March 29, 2018

The Fire Sale Showed It Was Hard To Move Investor Stock

A report from Global Times on China. “The era of ’strong demand’ in China’s housing market is over, with ‘imbalanced and inadequate’ development becoming the industry’s top problem, said Yu Liang, chairman of property developer Vanke Group. Yu made the remarks in Shenzhen, South China’s Guangdong Province to explain Vanke’s 2017 performance. ‘In the past 20 years, the unprecedented wave of urbanization in China generated strong demand for commercial residential houses. So we built a lot in a bid to meet that demand,’ Yu said. ‘But things have changed. Many urban housing units have been sold but lie vacant; meanwhile, young newcomers may lack decent housing.’”

From Bloomberg on Canada. “It’s a tale of two housing markets in the Toronto area as Canada’s biggest city gears up for the crucial spring selling season: sales of big detached homes are slow, while condo deals are booming. On one side are people like Karen Berends, who put her C$1.5 million ($1.2 million) house back on the market in nearby Oakville this month after two failed attempts to sell in the past year. She reduced her asking price by about C$51,000, but still there are no takers, and she’s kicking herself for not cashing out last spring when the market was in a frenzy.”

“‘We could’ve walked away with a really good amount of money in our bank account if we had taken the money last year, but our head wasn’t in it at that point,’ Berends said. ‘It’s been a complete 360 this time around — it’s absolutely dead.’”

“Berends has placed ads in several Chinese media outlets in hopes of attracting foreign shoppers. ‘Apparently there are still buyers in mainland China, but they’re not really jumping,’ she said. She’s hoping to retire to a home she’s building north of the city in a few years, but she’s waiting for the right price for her existing house. ‘I’m thinking we might have to take it off and wait till next year,’ she said. ‘It’s just so difficult to know.’”

From Mansion Global on New York. “Despite the biggest Wall Street bonuses since the Great Recession, Manhattan recorded a 15% drop in luxury home buying in the first quarter of 2018, according to data on luxury contracts. Sudden volatility in the stock market beginning in February may also have securities industry employees feeling a little tight-fisted, said Frances Katzen lead agent of Douglas Elliman’s Katzen Team. Her finance industry clients are also turned off by softened luxury prices, preferring not to upgrade if it means selling their current home for less than they think it’s worth, she said. ‘It’s not a seller’s market,’ she said.”

From Domain News in Australia. “A Brisbane unit development has resorted to huge price cuts to move the last of its units, after years of unconventional sales tactics. Prices for Belise apartments in Fortitude Valley were slashed nearly 25 per cent, in what the executive director of the project marketing firm called a ‘dramatic’ price drop. The final few apartments weren’t sold in a 20-unit sale, with the sales team appealing for offers in a close-out sale.”

“The largest price reduction was for the last two-bedroom, two-bathroom unit, down from $632,000 to $475,000. Buyer’s agent Pete Wargent said the fire sale showed how hard it was to move investor stock in Brisbane. ‘People read a lot into it but it’s a bit indicative of the wider market. It’s the end of cycle stuff for new apartments,’ he said. ‘It’s been quite common. If you look around, even the smaller developments are finding the final apartment or two quite difficult to sell.’”

“Mr Wargent said looming settlement risk for off-the-plan buyers meant developers had to be more aggressive to sell their units. ‘I think that’s because the risk of the buyer having the valuation come in at lower than the sale price and then you have to fight to settle.’”

“Since the project was first launched more than five years ago, the developer of Belise offered a five-year settlement deferment plan, with a minimum deposit of $60,000. ‘It might appeal to someone who has no way of getting a mortgage in the next year or two,’ Mr Wargent said. ‘In five years’ time if the market hasn’t improved you can walk away and lose your 60 grand but… I wouldn’t be jumping at it.’”

“From what he could tell, Mr Wargent said the building was struggling to secure tenants, too. ‘I think it’d be fair to say they’re getting tenants but it’s not easy in the current market.’”

“Brisbane-based economist Kerrianne Meulman said the market was still soft in Brisbane, with an oversupply of low-end one- and two-bedroom apartments. ‘There’ll be still more apartment stock to come,’ she said.”