April 22, 2018

The Result Of Excessive Exuberance And Relaxed Lending

A report from Drumheller Online in Canada. “With mixed national and provincial headines stating that the buyers market is not a place for new home owners, Don Rosgen with Century 21 in Drumheller said the local market is, in fact, a buyers market. ‘Right now, we’re in the buyers market. Normally we have(an amount of listings) in the 110 to 120 range. Total now, we have over 150,’ he continued. ‘It’s a supply and demand situation. The supply exceeds the demand right now. I think that’s where we are in Drumheller. ‘When you have excess market product. you’re then going to have to reduce your price if you want to get ahead in the market.’”

From the St. Albert Gazette in Canada. “Sales decreased overall across the entire Edmonton region. Year over year there was an 11.73 per cent decrease in sales across single family, condo and duplex/rowhouse housing sales. Darcy Torhjelm, chair of the Realtors Association of Edmonton, said he was surprised to see sales slump. ‘My assumption would be just that buyers are taking their time. I think there’s activity out there where people are looking at properties, but buyers are just not pulling the trigger on purchasing as quickly as they have in the past,’ he said.”

From Globes in Israel. “After a decade during which housing prices more than doubled, prices have finally halted their upward march, and have even changed direction. Anyone in Israel who has to sell a housing unit - a contractor who can get no more credit in money or time from a bank, or a family that has already bought its next housing unit and has to sell its old home, has to compromise on the price. It can be stated with certainty that the supply of housing for sale currently outstrips the demand - a situation that has not occurred in the Israeli market for many years.”

“Minister of Finance Moshe Kahlon, who ran in the elections on a single crucial promise - to lower the price of housing - can finally talk about a downtrend in prices, and no longer has to fear elections in this coming summer or winter. A cumulative 2.4% drop in prices in the past six months must, however, be assessed in the light of the 127% increase during the decade ending last August. The decline quite marginal - a further drop of 55% is needed merely to reach the level of prices in 2008.”

From The National on Dubai. “Keren Bobker advises a reader who wants to negotiate a lower interest rate on his mortgage for a Jumeirah Lake Towers property. Q: I bought a one-bedroom apartment in Jumeirah Lake Towers for Dh1.2 million in September 2008. The payments were initially Dh9,200 per month. Since the rental income was low, I asked the bank to give me a reduced mortgage payment of Dh5,000 per month. This continued for a period of two years and then I went back to the full mortgage payments. By this time I had accumulated Dh200,000 because of the reduced payments with interest.”

“I am now paying the mortgage in full, at a rate of Dh11,200 per month, with 60 per cent of that covered by the rent, and 40 per cent from my own pocket. I also pay the annual maintenance costs of Dh13,000 to Dh15,000 to the developer. What is the way forward with negative equity? I have approached the bank two times to refinance, but have been told the property to loan value needs to be 70 per cent, but it is currently around 100 per cent. If I sold the property, I would not make enough money, and would need to put in another Dh200,000 to fully repay. I cannot change banks, as no other bank is willing to take this on. Current mortgages are around 3 to 4 per cent, while I am paying 9 per cent. Is there anything I can do to get out of this situation legally? Can I just hand the property over to the bank? RM, Dubai.”

“A: It sounds as though the bank has previously been amenable as they have permitted RM to make reduced interest payments. The bank is not permitted to refinance the mortgage as under Central Bank of the UAE rules the maximum loan to value for any property with a value of up to Dh5m is 75 per cent and clearly no other bank can assist either. Banks do not permit borrowers to just hand over a property when monies are outstanding and RM is legally liable for all costs even if he sells the property. If the sale price is lower than the total outstanding then he must repay the bank in full before he is released from his liability.”

From the Korea Times. “Construction firms are increasingly concerned about the increasing number of unoccupied apartments in recent months as buyers face greater difficulties getting mortgages or finding tenants. With more owners delaying their payments to builders, this has begun adversely affecting the profitability of Samsung, GS, Hyundai, Daewoo, Daelim and other apartment builders. This phenomenon is particularly apparent in provincial areas in line with the increasingly unfavorable housing market amid interest rate hikes and the oversupply of new apartments.”

“GS and Daewoo each have nearly 20,000 apartments scheduled to receive residents in those areas this year. Their volume is almost twice that of Hyundai E&C with 10,000 apartments. Adding more concern, the outlook for the occupancy rate remains grim for this month too. The housing institution’s Housing Occupancy Survey Index for April stood at 70.4 points, down 3.4 points from a month earlier. A higher reading means builders are positive about occupancy. ‘The increase in the number of unlived-in apartments leads to builders’ financial difficulties,’ the construction firm official said. ‘And that can also deflate the entire housing market.’”

From Jing Travel on China. “China’s sharing economy is on the rise in a big way. However, arguably just as important is the growth of the real estate industry in China. Yang Changle, COO of China’s largest home-sharing company Tujia, noted that his company provides services for 130,000 landlords and operators. However, of that figure, 80,000 operate more than one shared home. Real estate prices in China have been soaring in recent years, although there is some speculation that the market is slowly ‘cooling.’”

“This has led to millions of vacant homes across the country and a seemingly endless rise in the price of homes, despite the fact that housing supply is largely on the rise. There is substantial debate over the exact number of ‘vacant’ homes and what constitutes such a property, although some estimates put this figure at well over 50 million. This, of course, has serious implications for the Chinese economy as a whole and arguably places an unfair burden on consumers, both renters and home buyers who are looking for affordable housing, while others are simply buying as much property as possible and inflating prices.”

From Edge Prop Malaysia. “The volume and value of small size, non-landed residential properties have escalated last year as oversupply looms. Data from AuctionGuru.com.my showed that there were 1,023 units of serviced apartments and serviced suites worth RM493 million put up for auction in 2017. The record-high figures were about two times the volume and value of the figures recorded in 2016 which saw 342 auction cases of such units worth RM146 million.”

“‘Unfortunately, there is an oversupply of this type of serviced apartments and serviced suites in the market which has pushed down rentals as their owners are rushing to rent them out. But some were forced to abandon their mortgage commitments when they failed to offload them on the market,’ says AuctionGuru executive director Gary Chia.”

“Chia says there is no quick solution to the rising number of foreclosure properties which was the result of the excessive exuberance in the property market and the more relaxed lending policy in the past. ‘We do not foresee any change to market conditions in the short term. Nonetheless, we view this trend positively as this is part of market adjustment which will put the property market in a better footing after this,’ he concludes.”

From News.com.au on Australia. “Straight-talking judge on The Block Neale Whitaker is set to make a loss on his luxury inner-Sydney pad. The interiors guru and his partner David Novak-Piper have listed their warehouse apartment in Alexandria for $1.6 million — $105,000 less than what they paid for it in 2016. The couple paid $55,000 over the asking price when they bought the apartment for $1,705,000 just over 18 months ago.”

From Your Mortgage on Australia. “There’s an oversupply of apartments in Melbourne, and this is creating plenty of opportunities for savvy buyers, according to numerous analysts. Buyers will soon be in a position to purchase units in medium and high-density buildings for below their replacement cost, according to Brian Capp, a professional buyer with Statewide Property Advocacy. He added that hundreds of apartments are listed for sale in Southbank, Docklands, Richmond, and other areas in inner Melbourne.”

“‘There will be some bargains to be found in the next six to 12 months in the high-rise buildings in the inner suburbs,’ Capp told the Domain Group. ‘Some of the second-hand two-bedroom apartments in the already established buildings, even though they are very small, are going to become an attractive buy because the replacement cost is greater than the price the owners are asking.’”