The Housing Bubble

A weekend topic on Canada and Australia starting with ThinkPol. “British Columbians want the government to go after money launderers, tax evaders, speculators and other fraudsters operating in the province’s real estate market, public responses to the governing NDP’s 2018 budget consultation show. Premier John Horgan’s government is scheduled to deliver its first full budget on February 20, and the NDP sought public input to on what to include in it. Many citizens publicly shared their responses to the NDP’s request for consultation, and corruption, speculation and impact of foreign buyers on the housing market seemed to concern many.”

“‘Pass a law no one can buy land or houses unless they are Canadians and jumped up prices will fall,’ Dave Devitt of Chilliwack, BC, wrote. ‘When our kids can’t buy million dollar houses somethings wrong!’ ‘Healthcare, education and mental health and addictions funding,’ Wendy Kathleen said. ‘Go after the money launderers, illegal real estate flippers, scammers, tax evaders and use the money towards all the above!’”

“‘I’d like to see some real disruption of the corruption in BC – money laundering, organized crime, the debacle that is our housing market, etc,’ Bex Tress wrote. ‘This requires manpower and money to oversee/enforce legislation. Be merciless.’”

“But not everyone was on board with deflating the housing bubble. ‘After I read post after post about crashing the housing market, I truly believe that people don’t understand the negative impact that would be for BC,’ KrystalDawn Cooke of Victoria, BC said. ‘Unemployed people can’t afford houses either even when they are $300k. Think of all the trades, realtors, lawyers, restaurant workers and etc that have jobs because the housing market is doing so well.’”

From the Regina Leader Post. “Saskatchewan homebuilders had a rough fall season, with the province posting the biggest year-on-year drop in new housing construction nationwide. Newfoundland and Labrador saw the biggest per-cent drop, but Saskatchewan experienced the biggest loss in terms of dollars. John Lax, spokesperson for the Saskatchewan Construction Association, the same issue has been plaguing homebuilders: low demand in a resource-price-driven downturn.”

“‘Homebuilders build homes when people want to buy them,’ he said. ‘There was a lot of inventory in the multi-dwelling sector that has to be absorbed. We should be looking at a much-improved 2018,’ he said. ‘But until we start seeing the money flow from those improved feelings and intentions, I don’t think we should be throwing any parades yet.’”

The Sydney Morning Herald. “It’s Friday night at Chadstone shopping centre in south-east Melbourne, and a queue has formed outside the Chanel boutique. A sign at the store’s entrance says it’s full: ‘Due to safety reasons, we are unable to let any more clients in at this time.’ A dark-suited staff member stands near the sign, as if to deter anyone so desperate to spend $7000 on a handbag that they are thinking of forcing their way inside.”

“In the air, there is barely contained retail mania. And the sound of people speaking Mandarin. From Hermès scarves and Cartier watches to top-of-the-range BMWs, products with pedigree – and preposterously high price tags – have never been more popular in this country. It’s the tennis courts that worry David Morrell. An agent for buyers at the top end of the Melbourne property market, Morrell says there are 120 courts in Toorak, the city’s richest suburb, and close to one-fifth of them are now Chinese-owned. Judging by the make-up of crowds at real estate auctions in the suburb, he expects that to rise.”

“At one auction, he says, ‘we counted 118 people, and 92 were Chinese.’ At another Toorak sale, Morrell watched three Chinese people bid against one another. ‘I said to the auctioneer, ‘This is like taking candy from babies.’ They just kept their hands in the air. They didn’t understand what the process was, and they didn’t care. It went a couple of million dollars over the reserve.’”

“Morrell is convinced that the flood of Chinese money has distorted the Australian real estate market. He cites Chinese buyer Qi Yang’s payment last August of almost $40 million for a large but slightly rundown Toorak house. That was about $14 million higher than the previous Victorian residential real estate record, Morrell says. And in his opinion, it bore little relation to what the place was actually worth. That willingness to pay over the odds has consequences for other buyers: ‘This time last year, I was paying $6500 to $7000 a square metre. Now I’m paying nearly $10,000 a square metre. That’s the difference in 12 months, and it’s directly related to Chinese investment.’”

From Domain News. “Sydney’s property market summer hangover isn’t showing signs of abating, with weaker than usual auction numbers kick-starting the year. The number of homes that will go under the hammer this weekend is down by more than 60 per cent compared to the same time in the past two years. The clearance rate is down to 50 per cent after only half of the 26 homes listed for auction last weekend sold.”

“‘Prices have gone down but the two auctions that I’ve sold [in the last three months] I didn’t think I’d get above $800,000,’ real estate agent Chadia El-Hage. ‘A lot of people are too scared to put their house up for sale because of how many people are saying the market is going to crash.’”

“It will take a large shift in Brisbane’s housing market if investors are to see any increase in rents in the near future, experts say. Domain data scientist Nicola Powell said stagnated rent had been the norm in Brisbane for five years or more. Dr Powell didn’t expect that to change any time soon. ‘I think it will take a large shift in the market. These tighter lending conditions will make it harder for investors to get finance,’ she said. ‘In the unit market they’re still impacted by oversupply.’”

“Partner at Living Here property management Haesley Cush said the news came as little surprise. ‘The last 12 months has seen a number of new accommodation precincts come out of the ground. What that does is drag down the median price,’ he said. ‘They’ve offered huge incentives and it’s left mum and dad investors unable to compete.’”

From the Gladstone Observer. “It is cheaper to buy a home in New York than it is in Brisbane, according to a new global study that ranks every one of Australia’s major housing markets as ’severely unaffordable’. International housing affordability think tank Demographia has released its 14th survey on house prices, revealing Sydney has the second most expensive housing market in the world after Hong Kong.”

“In Sydney, a home costs on average 12.9 times the median income. Melbourne, Sunshine Coast, Gold Coast, Geelong, Adelaide, Brisbane, Hobart, Perth, Cairns and Canberra are all near the top of the list. Brisbane is ranked the 18th least affordable major city, with homes there costing 6.3 times the median income. In comparison, homes in New York cost 5.7 times the median annual household income.”

“‘Australia is perhaps the least densely populated major country in the world, but state governments there have contrived to drive land prices in major urban areas to very high levels, with the result that in that country housing in major state capitals has become severely unaffordable,’ the report stated.”