The Housing Bubble

A report from Bloomberg on Turkey. “Turkey’s banks are issuing mortgages at a loss as the government prioritizes revival of the housing market to spur growth. President Recep Tayyip Erdogan, whose opposition to high interest rates is well known, began calling on commercial banks in August last year to slash their rates on mortgage loans. One after another, the banks obliged, cutting rates to below 1 percent monthly. The problem for the lenders is that since then, their borrowing costs have risen considerably, a move they’re not passing on to home buyers.”

“‘Trying to keep monthly rates below the psychological level of 1 percent has led to a different pricing in mortgage loans, which is not very profitable for banks at the current funding costs,’ said Cagdas Dogan, a banking analyst at BGC Partners Inc. in Istanbul.”

The Strait Times on Malaysia. “Sales agents in uniforms like the iconic kebayas worn by Singapore Airlines stewardesses were busy escorting home hunters around an unexpectedly crowded show-flat earlier this week at Country Garden’s mega Forest City project. Despite reports of China’s capital controls hitting Chinese buyers of the US$100 billion (S$142 billion) Forest City development, it appeared to be business as usual when The Straits Times visited.”

“Construction was also in full swing at project sites of Chinese developers in Iskandar Malaysia, the vast special economic development zone in southern Johor. Country Garden was forced to close its show-flats temporarily in China earlier this month. Dr Yu Runze, chief strategy officer of Country Garden Pacificview, accepted that capital controls imposed by Beijing ‘will have an impact on Forest City.’ ‘However, this is not a bad thing,’ he added. ‘We view this challenge as an opportunity to shift our sales strategy. It puts into motion our strategy to be more international,’ he said, noting the firm will open sales galleries in Myanmar, Vietnam, Taiwan, Dubai and Japan.”

The Sydney Morning Herald. “Young Australians aren’t the only ones feeling locked out of a red-hot housing market that seems unfairly skewed towards their parents’ generation. Beijing median housing prices, which outstrip those in Sydney and Melbourne, have prompted not only a government crackdown on new home buyers, but a viral song lamenting the lost housing dream of the young. Called My Mother-in-law Keeps Shouting at Me to Go and Buy a House, the video has been rapidly shared on social media in China.”

“The song laments that old ‘hutong’ neighbourhoods are just wishful thinking for young families, because a second-hand home in Beijing costs 5.95 million Chinese yuan ($1.1 million). On Monday, Beijing authorities announced that single Beijing residents, and married couples who aren’t registered as Beijing residents, wouldn’t be allowed to buy a single-storey house in the city if they already owned an apartment. One in four new homes in NSW, and 16 per cent in Melbourne, are being bought by non-residents. Of these, 80 per cent are from China, said a report by Credit Suisse last month.”

From Interest New Zealand. “The latest figures from Realestate.co.nz suggest the residential property market is becoming more of a buyer’s market. The specialist property website added 13,069 new properties that were listed for sale in March, up 10.8% compared to February and up by the same amount compared to March last year. It was the highest number of new sale listings the website has received in a March month in five years, and only the second time in the last 10 years that new listings in March have exceeded new listings in February.”

“In Auckland the trend was even more pronounced, with the website newly listing 4700 properties for sale in March, up a whopping 20.5% compared to March last year and the highest number of new listings it has received in the month of March since 2008. The surge in new listings comes as sales volumes are declining and selling prices also show signs of weakening in many parts of the country, particularly Auckland. Realestate.co.nz spokesperson Vanessa Taylor said it was good news for Auckland buyers in particular. ‘More homes on the market is good news for buyers, with more choice and less competition for individual properties,’ she said.”

From India.com. “To get rid of unsold inventory, investors in Mumbai have announced an unbelievable scheme of buy one get one free offer on houses. The property prices in Mumbai are falling fast by almost 15-20% in the last year because of this scheme. Not only this, the scheme comes with many other discounts and freebies to woo buyers. The one on one house offer that has been announced on an apartment in Chembur has created a buzz amongst Mumbaikars. Reports state that the apartments in country’s most expensive property market in Mumbai were already reduced by 15-20%.”

“Reports state that demonetisation, REGA and GST have played a major role in the fall in property rates. The registration of property sales had fallen to a six-year low in November and December, in MMR alone. The discounts this time are believed to be 20% higher than what was offered till now. Even before demonetisation, however, inventories were high as there was about 6.7 lakh unsold residential units across the country with 1.55 lakh in MMR alone. India’s most expensive real estate market has witnessed a slowdown in the last four years. As of now, Mumbai property market has over 80 months of residential units’ inventory yet to be sold at prevailing market prices.”

“‘The price of these apartments in Chembur are priced 15%-20% lower compared to the going rate 18 months back,’ Amit Wadhwani, director, Sai Estate Consultant was quoted by Financial Express.”

The National on Dubai. “Sale prices and rental costs for the most expensive homes in Dubai were significantly lower in the first three months of this year compared with 2016 as companies hired top-level staff at a slower rate. Prices for apartments in Dubai’s Burj Khalifa have dropped by about a quarter on the secondary market over the past 12 months, highlighting the weakening demand for luxury property, according to a new report by the property consultancy Cluttons.”

“About 1,200 units have been handed over at Mira over the past six months. These are generally renting for Dh120,000 to Dh140,000 a year, compared with typical rents of Dh170,000 to Dh220,000 at Arabian Ranches. Cluttons said that tenants were ‘aware of the burgeoning rental supply levels and are taking advantage of conditions by seeking out the best perceived value for money.’”

“CBRE reported that a rush from Dubai developers to build thousands of new apartments before the start of Expo 2020 was pushing up the number of new homes due to be delivered in 2017 and 2018 to ‘well above’ the five-year average of 15,000. It said it expected these numbers to continue to rise in the short to medium term. ‘Amid a flurry of off-plan launches the competition to attract investors is also rising, meaning developers are having to become more creative in order to sustain desired levels of sales velocity,’ said Simon Townsend, a director at CBRE.”

From CBC News in Canada. “Saint John’s plan to sell off a piece of Rockwood Park for development is meeting heavy skepticism, especially from a neighbour who says there’s already a glut of vacant properties surrounding it. ‘I was rather disappointed,’ said Richard Powell who lives next door to the Sandy Point property.”

“The thought of developing parkland never sat well with Powell when the issue was first raised. What bothered him more was the idea of an apartment complex being erected next door. But Powell said the prospect of selling the property makes even less sense now. ‘There is no demand, really, right now for these properties,’ said Powell. Across the road from his home are six vacant lots and within 2.5 kilometres there are two housing developments with more than 20 vacant lots.”

“‘Most of them have been on the market for five or six years with very little movement,’ said Powell. Powell also owns four apartments in the uptown and thinks developing on Sandy Point Road contradicts the city’s existing growth strategy.”