The Housing Bubble

It’s Friday desk clearing time for this blogger. “‘For Sale’ signs will soon be a thing of the past on homes in New Canaan, Connecticut. A six-month trial ban starts July 1, meaning those signs you see in front of houses will have to be taken down. ‘The amount of them is giving buyers an idea that this entire town is for sale,’ said resident Shawn Gardner.”

“These are tricky times for Manhattan condominium developers. Since the heady boom times of 2014 and 2015, New York City’s residential condo market has undoubtedly found itself in a state of correction. It all started rearing its head around 2016, when an unexpected and unprecedented presidential election triggered macroeconomic uncertainty and concerns about a supply glut in condo inventory began to take hold.”

“Jonathan Miller, CEO of Miller Samuel, attributed the slowdown to a ’sheer heavy volume of [luxury condo] units coming to market’ that has caused a ’slow buildup of inventory,’ as well as economic factors like a stronger dollar that has weakened interest among foreign buyers. ‘The billionaire or super-luxury market was not as wide and deep as everyone thought,’ Miller said.”

“Colorado voters will not have the chance to decide in November whether or not to limit residential growth along the Front Range, as the author of a proposed ordinance to do just said he will not try to collect signatures to get his proposal on the statewide ballot. ‘I think a recession is just around the corner, and this overbuilt mess we have will collapse like yesterday’s carnival,’ said Golden activist Daniel Hayes.”

“Warriors center Zaza Pachulia recently sold his penthouse at the Carroll Walk condo building on Bay Harbor Islands for $1.13 million – 14 years after he bought it for $1.33 million, according to real estate records. It was listed originally for $1.5 million in 2014 and it steadily decreased since. The buyer was a shell company based in Panama.”

“More people in Saskatchewan are continuing to fall behind on their mortgage payments, and recent numbers show the trend is climbing. The latest report from the Canadian Bankers Association says Saskatchewan leads the country in residential mortgages in arrears at 0.78 per cent. That’s approximately one in every 130 mortgages. It’s the highest level seen in the province since 1992, and more than three times the national average of 0.24 per cent. The percentage in Saskatchewan has more than doubled since 2014.”

“The sale price of homes is also on the downswing. The year-to-date average sale price in Saskatoon was $334,449, a 4 per cent decline from the same time last year.”

“Affordability wasn’t written into Dubai’s design brief. The ‘build it and they will come’ mentality saw developers race to fill the desert with glitzy skyscrapers, transforming the fortunes of the city in two short decades. But tightening economic conditions are contributing to a more affordable future for Dubai in all sectors of the real estate market. While prices and rents have fallen across the market, villa properties have seen the biggest drop. Plans are afoot to reboot the market which has fallen 15-20 percent since its peak in 2014.”

“‘The way we’ve been talking about the broadening of the market and the increased focus on affordability is the ‘new normal’ as a greater sense of financial realism enters the market,’ says Craig Plumb, head of research, JLL MENA. ‘Questions remain over oversupply, particularly in the residential and retail sectors and the market has definitely moved in the favor of tenants in recent years.’”

“Letting manager at Knight Frank Gail Cawood, says an increase of rental supply has caused the prices to drop, notably in the Southern Suburbs, Hout Bay and the Atlantic Seaboard. She says there are a number of new developments popping up in places like Claremont and Observatory, and a southern suburbs 2 bedroomed flat that a year ago was R15 000 would now go for about R12 000 a month. Bigger townhouses have dropped from about R32 000 to around R25 000 ‘We are finding a huge drop in the price of rentals, she said.”

“Real estate investors are now the biggest loan defaulters, signalling the more than decade-long property boom is easing. ‘The ratio of the non-performing loans to gross loans increased to 12.4 per cent in April from 11.4 per cent in February 2018 largely due to increased NPLs in the real estate, trade and manufacturing sectors,” Central Bank of Kenya governor Patrick Njoroge said. A dip in prices and the slow uptake of newly-built units have raised fears of renewed pressure on developers, who borrowed to fund for-sale projects as obligations mature. A slow down on growth of private sector credit is also hurting real estate, which heavily relies on bank loans for unit purchases.”

“Le Hoang Chau, chairman of the HCM City Real Estate Association, said that according to property brokers in these areas, sales volume had dropped by around 40 per cent compared to the peak period last month. The land liquidity there has fallen by 60 per cent compared to the previous months. Nguyen Van Trung, a broker in Binh Thanh District, told Viet Nam News: ‘Land prices have increased over the last decade, especially in recent years. Now, many investors have begun to sell at the same time.’”

“New Zealand’s property market has flattened and is likely to stay that way for at least the rest of the year, valuation data provider QV says. Even Wellington, which has had a strong run of price rises, experienced a drop of 1.3 per cent in May, attributable to weakness in Wellington City and less demand for higher-priced properties. CoreLogic head of research Nick Goodall said demand for houses would be reduced by the Healthy Homes Guarantee scheme imposing more requirements on landlords, more focus on dampening speculation in the market and ring-fencing of property investors’ losses.”

“‘All these things keep a lid on demand,’ he said. ‘The value growth witnessed in these centres over the last few years were unlikely to be sustained.’”

“Off-the-plan apartment buyers in Sydney’s west are selling below their purchase price as rising costs, falling prices and, in some areas, oversupply erode market sentiment. Darwin and Perth continue to struggle, says property surveyor Herron Todd White, with mortgagee-in-possession auctions increasing as borrowers default on repayments and lenders take possession and sell the property. Another one-time property price leader, Melbourne, is also beginning to splutter.”

“Apartments purchased off-the-plan four years ago for about $670,000 in popular Parramatta are selling for around $630,000, says Shaun Thomas, residential director of HTW. Dwelling prices have dipped by more than 1 per cent during the past three months and more than 4 per cent since their July 2017 peak. In parts of western Sydney they are down by nearly 7 per cent. ‘Generally the wider market has cooled with transaction numbers falling, selling periods extending and prices declining,’ says Thomas.”

“Brisbane apartments have plunged by about 20 per cent from their peak, according to CoreLogic. ‘Impacts of oversupply have come home to roost,’ says David Notey, an HTW Brisbane director. ‘There is resistance from buyers and they usually only perform at their best when a boom is under way.’”

“Joining a growing list of analysts including AMP Capital, the Commonwealth Bank and Morgan Stanley, Westpac predicts recent declines in Australian capital city house prices will continue for some time to come. ‘When the banks start to adjust their way of giving finance out, it affects everybody,’ said Property expert Robert Klaric. ‘All of a sudden if someone’s buying something for $600,000, there should probably be a good $50,000 to $60,000 cheaper purchase by the end of this year.’”