A Traditional Strategy Of Betting That Prices Would Go Up
A report from Real Assets IPE. “Price corrections in Norway, Sweden and Switzerland do not mean that bubbles are bursting in European housing markets, according to Scope Analysis. The German company argued that the price falls were caused by heightened levels of new construction – but it expects prices to stabilise this year. ‘Recent house price corrections have, in part, been caused by the significant expansion in the supply of apartments in the last three years,’ Scope said. ‘In 2017, supply grew across almost all of Europe for the first time in years.’”
“Construction of new apartments in Sweden is well above the long-term average. Construction levels are also above average in Switzerland, Norway, Denmark, Finland and Austria, although not to the same extent, it said. In Germany, on the other hand, construction is at more normal levels, although the number of newly-built apartments since 2010 has grown rapidly each year. Even in Stockholm and Oslo, the number of households have grown faster than the number of completed apartments in recent years, it said.”
“The current decline in apartment prices should not be confused with the bursting of a speculative bubble due to overly optimistic expectations or irrational exuberance, Scope said. Speculative construction is not widespread across Europe, it added. The only exceptions are the high-price segments in major cities such as London, Paris or Munich.”
From Home and Property UK. “London’s house prices are continuing to slide, with average asking prices down just over £11,000 year on year. ‘Aspiring first-time buyers are among the greatest potential beneficiaries of the downwards adjustment in asking prices by London’s sellers over the last 12 months,’ said Miles Shipside, Rightmove director and housing market analyst. ‘It’s been well-documented that the top end of the London market has been struggling for the past couple of years, but … asking prices in the lowest priced sector are now experiencing a larger percentage fall than these high-end properties.’”
“The key reason for price drops in the capital’s starter home sector is a collapse in the buy to let sector. Tax changes over the past two years have made owning a rental property a far less lucrative enterprise. The number of landlords snapping up flats in the capital has collapsed as a result, leaving the way clear for first time buyers. Jonathan Samuels, CEO of property lender Octane Capital, described the situation as a ’sea change’ in the property market. ‘Amateur landlords are fast becoming an anachronism,’ he said.”
From Burnaby Now in Canada. “The number of detached homes selling in Burnaby is dropping – and prices are following suit. A total of 56 detached homes sold in the city last month, down from 103 in June 2017. Over the same period, the median price of a home fell from $1.65 million to $1.45 million. At the same time, the number of active listings is on the rise.”
“‘Buyers are less active today. This is allowing the supply of homes for sale to accumulate to levels we haven’t seen in the last few years,’ said Phil Moore, Real Estate Board of Greater Vancouver (REBGV) president. ‘Rising interest rates, high prices and more restrictive mortgage requirements are among the factors dampening home buyer activity today.’”
“The market is flooded with detached house listings across the region, according to the REBGV. While the number of homes put on the market last month was lower than in previous months, the total number of active listings is at its highest since June 2015.”
From the Bangkok Post. Thailand is no stranger to a glut of real estate projects, even after the bursting property bubble of the mid-90s, which brought the economy down with it, sending shock waves through every strata of society. While some do not see history repeating itself this time around, a continuous rise in mortgage loans propelled by intense competition among financial institutions offering a high loan-to-value (LTV) ratio to homebuyers, along with numerous mixed-used projects in the pipeline, have stirred uneasiness for financial regulators.”
“‘Mixed-use projects are not on the verge of oversupply, but condominium projects outside of the central business district warrant concern because there is a glut, with many units remaining unsold,’ said Termporn Tantivivat, vice-president at Maybank Kim Eng Securities Thailand.”
“Phanom Kanchanathiemthao, managing director of property consultant Knight Frank Chartered Thailand, said the low-end market has many financial institutions concerned when considering mortgage loan applications. ‘This segment has a lot of non-performing loans [NPLs],’ said Mr Phanom.”
From ABC News. “Australia’s property market is enduring a serious winter chill. Preliminary auction clearance rates in Sydney dropped below 50 per cent last weekend according to Domain’s numbers and were clinging just above according to CoreLogic. Many agents are slow to report unsuccessful auctions, so those clearance rates tend to drop noticeably when the final figures come in at the end of the week. ‘We’re tipping somewhere between 41 and 44 per cent for Sydney and for Melbourne we’re thinking it’s going to come in roughly around 49 per cent,’ SQM Research managing director, Louis Christopher, said.”
“The Sydney market has already fallen around 5 per cent from its peak last year. Although both Louis Christopher and Pete Wargent observed that these falls have not been evenly spread, with some properties faring much worse and some holding their value. ‘Some of the second tier and secondary quality properties the clearance rates have dropped very sharply,’ Mr Wargent noted. ‘That’s where a good agent doing their job should be able to help a vendor set their expectations accordingly,’ he said, noting unrealistic boom-time expectations are one of the reasons many properties are staying on the market for months.”
“Based on previous experience, Mr Christopher is expecting auction clearance rates to fall into the 30s for Sydney and mid-40s for Melbourne. ‘There’s only been about two or three times I’ve seen auction clearance rates in the 30s,’ he said. ‘That was previously in 2008, when we were entering into the GFC. Before that, briefly in 2004 in Sydney when the state had the vendor stamp duty introduced. And then, prior to that, back in 1989 when the cash rate hit 17 per cent.’”
From Bloomberg on Australia. “Sydney-based mortgage broker Redom Syed said he has seen a ‘material clampdown’ since the start of the Royal Commission banking inquiry, with lenders ramping up verification of borrowers’ income and living expenses. Australia’s banks are on notice. Alarmed by the free-for-all in risky loans and the deterioration in standards that accompanied lenders fighting for market share, regulators slapped them with curbs that included restrictions on interest-only lending. The value of new interest-only lending, which is the preferred option of investors, is down 57 percent on a year ago.”
“Syed is also seeing a number of ’surprised’ interest-only clients, who were unaware that their repayments are set to increase and are now scrambling for options. For every A$1 million of mortgage debt, a borrower now needs roughly A$40,000 more in household income than three years ago, Syed said. For those on the wrong side of the new restrictions, options are limited: Find the money for higher payments, move to another interest-only loan at a non-bank lender or sell the property.”
“For an immigrant from Russia and 47 year-old mother-of-three Natasha Arens, establishing a foothold in the property market was central to securing her family’s future in Australia. Arens said she followed a traditional strategy of betting that prices would go up in Australia. She had planned to eventually pay off the mortgage on her house by selling the additional properties after their value had risen. ‘I was trying to give my family their share of the Australian Dream, which is owning property,’ she said. ‘Some might say it’s crazy, but that’s what people seem to do.’”
