The Housing Bubble

A report from The Windsor Star in Canada. “The good news about Calgary’s resale housing market is, if you’re in a buying mode, there are a lot of homes from which to choose and very little competition from other buyers. The Calgary Real Estate Board’s (CREB) report for April shows sales for all types of homes are down by 20 percent on a year-over-year basis for the month, from 1,900 sales last year to 1,518 sales last month. The decline was led by single-family homes, down 23.83 percent, followed by semi-detached homes at –23.53 percent, attached homes down 18.12 percent, row/townhomes at -13.12 percent and apartments, down 7.42 percent.”

“Conversely, inventory rose to 7,324 homes in April, a 33 percent increase from April 2017, leading to almost a five-month supply on the market. Changes in the lending industry – the mortgage stress test and rising interest rates – are part of the slowdown, as is an economy that continues to be sluggish.”

“‘Slower sales do not come as a surprise, given the economy has not yet improved enough to offset the impact of changes in the lending industry,’ said CREB chief economist Ann-Marie Lurie. ‘While the rising inventories are being monitored, prices have remained relatively flat as gains in some areas of the city have been offset by declines in other areas.’”

From This Is Money. in the UK. “House prices dropped 3.1 per cent in April, in the biggest monthly fall in more than seven years, Halifax’s latest figures revealed. Lucy Pendleton, founder director of independent estate agents James Pendleton, said: ‘This sudden batting collapse in the monthly figures has knocked more than £7,000 off the price of the average home as the market continues to be starved of life. It’s true that monthly figures are more volatile but you mustn’t ignore the body of evidence that surrounds them either.’”

“‘We’ve now witnessed three consecutive falls in the quarterly figures, the amount of new consumer borrowing quite literally collapsed in March in an ominous sign of tightening purse strings, home sales are at a two-year low and the number of new instructions has fallen for the 25th month in a row. Whether or not this is a market being pulled in different directions remains to be seen. Short-term volatility can be ignored to a certain extent, but less so when it confirms what a great many other indicators are telling you.’”

From The Kuwait Times. “There are currently 49,130 empty flats in Kuwait and 26,466 others under construction; thus more than 75,000 units need to be ‘absorbed’ by the domestic property market in 4-5 years, according to the Kuwait Real Estate Union. Average monthly rent dropped from KD 278.9 (approximately $920.3) to KD 242 ($798.6) – 13.2 percent – said Ahmad Al-Dewaihees, the union’s secretary general, citing a report prepared by the union. It studied 875 plots, including 26,466 under-construction residential units in all districts, in addition to 13,535 completed ones.”

“The rate of expatriates’ population growth, which reached 4.8 percent over the past five years, dropped by two percent in 2017 and will fall by 1.5 percent in the coming five years. As to ownership flats, transactions exceeded 1,000 in 2007 and 2008. Following the global economic crisis, they ebbed by 2012. However, the market recovered, with 973 transactions in 2015, but dropped to 671 in 2017.”

From Asia One. “Singapore is recognised as an exceptionally expensive city, especially when it comes to price of cars and properties. Much to the delight of Singapore’s renters, the average median rent of 4-room HDBs decreased by 3.67 per cent to S$2,120 in 2017 and by 13.16 per cent over the past 3 years. Areas further from the downtown core experienced the biggest decline in rents. For instance, Jurong West, Punggol and Sengkang experienced the most significant declines in rental prices of around 20 per cent.”

“The decline appears to be driven by both government intervention and market dynamics. For example, in recent years the government has introduced measures to cool the housing market. Simultaneously, there has an increase in the supply of HDB flats.”

“While renters can enjoy a decrease in rental prices, property owners and real estate investors should take heed when purchasing a property due to recent trends in the HDB resale market. HDB prices followed a similar trend to the rental market. The Resale Price Index (RPI), which measures price changes in the HDB housing market, has consistently decreased from the end of 2013 (145.8) through 2017 (132.6). Areas like Bedok and Woodlands exemplified this decline, experiencing the most significant declines with resale prices down 27 per cent and 25 per cent from 2014 through 2017, respectively.”

From Focus Taiwan. “Transactions in Taiwan’s property market fell in April despite a rise in the listing of homes that are being built or are newly completed, according to a survey conducted by real estate magazine My Housing, indicating potential buyers were still taking a wait and see attitude. The magazine said April was a traditional peak season for the local property market and it was no surprise that property developers were keen to launch homes in the month to boost buying interest.”

“Ho Shih-chang (何世昌), a research manager at the magazine, said the efforts by property developers to launch new homes in the market showed they were becoming more confident, adding that the number of newly-completed homes hit about 1,500 units in April. Nonetheless, potential buyers were clearly still reluctant to make home purchases.”

“One of the reasons buyer sentiment remained weak was because of the continuing high prices, which are not affordable or are considered too costly for average wage earners. Data compiled by the magazine showed that the total value of pre-sale homes in the month stood at more than NT$50 billion (US$1.68 billion), according to the magazine. Ho said the survey results suggest that the room for home price negotiations has narrowed, indicating that property developers appeared reluctant to lower the price of newly-launched homes, which prevented transactions from being completed quickly.”

“Owners of used homes may also be reluctant to reduce prices, contributing to the continuing slump in Taiwan’s property market.”

The Sydney Morning Herald in Australia. “To get a home loan, most people would know they might have to make sacrifices - but perhaps they don’t expect their bank to suggest they cut their $15-a-week gym membership. That’s what happened to Brooke Tassits when she took the plunge into property ownership last year, as her lender demanded to know, in great detail, about her day-to-day living expenses to get the deal over the line.”

“The 23-year-old marketing professional from Melbourne says her bank wanted to know how often she ate out, went to the movies and filled up her car with petrol. It doubted she would be able to afford her gym membership with a mortgage - so was she going to the gym? ‘There was a lot of back and forth, there was a lot of them scrutinising my bank statements and questioning single items on there and what they were,’ she says, adding that she did quit the gym.’

“‘I remember I paid one of my grandma’s bills for her one day, and they even questioned that and whether it was a regular thing.’ At one point she was tempted to walk away, because ‘I just felt like I had to prove my entire life to the bank,’ but she was convinced to press ahead by her mother and ultimately got the loan and bought a unit.”

“After copping a public hammering for all sorts of poor behaviour at the royal commission led by former High Court judge Kenneth Hayne, banks say they are going to extra lengths to dot every ‘i’ and cross every ‘t’ in meeting their legal obligations, especially those relating to responsible lending. The squeeze will also likely come on financial planning and business lending to improve standards and reduce conflicts of interest.”

“ANZ’s Elliott this week told investors banks had enjoyed a 20-year golden era, propped up by strong economic growth and a buoyant housing market, but they now faced a ‘watershed moment’ that would have consequences, including in the $1.6 trillion home loan market. House prices are already falling in Sydney and Melbourne, with the slump blamed on tougher lending rules for property investors, a wave of new units coming onto the market and buyer exhaustion after years of strong growth.”

“Capital Economics economist Paul Dales doesn’t see a credit ‘meltdown.’ But he points to the possibility that if Labor wins the next election, the property market would face a ‘double whammy’ - tighter lending conditions at the same time as negative gearing is curbed and capital gains tax concessions are slashed. Interest rates might also start to rise, further dampening prices. ‘The real risk is that house prices fall further and faster than the gradual, fairly modest decline we are currently expecting,’ Dales says.”

“As for Tassits, she has now rejoined her gym.”

The Dockland News in Australia. “What legislation and the courts couldn’t do, market forces are now starting to turn the tables on short-stay apartments in Docklands. While some real estate agents are reluctant to declare a definite trend, one agency says it returned 16 apartments to the long-term market in the last month. Lina D’Ambrosio of City Residential said many landlords are now yielding more from long-term rentals, but only if they let their properties fully-furnished.”

“NewQuay landlord Elena Tsapatolis said she recently returned two furnished apartments to the long-term market because the bottom had fallen out of the short-term industry. She said, at its peak, one of her apartments was returning $4000 per month, but had recently dropped to only $1500. But, she said, the apartment was now bringing in $3500 per month by being rented fully furnished on the long-term market.”

“She said long-term renters had greater respect for the apartment itself and, more tellingly, for the local community. Ms Tsapatolis said an over-supply of short-term rentals in recent years had led to a price war, which had now made long-term rental more attractive. Barry Plant associate director Steven Heaven said low occupancy rates was at the heart of the move for landlords to return rentals to the long-term market.”

“He said short-stays in the past were occupied 95 per cent of the time, but this figure had recently falled to 30 per cent. He said one landlord recently returning his property to long-term renting reported just 10 per cent occupancy. Ms D’Ambrosio said the demand for long-term furnished apartments was enormous, with many being snapped up before they were even advertised. She said online booking agencies were now taking massive commissions from short-term landlords, making many of them question their approach.”

“‘When you throw in the other costs like cleaning, they are better off renting to people who want to stay longer,’ she said.”