September 4, 2018

To Buy A Cat In A Sack

A report from Post Media on Canada. “The Metro Vancouver pre-sale condo market, which had been seeing double-digit-percentage price gains of between 30 to 60 per cent, with each new project seemingly selling out and setting ever higher prices, is showing signs of slowing. Meanwhile, investors and buyers entering the market for the first time are also becoming more price-sensitive and selective. They’re asking more questions about the value of projects and the ‘local track records’ of developers.”

“‘There is an adjusting of expectations,’ says Michael Ferreira, managing principal at Urban Analytics. ‘Gone are the days when it didn’t matter who was building it. There is a flight to quality and brand,’ says Ferreira.”

The Online Citizen in Malyasia. “Last Monday, the Malaysia leader Mahathir Mohamad said at a press conference that foreigners will not be allowed to buy residential units at the Country Garden project. They also won’t be granted visas to come and live there. Mahathir has been uneasy with the astronomical amount of Chinese investment in Malaysia even before the election. And Forest City has always been a thorn in his eye.”

“Besides, the $100 billion Forest City megaproject is an easy target. It is a white elephant built for foreigners. Locals can hardly afford to buy those homes and are unlikely to benefit from the luxury development.”

“So what is the bargaining power of a foreign developer like Country Garden in Malaysia? The largest developer in China is running out of luck recently in their country. On top of frequent work accidents amidst tight completion deadlines, poor quality control is also a big damage to Country Garden’s reputation.”

“A China property agent told the Hong Kong media that he is afraid of accompanying buyers of Country Garden projects to collect keys. Because owners are often shocked by the poor building quality and bad workmanship once they open the door. There are incidents of collective actions of owners to return the keys to the developer and refuse to accept the units. This problem also caused widespread protests in different parts of China.”

“Why are two-thirds of Forest City’s buyers from China? Chinese buyers sold on the project are mainly the middle class and SME owners. Like other Chinese nationals who are keen to leave the country, they long for clean air, safe food, western education and freedom. Yet they are not eligible to migrate to western countries. They may lack the financial means to migrate as investment immigrants. But they do have some spare cash to invest.”

“The developer’s promise to help them apply for permanent resident status though Malaysia, My Second Home Programme is the best answer. According to the Prime Minister’s Office, purchase of properties does not guarantee automatic residency in the country. Only renewable multiple-entry social visit passes for 10 years will be issued to successful applicants through the Malaysia My Second Home programme.”

“To invest in an overseas property without due diligence is to buy a cat in a sack. When the developer let the cat out of the bag, naïve buyers have to face the consequences.”

The Business Insider Australia. “If you’re in the market to buy a home in Sydney, you’re in luck. Not only are prices falling, the amount of properties listed for sale across the city has risen to the highest level since the GFC. The number of Sydney homes for sale jumped by 30.4% in the year to August, leaving total listings at the highest level since the GFC, according to SQM Research. Total listings in Sydney rose by 10.9% in August.”

“‘Sydney residential property listings are now at the highest level recorded since February 2009, surpassing the peak in listings recorded during the 2010-12 housing downturn,’ said Louis Christopher, Managing Director of SQM Research. ‘Some home owners are readying for a sale and want to list their homes sooner rather than later before prices fall any further, especially in Sydney, where asking house prices are down 2.1% over the month to 4 September.’”

The Australian Financial Review. “Naomi Holtring and her husband have two big problems in Sydney’s sliding housing market. The first is that they can’t sell their property because they will lose money. The second is that they are struggling to get tenants. ‘We have two properties, one [in Merrylands West] is rented out. The other one in Liverpool is vacant and when we took it to a real estate agent he said we would have to put the rent down to $330 from $390 a week,’ Ms Holtring said. ‘If we take a big hit on the rent and also have to pay agent fees, it would be hard to swallow.’”

“Harder still, is selling out. Sydney house prices have fallen again in August with dwelling values in Sydney now down 5.6 per cent in the last 12 months, according to Corelogic. They are falling at their fastest pace in nine years.”

“Ms Holtring owns a two-bedroom apartment in Liverpool, in Sydney’s south-west and is currently renovating to attract more tenants, but she is finding it difficult to attract tenants. ‘There is an oversupply of units in the area, and the supply means people have more choices, and as we are on the highway, it doesn’t help.’”

“Ms Holtring is already actively cutting costs, and is using cheaper online property managers which charge less than traditional agents. She is nervous about selling. ‘If Bill Shorten comes in, he may remove negative gearing and that will make a bad situation far worse. Many people won’t be able to afford their properties and they will dump their houses and there will be a crash.’”

“But it is vacancy that is the new issue. Rising vacancy is caused by the sudden surge of completed new dwellings, and a flood of properties that have come back onto the market because they failed to sell as the market softened. For two weekends, The Australian Financial Review went to auctions in these areas and attended many passed in auctions. At some auctions, there were no bidders or anyone inspecting.”

“Some western Sydney real estate agents report up to 50 per cent of their listings are from homeowners who cannot afford to move to more expensive principal and interest loans. Some, such as LJ Hooker’s Peter Tannous’ clients are selling their homes for less than purchase prices.”

“Telltale signs include a spike in foreign buyers trying to sell homes purchased two to three years ago, large numbers of new project homes on the market and smart buyers looking for a bargain. As an example, The Avenue Real Estate’s Steven Liu says for a house priced at $1.3 million to $1.4 million, buyers are offering around $1.1 million.”

“The softening house market and tighter macroprudential policies are not only cooling house prices but causing an avalanche effect on other aspects of real estate such as rents, property management services and jobs for real estate agents. Adding further woe to the situation are concerns of a change in government, Realrenta.com.au director Marlene Liontis says.”

“‘The anecdotal evidence is investors are getting nervous,’ she said. ‘Last week’s events in Canberra saw an unprecedented spike in the calls we were getting. A lot of investors rely on negative gearing to keep them in the game and if that is limited, it is going to throw a lot of investors out.’”




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35 Comments »

Comment by Ben Jones
2018-09-04 18:51:28

‘Sydney residential property listings are now at the highest level recorded since February 2009, surpassing the peak in listings recorded during the 2010-12 housing downturn,’ said Louis Christopher, Managing Director of SQM Research. ‘Some home owners are readying for a sale and want to list their homes sooner rather than later before prices fall any further, especially in Sydney’

Your world has been turned upside down in a matter of months Louis.

Comment by qt
2018-09-04 19:50:18

This is the problem with trying to time the market. These speculators are all trying to sell at bubble peak. The problem is everyone is trying to time it but once the slides has began, it’s already too late. Everyone panic and the ones who panic first and unloads at 5 or 10% discount gets out alive. The rest will die in fire.

Comment by Ben Jones
2018-09-05 06:34:02

Penthouse sale a sign Brisbane apartment glut is not over
The Australian-6 hours ago
The sale of an inner Brisbane penthouse for just 40 per cent of the original sale price has prompted warnings the city’s apartment oversupply issue is far from …

Plummet in Swedish Home Prices May be Hitting Soft Landing
Wall Street Journal-Sep 4, 2018
The closely watched Swedish residential market, which hit a slump in late … the white-hot market and a glut of new supply produced by developers eager to …

 
 
 
Comment by Ben Jones
2018-09-04 18:54:33

‘A China property agent told the Hong Kong media that he is afraid of accompanying buyers of Country Garden projects to collect keys. Because owners are often shocked by the poor building quality and bad workmanship once they open the door. There are incidents of collective actions of owners to return the keys to the developer and refuse to accept the units. This problem also caused widespread protests in different parts of China’

‘My Story of renting a Place in Beijing’

‘For me, the secret to happiness is to just lower your expectations. Apart from signing the contract, the real estate agent pretty much doesn’t show up ever again when problems arise.’

Comment by Econ_Teacher
2018-09-05 09:40:40

The reason for these lowered expectations? The author blames a shortage of supply. In China. I am only one teacher. I can’t keep up. Ben has done more than I have, but I believe we are still vastly outnumbered by fools.

 
 
Comment by Boo Randy
2018-09-04 18:57:41

Every weekend, Hong Kong developers hold the Running of the Lemmings to unload their flats on Greater Fools and Knife Catchers. Last weekend was a mixed bag, as many lemmings plunged over the cliff by signing on the dotted line, while another developer only sold five of 80 units on offer. 597 new flats are up for sale - this should be an interesting gauge of demand.

https://www.scmp.com/property/hong-kong-china/article/2162763/hong-kong-developers-hold-biggest-weekend-property-sale-six

Hong Kong property developers will put 597 new flats on the market between Friday and Sunday, the biggest weekend sale in six months, as competition to lock in buyers heats up before the era of cheap mortgages comes to an end.

Interest rates are expected to rise by the end of the month, with Hong Kong set to follow an increase by the US Federal Reserve, a move that is likely to dampen demand.

“Buying interest will drop and more buyers will take a wait-and-see attitude when the prime rate rises,” said Lung Siu-fung, analyst at China Merchants Securities International. “Developers want to sell before the prime rate rises.”

Comment by oxide
2018-09-05 06:45:47

Every weekend, Hong Kong developers hold the Running of the Lemmings

You should write for the Onion.

 
 
Comment by Ben Jones
2018-09-04 19:00:02

Once again:

‘Luxury home markets record steepest price falls’

“CoreLogic head of research Tim Lawless said the weakness in the housing market was actually driven by the lacklustre premium sector. “This trend towards weaker premium housing market conditions is largely attributable to larger falls across Sydney and Melbourne’s most expensive quarter of properties where values are down 8.1% and 5.2% over the past twelve months,” he said.’

“This means that values in the most expensive markets are clocking faster declines than the national trend.”

“Lawless explained that tighter credit rules for borrowers will likely affect demand in expensive markets, where prices are still significantly higher than median household incomes.”

Wa? But rich people don’t need to borrow! All cash Chinese? What happened to the shortage!!

Comment by Professor 🐻
2018-09-04 19:22:26

Seems like a lot of wealthy homeowners are getting schlonged by falling prices about now. If trickle down is still a thing, then we can expect the price declines to show up in mid-tier housing by this time next year.

 
 
Comment by Mortgage Watch
2018-09-04 19:05:36

Provo, UT Housing Prices Crater 9% YOY As 2010-2016 Subprime Mortgage Defaults Skyrocket

https://www.movoto.com/provo-ut/market-trends/

 
Comment by b
2018-09-04 19:11:39

you mean that $1.2 M for a 1000 sq ft condo with $1200 condo fees is not sustainable. Maybe they should emphasize the view in the distance of the water - and the immediate view of heroin addicts and street poopers.

RE: A report from Post Media on Canada. “The Metro Vancouver pre-sale condo market, which had been seeing double-digit-percentage price gains of between 30 to 60 per cent, with each new project seemingly selling out and setting ever higher prices, is showing signs of slowing. Meanwhile, investors and buyers entering the market for the first time are also becoming more price-sensitive and selective. They’re asking more questions about the value of projects and the ‘local track records’ of developers.”

 
Comment by Boo Randy
2018-09-04 19:16:34

Rising vacancy is caused by the sudden surge of completed new dwellings, and a flood of properties that have come back onto the market because they failed to sell as the market softened.

And let me guess: no one saw it coming.

Comment by qt
2018-09-04 19:56:59

No just the realtors who livelihood depends on it didnt see it coming LOL

 
 
Comment by Professor 🐻
2018-09-04 19:17:26

“To invest in an overseas property without due diligence is to buy a cat in a sack.”

They’d better hope Schrödinger is not the cat’s owner.

Comment by Ol'Bubba
2018-09-05 05:05:41

I guess “buy a cat in a sack” is the Aussie equivalent of “buy a pig in a poke”.

 
 
Comment by Mortgage Watch
2018-09-04 19:29:40

Coppell, TX Housing Prices Crater 9% YOY As Economy Accelerates On Plunging Prices

https://www.movoto.com/coppell-tx/market-trends/

 
Comment by Boo Randy
2018-09-04 19:33:42

And BTW, who the hell buys a cat in a sack?

Comment by Ben Jones
2018-09-04 19:56:04

If you got a long ways to walk?

 
Comment by Mr. Banker
2018-09-05 06:38:53

Some trivia …

“Cat in the sack”

“A ruse, swindle, or suspicious transaction. In English, the more common phrase is “(to buy a) pig in the poke” (a “poke” being an older word for a bag or sack), meaning to buy something without verifying its contents or value first; the “cat in the sack” (a phrase more common to other European languages) refers to an item of lesser quality or value that has been substituted in its place. This is also the basis for the phrase “the cat’s out of the bag” (and iterations thereof), meaning the swindle or secret has been exposed. I thought I was getting a great deal buying my car from that online seller, but as soon as I drove it home, I realized I’d bought a cat in the sack.”

A modern day example: “When I decided to victimize myself by signing a loan document that I decided to not even read that committed myself to paying some stranger hundreds of thousands of yet unearned dollars over a period of several decades was like buying a cat (a dead one at that) in a sack.”

 
Comment by OneAgainstMany
2018-09-05 07:25:03

I would buy a cat in a hat.

 
Comment by nolookpass13
2018-09-05 09:30:35

They are a popular transaction in the red light district.

 
 
Comment by Ben Jones
2018-09-04 19:51:23

‘Telltale signs include a spike in foreign buyers trying to sell homes purchased two to three years ago’

Oh dear…

Comment by Saltwater Catfish
2018-09-04 22:37:49

Coming soon to a California city near you…

 
Comment by Apartment 401
2018-09-04 23:24:18

Realtors are liars.

 
 
Comment by Professor Bear
2018-09-04 23:44:31

EEE-BOLA ALERT!

The Financial Times
US banks
High house prices stifle banks’ mortgage units
Lenders feel the pinch as would-be buyers balk

Robert Armstrong in New York 3 hours ago

…house prices in the US have risen to the point where buyers are keeping out of the market.

“House price appreciation has been running at four times the long-term average for several years,” said Doug Duncan, chief economist at Fannie Mae, the government-backed mortgage guarantor. “As a result, people are saying, ‘at these prices, and with rates rising, I’ll stay where I am’.”

The Case-Shiller 20-city home price index surpassed its housing bubble peak in January, and has continued to rise since. But activity has slowed down, as buyers and sellers are in stand-off.

Respondents to a Fannie Mae survey of home purchase sentiment cited high prices as the top reason it is a good time to sell a home — and the top reason why it is a bad time to buy one.

The number of existing home sales in July fell 1.5 per cent from the prior year, the fifth month in a row showing a decline, according to the National Association of Realtors.

 
Comment by Tim
2018-09-05 02:05:49

“If you’re in the market to buy a home in Sydney, you’re in luck. . . home owners are readying for a sale and want to list their homes sooner rather than later before prices fall any further, especially in Sydney, where asking house prices are down 2.1% over the month to 4 September.”

I found that somewhat amusing.

Comment by azdude
2018-09-05 05:39:16

there is nothing price wont fix.

Comment by Mr. Banker
2018-09-05 06:28:35

Except stupidity.

 
 
 
Comment by Apartment 401
2018-09-05 05:23:21

Morning repost for all the Realtors:

“#1 The student loan debt bubble has now grown to 1.4 trillion dollars.

#2 In 2007, the total amount of student loan debt in the U.S. was just 545 billion dollars.

#3 Over the previous ten years, student loan debt has grown by a staggering 176 percent.

#4 Americans now owe more on their student loans than they do on their credit cards.

#5 In 2003, student loan debt accounted for just 3.3 percent of all household debt. Today, that number has grown to 10.5 percent.

#6 The current student loan 90-day delinquency rate is 11.2 percent.

#7 30 percent of all student loans in the United States are either in “deferment” or “forbearance”. The most common reason a loan is placed into one of those categories is because the borrower cannot pay.

#8 It is being projected that a whopping 40 percent all student loan borrowers will default on their loans by 2023.

#9 From 2007 through 2017, “college tuition costs jumped 63 percent, school housing surged 51 percent and the price of textbooks by 88 percent.”

#10 In 2001, 18.6 percent of all U.S. households led by someone in the 18 to 34 age bracket were carrying household debt. Today, that number has jumped to 44.8 percent.

#11 Each year, more than a million Americans default on their student loans.”

https://www.zerohedge.com/news/2018-09-03/11-rage-inducing-facts-about-americas-wildly-out-control-student-loan-debt-bubble

No “pent-up demand” for $500,000 starter homes happening here.

Comment by Mr. Banker
2018-09-05 06:27:17

“#10 In 2001, 18.6 percent of all U.S. households led by someone in the 18 to 34 age bracket were carrying household debt. Today, that number has jumped to 44.8 percent.”

😁

 
Comment by Professor 🐻
2018-09-05 06:37:07

Who takes the hit on student loan defaults?

Comment by Mr. Banker
2018-09-05 06:40:07

Ask not for whom the bell tolls, it golls for thee.

 
 
 
Comment by Apartment 401
2018-09-05 05:51:35

Hey Realtors, how do you feel about knowing that Realtors are liars?

It’s now better to rent than own in Denver, report says:

“As far as wealth creation is concerned, it’s now better to rent a home than own one in Denver.

“It is clear that we are at a point where markets will begin to see downward pricing pressure, implying in some markets annual pricing increases will begin to slow,” said Ken Johnson, a real estate economist and one of the index’s creators in FAU’s College of Business, in a release.

According to Eli Beracha, co-creator of the index and director of the Hollo School of Real Estate at FIU, recent jumps in home prices play a big role in moving the market to benefit renters. “Currently, the biggest driver for moving the U.S. into rent territory is the fact the cost of ownership is outpacing the cost of renting a like-kind property,” Breech said.

https://www.bizjournals.com/denver/news/2018/08/30/rent-vs-own-denver-report.html

No “pent-up demand” for $500,000 starter homes happening here.

 
Comment by CryptoNick
2018-09-05 06:57:00

Apparently there are still a lot of Yellen Bux out there seeking a toetag home.

People are making more than 500% buying property that doesn’t actually exist
By Aaron Hankin
Published: Sept 5, 2018 8:30 a.m. ET
One investor is planning to build a virtual joy ride and selling tickets for virtual people to ride it:
Decentraland

Virtual currencies are, for many, hard enough to fathom. So wrapping their heads around the concept of a virtual city that you can only enter via a digital-currency toll presents a problem by an order of magnitude.

However, those who can wrap their heads around the concept are banking profits of more than 500% by buying and selling virtual property in a place called Decentraland.

https://www.marketwatch.com/story/people-are-making-more-than-500-buying-property-that-doesnt-actually-exist-2018-09-04

Comment by Carl Morris
2018-09-05 09:01:52

Bithouse? That should end well.

 
 
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