The Housing Bubble

A report from Gulf Business. “Dubai Land Department has issued a decision to seize the land, real estate and escrow funds registered to developer Schon Properties to safeguard the rights of investors. The decision was made to allow the Public Prosecutor’s Office and the Dubai Courts time to complete legal procedures against the real estate group, Dubai Media Office said. ‘The step is aimed at protecting the rights of investors in light of Schon Properties’ actions of exploiting investors by refraining from depositing their money in escrow (guarantee) account,’ a DLD statement read.”

“Dubai’s real estate market has seen residential sales prices and rents slump over the last two years. Data from listings site Bayut showed rental rates down up to 15 per cent in some areas from the second half of last year to the end of the first half of 2018. Sales prices were also down up to 8.8 per cent in some areas during the same period, according to the company. Credit ratings agency S&P said in a February report that it expected Dubai’s real estate slump to continue for another two years.”

From Graphic Online on Ghana. “In an ironic twist of facts, Ghana is currently experiencing a housing glut, but many citizens cannot afford decent housing. ‘Currently, there is just 60 per cent occupancy of upper tenants,’ the Executive Secretary of Ghana Real Estate Developers Association, Mr Samuel David Kofi Amegayibor, told the Daily Graphic recently.”

“Affirming that there was a glut in housing, he said some people were buying housing properties because they saw them as worth investing in, but sales had slowed down because ‘you wouldn’t want to buy properties people don’t want to occupy due to their high cost.’ Building high end dwellings is not a misplaced priority, Mr Amegayibor surmises, but believes ‘it is a bit unfortunate or disturbing to note that while there is a huge demand for housing and the developers have also tried to put some houses on the market they are unable to sell. That tells you that there is a bit of mismatch as to what is required and what is supplied.’”

“‘Because they put them in investments, maybe they made so much from rentals and those who used mortgage to buy were able to pay back but now the trend is changing a bit. Most of the houses that people bought some time back, they claim they have not been rented for sometimes a year or so – they have bought those houses and they are still empty and so the investment option is also becoming difficult,’ he added.”

“He said if the buyer used a loan facility to buy the apartment it meant he or she would be paying interest while the house or apartment remained empty.”

The Hindustan Times in India. “This has been a monsoon of discount offers for residents of Mumbai and Delhi. Every day, a barrage of messages, emails and media advertisements assail us, from desperate real estate firms. A housing slowdown has been around for some time but now there are visible signs of panic. But buyers, particularly in north India, are just not interested. Sellers, having patiently waited it out so far, are now beginning to throw in the towel. An equilibrium will be reached eventually, but before that there may be more blood on the housing street.”

“Buyers aren’t foolish and they can see the pile of unsold houses and signs of desperation from sellers. Prices have corrected about 10-20% in most north Indian cities but people are prepared to play the waiting game. The reality is that total costs of properties in metro cities are still way too overpriced. In Mumbai, the average cost of owning an apartment is eight times a family’s annual income. In Gurugram, it is five times. This is exorbitant. In this game of blink between buyer and seller, the buyer has the upper hand now.”

From Korea Joongang Daily. “A year has passed since the Moon Jae-in administration tightened real-estate regulations on Aug. 2, 2017, with the aim of curbing speculation in the market. One year later, the country’s housing market is more polarized than before, with apartment prices in Seoul refusing to drop while the market in other regions stagnates. Apartment prices in areas such as Ulsan, Pohang in North Gyeongsang and Geoje, South Gyeongsang, tumbled in the past year, with Geoje prices dropping by 14 percent.”

“‘Some regional [housing] markets look to have fallen into a recession due to the difficulties with their economies and oversupply [of apartments],’ said Kim Hyun-mi, the country’s land minister. ‘We need policies that can revive the regional economies or control the apartment supply.’”

“The Ministry of Economy and Finance revealed a tax reform scheme last month that included an increase to the so-called comprehensive real estate tax that puts a greater burden on owners of multiple homes. ‘The real estate market has already shown some reaction to the measure,’ said Kim Se-ryeon, a real estate analyst at SK Securities. ‘While the overall index has not fallen, the rise in housing prices in three districts in Gangnam - which hold up the index - has shown deceleration, and a fall in the overall index seems inevitable.’”

From 2GB in Australia. “Melbourne now holds the nation’s worst performing housing market, overtaking Sydney. Property prices in Victoria’s capital fell over the past quarter by 1.8 per cent, whereas Sydney only experienced a 1.1 per cent decline. The situation isn’t much better for the nation as a whole, with national house prices falling at the fastest rate in six years.”

“‘A lot of people, 12 months ago, were concerned with a property bubble in Australia,’ Ross Greenwood says. ‘It now, clearly, has been popped.’”

From Domain News. “Sydney and Melbourne property price falls could have a long way to go before bottoming out, with a ‘fear-of-missing’ out mentality in the market becoming a ‘fear-of-not-getting-out’ anxiety. ‘We are not there yet, but FOMO (fear of missing out) risks becoming FONGO (fear of not getting out) for some investors,’ wrote AMP Capital chief economist Shane Oliver.”

From Live Wire Markets on Australia. “A phrase consistently heard in the current property market is ‘I wish the media would stop talking the market down.’ Is the media being made a scapegoat for the market’s cyclical fluctuations and corrections which often result in people not achieving the sales results they’d hoped for?”

“Now that property prices are declining, we often hear people blaming the media, the banks, neighbours for selling cheap or buyers for being lowballers. People don’t like to acknowledge that they may have overpaid for a property, made an unfortunate investment decision or just had to sell before any growth is realised. In fact, right across the Sydney market many sellers are grappling with the concept that they will be selling their property for less than what they paid for it several years ago.”

“The Inner West has felt this market shift harder than most other regions and premier areas like Balmain have seen prices decline by around 9% year to date. Add another 5% drop through 2017 and you’re starting to see a pretty reasonable price adjustment in an area where many properties sell in excess of $2-3m. The concerning thing for those looking to sell is that the auction clearance rate across Sydney is at 50%. This highlights that we’re well and truly in a buyers’ market and that many sellers’ expectations haven’t adjusted enough to this new environment.”

A report from the Miami Herald in Florida. “For renters, Miami’s greater downtown area is the place to be. Budget-conscious home buyers should consider Homestead, Miami Shores and Kendall. Investors will want to pay attention to the Design District. Miami Beach remains popular, but watch out for inflated prices. Analysts say the increased optimism reflects an oversupply of unsold condos and a growing number of new rentals buildings — two factors that should make sellers and landlords adjust their asking prices in order to remain competitive.”

“‘You’re starting to see the repercussions of overbuilding,’ said Peter Zalewski, founder of Cranespotters, a website that tracks condo development in South Florida. ‘The supply of rental apartments is going through the roof and as the cranes come down, rents are going to come down, too. And there’s a 32-month supply of condos in downtown Miami alone, so the only way you’re going to move a condo in this market is to lower your price.’”

“Half of the study respondents said the current market inventory of luxury properties priced at $1 million and above is high, with comments such as ‘the industry is stagnant,’ ‘tons of inventory on the market much longer’ and ‘buyers’ market right now.”

“According to the most recent residential market study by Integra Realty Resources, nearly 4,800 new rental apartments were completed from 2014-2018 in the Greater Downtown Miami area. Another 5,062 units are currently under construction — and that number doesn’t include the large number of condos that will be listed for rent by their out-of-town owners.”

“Daniel de la Vega, president of One Sotheby’s International Realty, said luxury properties are trading at 15 percent to 20 percent lower than their asking price, but they’re still selling. ‘You have seven months’ supply in the million-dollar single-family home market and 70 months’ supply at the over-$10 million range, so there’s a lot of inventory,’ he said. ‘But these properties are still selling and the [luxury] market is going to continue to appreciate. It will just be at a normal pace, nothing drastic.’”

“Henry Torres, CEO of The Astor Companies, said that although the pre-construction buyers overall at his Merrick Manor condo development at 4200 Laguna St. are 60 percent foreign, this year’s buyers have been predominantly locals, with foreign buyers ‘few and far between,’ he said. Construction is expected to be completed by the end of 2018, and 58 percent of the condos have already been sold. ‘We used to have a big influx from Venezuela, but that has slipped to practically nothing,’ Torres said.”

The Post and Courier in South Carolina. “For two or three days every year when July turns to August, the narrow streets of downtown Charleston become an obstacle course. It’s the routine shuffle of college students from one house to another as most rental leases turn over Aug. 1 to coincide with the school year. New luxury apartments such as 930 NoMo on Morrison Drive and SkyGarden on Woolfe Street were built as student housing, and they’re more than a step up from the traditional dormitory-style dwellings of past generations. They offer high-end furnishings, outdoor pools, fitness centers, study rooms and even tanning salons.”

“A sampling of recent listings of homes for rent on the peninsula showed prices per bedroom were roughly the same as those in the apartment complexes. Will Parker moved into 930 NoMo on Tuesday after living in apartments in historic properties the past two years. He said that while those places were unique, they weren’t very well maintained. Plus, he felt like he was getting more for the money. ‘I’m just kind of sick of living in old housing,’ he said. ‘This place is a lot more spacious, and I think it’s actually cheaper.’”

“Marion Hawkins, president of the neighborhood association, said the mix of residents seems to be changing again, possibly as a result of the new student apartment developments. ‘I’ve heard from several people in the last six months or so that different landlords who have always been able to rent to students are seeing a lot of vacancies they haven’t seen before,’ he said. ‘That kind of college rental market in the neighborhood and throughout the city seems to be softening.’”

The Columbia Daily Tribune in Missouri. “With less than two weeks before almost 30,000 University of Missouri students descend on Columbia, fierce competition that sent one housing property into foreclosure this year continues unabated, with offers of as many as three months of free rent dangled in front of prospective tenants.”

“Brookside Midtown at College Avenue and Walnut Street has a large banner promising to beat any competitors’ rent. The Rise on Ninth Street, which was offering to buy out freshman housing contracts at this time last year, has advertised a $1,200 incentive this year. To compete with those newer buildings close to campus, Campus View is offering free rent for May, June and July.”

“The pressure on landlords is twofold – a continuing decline in enrollment and more aggressive marketing of residence halls. The market casualty was The Row, an 82-unit, 328-bed townhouse-style duplex student housing development on Commercial Drive, sold for $7.6 million in a March foreclosure auction to Fannie Mae. TwinRock Partners, which purchased the property with an $11.25 million mortgage in 2016, continues to own The LYFE at Missouri on Buttonwood, a 450-bed complex built in 2006, which it purchased, also in 2016, for $21.6 million.”

“Alexander Phillips, president of TwinRock, was not available for an interview but was optimistic about the market in 2016. ‘Missouri is the flagship school for the state. It’s an SEC school,’ he said. ‘There’s no reason for it not to rebound.’”

“The rebound is coming but it won’t be this fall. And there are not just fewer students overall, MU will keep a record number of returning students on campus in residence halls. The incentives can make rent very reasonable. Danae Nash, a leasing consultant at Campus View, said the three months free can be taken as a discount each month, making a bedroom as cheap as $248 per month.”

“‘Yeah, honestly, truly, I feel the money is what is making it go around,’ she said. ‘Everybody is trying their best with incentives.’ The complex is marketed to students but is not exclusively students, she said. ‘We take anyone who can agree to our qualifying guidelines and a background check,’ she said.”

“Campus View is owned by Peak Campus, the second-largest operator of student housing in the country, which states it has 48,000 beds across in 89 properties worth more than $3.5 billion from Maine to California. The Brookside properties are locally owned by a company led by Jon and Nathan Odle, who also have developments at Discovery Park. Brookside Midtown is offering to match or beat other offers is a part of the market right now, spokesman Jack Cardetti said.”

“‘Many of the housing investment that comes in from out of state is to develop properties with an eye to selling them,’ Cardetti said.”

From Senior Housing News. “Capital Senior Living’s only salvation may be in its owned real estate, according to analysts from Stephens and Stifel. The Dallas-based senior housing provider reported ‘disappointing’ financial results for the second quarter of 2018, as well as a drop in occupancy for consolidated and same communities to 85.5%. Currently, Capital Senior Living leadership ‘is fighting an uphill battle to stabilize occupancy, contain costs and regain investor confidence,’ according to a July 31 note from Stifel analysts.”

“Stifel estimates Capital’s owned real estate is valued at $7 to $9 per share. Stephens, on the other hand, estimates that Capital’s real estate is valued between $6.41 and $16.75 per share, assuming cap rates of 6.5% to 7.5%. As of market close on Wednesday, Capital’s share price had fallen 23.12% to $7.68.”

From Next City on Colorado. “Sometimes, the solution to a seemingly intractable problem is staring you right in the face. That turned out to be the case in Denver, Colo., where a fix for the mounting affordable housing crisis was standing smack in the middle of the city’s booming skyline — in the form of 21,000 brand-new, market-rate apartments sitting vacant, while some 13,000 Denver residents struggle to make rent each month.”

“It all started last year with a series of brainstorming sessions among friends in the affordable housing business — finance and equity specialists, dealmakers, policy folks, we ran the gamut. We were mulling over the irony that so many teachers, police officers and health care workers were getting priced out of a city with a glut of quality housing — something many U.S. communities experience today. And then it dawned us: why couldn’t Denver use a private housing subsidy, with municipal support, to match some of those families with unrented apartments?”

“And in less than a year, those conversations led to a first-of-its-kind initiative called LIVE Denver (LIVE stands for Lower Income Voucher Equity), that will bring hundreds of those vacant units within financial reach of severely rent-burdened families. Just last month, the Denver City Council approved a $1.2 million funding partnership to make it happen.”

“Sure, there are observers who say that the city’s high rents will eventually decline because supply so outstrips demand. But those kinds of market adjustments can take years, and they’re not guaranteed. Working people need help now. As LIVE Denver has unfolded, we are hearing from other cities such as Seattle and San Antonio, with similar housing quagmires — too few affordable homes, too many families priced out of the places they live, and too many market-rate units languishing empty.”