Even These Darlings Have Recorded A Drop In Prices
A report from the Financial Post in Canada. “Renters will tell you they can’t afford the escalating prices to lease out a unit in the Greater Toronto Area’s ridiculously tight condominium apartment market. Yet, as the average rental rate in the city for a 734-square-foot condo increased to $2.99 per square foot or $2,219 in the third quarter of 2017 (an increase of $232 during the past 12 months) those units being bought by investors are actually producing no income and costing landlords money. ‘Investors don’t typically buy a completed unit, they buy new construction,’ said Shaun Hildebrand, senior vice-president with Urbanation Inc, noting the units being leased out today were bought at much lower prices four years ago. ‘That’s the only reason they are cash flow positive or cash flow neutral. To buy a condo today at today’s average price and rent it out you are cash flow negative. Some people are doing that betting on appreciation.’”
“‘My concern is not so much the units being rented out now as the ones being bought now that will have to be rented out later,’ said Hildebrand. ‘They are being sold in pre-construction for prices 30 or 40 per cent more than a year ago. What happens when rents don’t cover their investment today?’”
From Radio New Zealand. “The latest Massey University Home Affordability Report shows housing affordability has slightly improved nationwide, largely driven by falling prices in Northland, Wellington and Central Otago Lakes. In Northland median house prices dropped $30,000, in Wellington by $28,000, and Central Otago Lakes by $35,000. ‘We’ve seen some significant falls in house prices in some regions this quarter, so it will be interesting to see if this spreads to other regions in the coming quarter,’ said Associate Professor Graham Squires from the School of Economics and Finance.”
From Domain News in Australia. “Sydney hasn’t been the only city to experience falling property prices in the past few months – nine regional towns in New South Wales also saw a pull back over the September quarter. As investors and young buyers have been priced out of the harbour city, they’ve increasingly headed to Wollongong and Newcastle – the nearest regional hubs. And prices have soared. But now even these real estate darlings have recorded a drop in prices, Domain Group’s State of the Market report found.”
“And in Newcastle the selling environment was much the same, with less competition in recent months, Newcastle Buyer’s Agent principal Tiron Manning said. ‘I’m seeing more property price reductions, and more emails every day about price reductions, especially at the higher end of the market from about $800,000 to $1 million. I’m getting feedback from agents that buyers at that price point are more guarded, they’re not as ready to pounce.’”
From The Australian. “More than 100 apartments in a high-profile inner-city Brisbane development are yet to settle amid warnings it is ‘crunch time’ for developers in the Queensland capital. Some 20 per cent of the first tower of property developer Gurner’s 520-unit FV development are yet to settle, although the company maintains sales-to-date have allowed the $180 million in debt linked the project to be repaid in full. The planned $600m twin tower development in the Brisbane apartment hotspot of Fortitude Valley is being closely watched as an indication of health for the local market, considered by many — including the Reserve Bank — to be oversupplied.”
“Sunland Group executive chairman, Soheil Abedian, said four foreign buyers recently failed to settle their apartment purchases in the 150-unit Abian complex, arguably one of Brisbane’s most luxurious apartment towers. All local buyers settled, but three offshore Chinese buyers and one Pacific Island buyer did not. Mr Abedian said he resold the four apartments at a premium to the initial purchase price of 10 per cent or more. ‘What we are seeing is the Chinese coming from overseas are having difficulty because of the restriction of transfer of funds by the Chinese government,’ Mr Abedian told The Australian.”
“Ferrier Hodgson Queensland property director Campbell Gordon said the weeks leading up to Christmas would be the potential settlement crunch for developers, which could add to their lending costs. ‘That’s where the big exposure is,’ he said. ‘That’s when there is more collateral damage — that’s when a lender steps in. If there is any pain it will be somewhat short and sharp. Leading up to Christmas certainly will be crunch time.’”
From The National on Dubai. “Residential property transactions in Dubai are rising, but the price trajectory remains unclear as developers selling off-plan units drive down prices in the affordable housing sector and create a stock of low-quality residential units in the emirate, brokers said. Core Savills cautioned that the quality of off-plan products will not meet the demands of the end-users.”
“‘Although we anticipate the number of proposed units and actual hand-overs to vary notably, we expect developers to continue building in the run up to 2020 creating a significant surplus in the lower end of the market that does not adequately address the needs of target end-users,’ said Core Savills. ‘Despite stronger regulations being in place, we continue to view increasing off-plan activity with caution, particularly given its detrimental effect on ready sales that fuels further systemic market risk.’”
From Bloomberg on the UK. “Home price declines for the most expensive homes are rippling out to the rest of the city as tax increases for landlords, fears about the economy after the Brexit vote and high values damp demand. Home values fell 2.7 percent in the year through September, the most since 2009, according to Acadata and LSL Property Services. The top end of the market has been falling further for longer — values are down 15 percent from the peak in September 2014, according to data compiled by Savills Plc.”
“Buyers seeking mortgages for home purchases in some parts of London are being told by valuers that properties are worth less than they’ve offered, according to Ray Boulger, senior mortgage technical manager at mortgage broker John Charcol. That leaves them with the option of dropping the sale, using more cash or bargaining for a lower price, he said.”
“It’s not just sales that are falling. Rents fell 1 percent in Greater London in September from August, according to rental index HomeLet. The cost of leasing a home in the best districts is down 3 percent in the past year, according to broker Knight Frank. The rental ‘market is continuing on a downward trajectory,’ Mark Wilson, the founder of broker Global Apartments, said. ‘We will know when it hits the floor, or that there is an equilibrium, when the phones start ringing like they used to. Landlords continue to be fantasists.’”
“‘We are approaching a tipping point,’ Lawrence Bowles, a residential research analyst at broker Savills Plc said. ‘We have seen transactions in London fall, particularly for home movers since the great financial crisis. Eventually you get to a point where people are fed up waiting and accept a price cut to get a sale.’”
