, they were worth less than the purchase price, retaining just 4% of their value. That’s an extreme example, and lucky for most, homes retain value better than Beanie Babies. However the takeaway is the same. Assets bought with disregard for historic data for price discovery on the way up, typically disregard historic data on the way down.”

From the Daily Mail in the UK. “Hundreds of thousands of pounds are being knocked off the asking prices of properties valued around the million pound mark as the top end of the housing market cools, it has been revealed. The trend is particularly pronounced in London, where values tend to be higher and £1million often doesn’t extend to much more than a two or three-bedroom flat in some areas. Discounts of up to 50 per cent can be found, according to estate agents.”

“Nicholas Fine, of Garrington Property Finders said: ‘The London market’s shift from blistering price growth to stagnation and now gentle decline has been gradual, but it’s no less remarkable for that. Of course the capital’s gravity-defying, double-digit rates of annual price growth were always going to be unsustainable.’”

The Gulf News on Saudi Arabia. “For the first time in decades, residential rents are declining in Jeddah. A large number of expatriates interviewed also said that the owners of their buildings have reduced their rent without them even requesting for it. Vacant apartments are also mushrooming throughout the city with ‘Apartment for Rent’ signs on almost every building.”

“A real estate agent, who has his office in an affluent neighbourhood, said that despite rents being reduced, very few people have stepped in to inquire about renting an apartment, and even fewer have actually rented. ‘The demand for rented apartment has gone down drastically,’ he said.”

From Reuters on China. “International sanctions on North Korea have helped sustain a housing glut in China’s border city of Dandong, through which most trade with the North flows, in contrast to falling inventories in much of the rest of China, sales data showed. Dandong, with a population of around 860,000, has accumulated more unsold housing inventory than much larger cities. ‘North Korea’s constant talk of war has meant Dandong property prices have never gone up,’ said local resident Xiao Tengfei, who along with other family members purchased several apartments in Dandong’s New Zone seven years ago.”

“Xiao said she never moved in when her building was finished in 2013 due to a lack of surrounding facilities and was now struggling to find buyers to offload her investment. ‘My money has been tied up in here for years now.’”

From Your Property Investment on Australia. “Apartments purchased off-the-plan at the beginning of Brisbane’s unit-construction boom are selling at significant losses. According to Michael Yardney, CEO of Metropole Property Strategists, buyers who bought off-the-plan apartments in high-rise towers in Hamilton, Bowen Hills, and Fortitude Valley were particularly hard hit. ‘This comes after an unprecedented building boom over the last five years, which created a massive oversupply of high-rise apartments,’ he said. ‘It seems that price drops of 20 to 25 per cent are not uncommon for resales after off-the-plan purchases.” And things are not going to improve any time soon: Just look at the skyline and you’ll still see cranes everywhere.’”

“The current glut of apartments is causing anxious Brisbane landlords to resort to desperate measures to secure tenants, according to Yardney. ‘Typically they’ll offer at least a month’s free rent to incentivise a tenant to take a 12-month lease,’ he said. ‘Other landlords are even offering an iPad, a free gym membership or a gift voucher to secure tenants. One large Fortitude Valley developer was recently offering three months free rent and $1,000 cash to tenants who took 12-month leases.’”

From The Australian. “Brisbane apartment owners face a potential $4 billion drop in property values over the next three years in the face of oversupply and a falling market. Almost a quarter of Brisbane apartments lost money in the first three months of the year, up from about 18 per cent of sales making a loss mid-last year. Across Brisbane each loss-making sale, including homes, wiped off an average $27,000.”

“Official property searches show some off-the-plan apartment high-rises completed at the start of the boom have since resold at significant losses, as high as 35 per cent, in the densely built areas such as Newstead, Bowen Hills and Hamilton. Resale losses include a $145,000 fall on an original $400,000 purchase in Bowen Hills, a $152,000 fall on an original price of $522,000 for a Hamilton two-bedroom unit and a $115,000 loss on another Hamilton two-bedroom apartment.”‘

“An analysis provided to The Australian researched resales since last year in Newstead, Bowen Hills and Fortitude Valley developments with more than 50 apartments each that were completed over the past five years. It showed 90 per cent of the 83 sales were at a loss. A 63sq m one-bedroom apartment in Bowen Hills sold in 2011 for $371,000 and resold in May last year for $260,000. Another 59sq m Bowen Hills one-bedroom unit originally sold for $390,000 and resold five years later for $285,000.”

“Jill and Matthew Egerton are selling their two-bedroom Paddington investment property and the townhouse, where they live, to buy a more spacious family home. The Egertons are willing to negotiate but if they cannot get their desired price they may consider renting it out again. ‘(It’s) probably not the best time to sell it — with all the other units, brand new units on the market,’ Ms Egerton says.”