April 15, 2018

Wiping Away The Near Frenzied Competition

A report from the Vancouver Courier in Canada. “As housing sales dropped to the lowest level in five years, Metro Vancouver new home starts have soared in the first quarter of the year, with starts in Vancouver alone more than twice as high as during the same period in 2017. There were 6,542 home sales on the Multiple Listing Service in Metro Vancouver during the first quarter of 2018, which is a 13.1 per cent decrease from the same period last year. This represents the region’s lowest first-quarter sales total since 2013, reports the Real Estate Board of Greater Vancouver.”

“But total housing starts across the region increased to 6,864 units in the first three months of 2018, up 30 per cent from a year earlier. In Vancouver, first quarter starts soared 109 per cent to 1,956 homes, including 1,592 apartments or townhouses. Vancouver detached house starts jumped 93 per cent to 364 homes, reports Canada Mortgage and Housing Corp. Huge increases were also seen in North Vancouver, where 1,422 homes broke ground so far this year, compared with 107 in the same period in 2017. Starts were also higher in the Tri-Cities and Richmond. West Vancouver had 120 multi-family starts this year compared with none in the first quarter of 2017.”

From Madhunt in Canada. “Oxnard Developments, which is building 59 semis and townhomes, is seeking up to a year delay in paying the hard services component of development charges, of which in this situation equates to approximately $1 million, due in May, for phase two. Negar Javaherian, Project Coordinator with Oxnard, is expected to tell councillors tonight in her deputation that provincial government changes to the real estate market have created a drag on their new home sales.”

“‘Higher borrowing cost and federal and provincial government decisions have affected the demand side of the market and has caused the GTA housing market to slow down. We suppose no one is immune to this slowdown happening in the GTA home market,’ according to Ms. Javaherian’s letter to council seeking a deputation. ‘It has affected us negatively to the extent that we have sold only a few houses since last October.’”

From the Toronto Star in Canada. “Your letters: Little sympathy for home buyers caught in downturn: Mike Faye, Toronto. ‘Although basing their new-home purchase on artificially inflated house prices was very risky, it seems Mattamy Homes could provide some assistance/relief to these buyers. The most telling part of this story is that the average price for a new detached home has dropped $280,000 or 18 per cent. This means developers were pocketing enormous profits at the expense of home buyers, since they are still making acceptable profits at the new average price.’”

“No wonder house sales have dropped so much over the past 10 years. Who can afford a detached house at $1.22 million, when the median household income in the GTHA is $80,000, which can only support a mortgage of about $350,000 at 5 per cent over 25 years, without spending more than 30 per cent of their income. We need the industry to build housing people can afford.”

“Victor Doyle, Toronto. ‘I am not a fan of builders but, in this instance, Mattamy has done nothing wrong. It is unfortunate for the buyers that they’re not getting approved for conventional mortgages but, at $1.6 million, these are not folks who are financially struggling. These are folks who timed the market incorrectly and not getting what they want versus what they need.’

‘Is the Star actually supporting government intervention to help folks who can’t afford $1.6 million but could likely afford $1 million? With all the other social issues we have in this province, supporting families who are obviously not starving and struggling should be way down the list. The fact these folks bought before having the cash in hand is representative of their market sentiment and, to a small extent, greed.’”

From the Goldstream News Gazette in Canada. “The City of Colwood has thrown its support behind the province’s speculation tax as a way to help cool off housing prices in Greater Victoria. During a meeting earlier this week, council voted not to send a letter as requested by the Victoria Real Estate Board, asking the province to take a sober second look at the unintended consequences the tax could have before it’s implemented later this year.”

“Coun. Jason Nault saw first-hand the effects of people purchasing properties as investments only to have them sit vacant. While waiting for his current house to be built, he rented a house in Colwood and said almost half of the other homes on the street were unoccupied for a majority of the year. He hopes that will change once the tax is implemented.”

“‘There were no people living there and they were not people who contributed much to Colwood,’ he said. ‘I understand this might drive down in the short term prices of existing homes. They’re ridiculously priced as it stands.’”

From the Daily Mail on Australia. “Inner-city house prices in Sydney plunged by 10 per cent last year for the first time in more than a decade. The decrease in March represented the biggest fall in 13 years according to CoreLogic. Real estate agents have been left frustrated by the price falls laying the blame on banks for refusing to give out loans to would-be buyers. House prices fell in the city and inner south region by 10.1 per cent and inner west by 9.2 per cent which covers the suburbs of Redfern, Surry Hills and Newtown. The area with the biggest falls came in Baulkham Hills and Hawkesbury where houses dropped by 2.9 per cent and apartments plummeted by 12.2 per cent.”

“A two-bedroom cottage in Newtown sold for $1.3 million in March which would have fetched $100,000 more a year ago, one agent told realestate.com.au. Another property in Redfern, which agents believed could have fetched $1.7m in 2017, is now on the market for $1.2m. Ercan Ersan, of agents Ray White, said: ‘Talking with all the top mortgage brokers, they say the banks are taking up to five weeks to approve a loan rather than two weeks. They’re focusing more and more on buyers capacity to pay back the loan.’”

“Analysts believe the market will get harder if there is more scrutiny by lenders about whether to approve loans - following a royal commission investigating banking practices.”

From Domain News in Australia. “Not a single region in Sydney has been immune to the effects of recent tightened lending restrictions and a record increase in housing supply. Some homeowners who last year could have sold anything with a roof over it, are now struggling to sell homes even in highly sought-after locations around the city. Since February this year, auction clearance rates in Sydney have fluctuated between about 51 to 63 per cent, but some sellers in pockets of Sydney have felt the effects more acutely.”

“‘You see a huge drop-off generally because of the tightening in lending standards that APRA put through. You’ve got a lot of apartments, so supply has gone up. That has led to less confidence from buyers,” AMP economist Shane Oliver said.”

“One of the biggest changes seen in a single suburb was Hornsby. In the first three months of 2017, 86.4 per cent of properties were selling at auction. At the beginning of this year, just 14 homes went to auction, of which only a quarter sold. Real estate agent at LJ Hooker in Hornsby Nick Addison said a huge number of off-the-plan units ‘flooding the market’ were partly to blame for the lack of homes selling at auction, because they had created an oversupply of housing in the area.”

From News.com.au in Australia. “Sydney’s once frustrated home buyers have moved into a commanding position in real estate sales following the city’s flip from an extreme seller’s market to a buyer’s one. Data provided exclusively to the Daily Telegraph revealed city housing demand has dropped 25.4 per cent from a year ago, wiping away the near frenzied competition buyers were previously facing for listed properties.”

“The softer demand — mostly the result of investors and China-based buyers dropping out of sales — followed a 23 per cent bump in the supply of available housing over the same period. Home seekers have capitalised on the increased choice of homes and fewer rival buyers by negotiating prices down. Realestate.com.au’s Property Outlook report showed Sydney’s median house price dropped 4.6 per cent over the past year, while a typical unit is 1.4 per cent cheaper.’They are not competing at auctions with as many investors as they once were and the urgency to buy has gone a bit,’ the online property portal’s chief economist Nerida Conisbee said.”

“Ms Conisbee added that prices would likely continue to fall for a few more months but the strong NSW economy would prevent a major market collapse. ‘First home buyers shouldn’t wait thinking prices will keep going down and they will soon be able to afford to buy in somewhere like Rose Bay. That’s not going to happen,’ Ms Conisbee said.”

From Mirage News in Australia. “RiskWise Property Research CEO Doron Peleg says the research house has received a number of enquiries about Central Queensland as an investment alternative to the major East Coast hubs of Sydney and Melbourne. ‘Central Queensland is attracting a new wave of attention because many investors believe this property market has hit rock bottom and that the only way is up,’ Mr Peleg said.”

“However, he said the economy of Central Queensland had been in decline ‘at an alarming rate’ since the end of the mining boom. ‘This is followed by negative capital growth of, on average, (-17.5%) for houses and (-18.7%) for units in the past five years,’ he said. ‘Some areas, such as Gladstone – Biloela experienced even more severe price reductions, with (-28.7%) negative growth for houses and (-39.9%) for units in the past five years, including -7.3% and -10.4% in the past 12 months, for houses and units, respectively. So, it’s no surprise many believe strong capital growth will follow.’”

“However, Mr Peleg said while its economy had shown some slight improvement recently, Central Queensland was projected to deliver low economic growth, a soft job market and low population growth. ‘This means both houses and units in the region still carry high risk and research in our report, published last month (February), backs that up,’ he said. Moreover, he said the unemployment rate in the region was ‘very volatile,’ with frequent significant changes in recent years.”

“‘The risk is even higher for off-the-plan properties that are currently in the pipeline. The 559 house building approvals and 639 unit approvals are of the greatest concern as these new properties will be added to the already current oversupply,’ he said.”