What’s Going On Here?
Some housing bubble news from around the globe. Reuters. “Grosvenor Group, which owns most of London’s upscale Mayfair and Belgravia districts, said the rate of luxury home price growth in the capital looked unsustainable after years of foreigners pouring cash into the safe-haven market. Luxury home prices have surged 53 percent since 2009, compared with 25 percent in Greater London. ‘The extremely high rate of growth over the last two, three years is a thing I’m concerned about and I think it’s probably unsustainable,’ Grosvenor’s Chief Executive Mark Preston told Reuters. ‘We’re reaching values in prime London that are just extremely high by historic standards.’”
Homes Go Fast. “Overseas property investors seeking a buoyant property market in the Eurozone should take a long hard look at Latvia and Estonia. Both countries have seen remarkable average house price rises in the fourth quarter of 2012. Slovenia housing and economic situation is probably the biggest worry for the Eurozone trying to hold its states together. According to the Paris-based Organisation of Economic Cooperation and Development, Slovenia’s local banks, mostly state-owned, are burdened with 7 billion euros ($9.2 billion) in bad loans, equivalent to a fifth of Slovenia’s annual output.”
The Moscow News. “The ongoing financial crisis may be hitting European economies hard, but the continent retains a good deal of interest for Russian customers looking to invest in property abroad. A decline in prices can revive interest in a moribund property market, but only with time to determine the market’s direction.”
“‘If we’re talking about countries in deeper crisis, such as Greece or Cyprus, where the crisis arose very recently, then the behavior of buyers is somewhat different [than in Spain or Italy],’ said Anna Batizi, head of international sales at Moscow Sotheby’s International Realty. ‘Customers have taken a wait-and-see position. The market for residential real estate is responding to the situation with a small delay, in all likelihood with a significant fall in unreasonably high prices.’”
Baltic Business News. “Spanish company Property Logic behind which is Estonian businessman Margus Reinsalu and that was developing a luxury real estate project in Morocco has been sued by about 50 foreign investors, writes Eesti Ekspress. Property Logic is developing Le Jardin de Fleur, a luxury residential development for 1,250 housing units in Saidia, a Moroccon resort on the Mediterranean beach in Morocco.”
“Six yeas ago the company announced grand plans to build a luxury residential estate with fully furnished apartments for 250,000 euros and normally asked half of it up in front. The whole area was in a property boom. All in all, more than 600 investors took the opportunity, many of them from UK and Ireland, but also from France, Norway and Swizerland who have paid Property Logic at least 30,000 euros in advance. Investors claim that the project which raised about 60 million euros in prepayment is stalled and fear that they could lose their investment. Reinsalu himself may lose 10 million euros of his own money in the project.”
The National. “How much is too much to pay for a townhouse that hasn’t yet been built? How many housing units does a growing city need? How much money from other countries is cascading into the UAE’s housing market? These questions are reverberating along the high-rise canyons of Dubai this week, along with an even more pressing one: Can another property bubble be averted?”
“Different price-measurement tools show that Dubai villa prices rose by 18 to 24 per cent in the past year. This time, unlike in 2008, investment money from countries nearby is adding fuel to the frenzy. As The National’s Gregor Stuart Hunter reported yesterday, the rowdy crowd at Saturday’s Emaar sale of 188 off-plan units at Arabian Ranches was not made up solely of people eager to live near Global Village. Many of the purchasers were speculators, paying cash, and some were offering their precious tokens - symbolising the opportunity to buy - on the classified website Dubizzle within hours, at markups reaching 30 per cent.”
“One way or another, the irrational enthusiasm must be wrung out of the property market, and soon. Soaring prices complicate life for ordinary people looking for housing, while they elevate the risk of further turbulence.”
“Meanwhile the city’s housing stock is increasing rapidly. Tomorrow Emaar opens registration for another development, the 640-unit Burj Vista.”
From Emirates 24|7. “Flippers are in action, once again. This time property agents started putting adverts for sale of units in Burj Vista, a luxurious twin-tower project in Downtown Dubai just a few hours after the launch took place on Saturday. In July 2012, the Dubai Land Department had urged developers launching new projects to ‘discourage’ investors from re-selling ‘off plan’ properties unless the project has reached an advanced stage of construction.”
“‘We don’t have any regulation to prevent people from reselling their property. The developer should discourage people from selling off-plan until the project has reached an advanced stage,’ the department said in response to a query by Emirates 24|7.”
The Vancouver Sun. “The different attitudes displayed by people from Hong Kong and more recent arrivals from mainland China contributes to the tension in the city of Richmond over the expansion of Chinese-language signs, according to a report in The South China Morning Post. At the same time, bilingual Hong Kong residents (who can often speak both Chinese and English) have almost stopped arriving altogether in Richmond and Metro Vancouver. Indeed, the newspaper suggests thousands of former Hong Kong residents per year now seem to be going home or elsewhere.”
“Kerry Starchuck’s concerns {about the preponderence of Chinese signs in Richmond) roughly coincided with a boom in mainland Chinese migration. Starchuk, a fourth-generation Richmond resident, said she was unaware of that demographic shift, but she knew changes were afoot in her beloved city. ‘I just knew that something had happened. Our real estate market went crazy. And I was wondering ‘what’s going on here?’ she said.”
From China Daily. “Chinese banking regulators warned that risks related to property loans remain high, and vowed to keep a close watch on such lending this year. ‘Pressure from risks posed by property loans is still rising. These potential risks cannot be neglected,’ said Wang Zhaoxing, a vice-chairman of the China Banking Regulatory Commission. He said a high level of liabilities has been accumulated by developers, with more than half of such companies suffering from negative cash flow in the first three quarters of 2012. ‘Defaults on mortgage loans have increased in some areas since the third quarter, especially for expensive or big properties.’”
“According to a survey conducted by the China Banking Association last year, nearly 70 percent of Chinese bankers expressed worries over the risks that stem from lending to the property sector. Rising home prices cannot simply discount the risks lying in property loans, said Hu Bin, a Moody’s senior analyst. ‘The previous rounds of property control measures from the government have led to consolidation within the property industry and the dropping out of some of the weakest players, which means more tightening would probably hit bigger ones, and that could cause much more serious problems for banks,’ Hu said.”
Macau Business Daily. “The average price of dwellings in Macau was 70,385 patacas (US$8,798.10) a square metre in February, a 71-percent surge over the same time last year, government data show. An uncertain global outlook and Hong Kong’s stagnant housing market will moderate Macau’s flat prices but scrapping the special stamp duty would increase supply and help prices fall further, according to some real estate agents. The government’s regime imposes a 20-percent duty on the price of homes sold within one year of purchase. Centaline (Macau) Property Agency Ltd director Jacky Shek Po Tak said the special stamp duty has sustained high prices since its introduction in June 2011. ‘The special stamp duty has tightened housing supply, which spurs the price,’ he said.”
Dow Jones Newswires. “The Singapore government in January imposed new measures to contain runaway housing prices, which have risen almost nonstop since the global financial crisis. Those steps–the seventh set of curbs since September 2009–helped curb housing-price growth in the first three months of this year. Singapore regulators aren’t planning more curbs for the property market now, as the latest steps appear to be having some effect in containing home prices, Deputy Prime Minister Tharman Shanmugaratnam said in an interview with the Straits Times.”
“Helped by low interest rates and abundant capital, private-home prices have surged nearly 60% since the second quarter of 2009, the market’s most recent trough. The January measures came after home prices jumped sharply in the final quarter of 2012. ‘Over the next two years, there’s a lot of supply coming on the market and I think there’s bound to be some softening in prices,’ Mr. Tharman, who is also finance minister, said in the interview.”
From Reuters. “Thailand’s booming banks are warily watching for signs of a credit bubble, even as they rake up record profits on robust loan growth on the back of a strong economy. The Bank of Thailand has cautioned banks on rising household debt in Southeast Asia’s second biggest economy, and expressed concern that cheap home loans could cause a steep rise in prices similar to that seen in Singapore and Hong Kong.”
“The country’s leading private lenders say there are not worried about a property bubble, but concede there is a possible excess supply of condominiums along Bangkok’s mass transit routes. Minutes from the April meeting of the Bank of Thailand reflected concerns about the risks to financial stability centred on household credit growth and ‘incipient signs of speculation’ in the property market.”
“Kasikornbank, Thailand’s fourth-largest lender by assets, said it is tightening its credit lines. ‘We should take a closer look at housing loans. The number of housing units has increased sharply, while purchasing demand should not rise at the same rate,’ said Patchara Samalapa, executive VP in charge of SME clients.”
The Nation. “Leading property firms, convinced that the market is still experiencing real demand and not developing into a bubble, are continuing to launch residential projects, despite the Bank of Thailand’s (BOT) concern about the state of the market, which it has been monitoring closely due to worries about oversupply and speculation. Pruksa Real Estate chief business officer Prasert Taedullaya said the company was sticking to its plan to launch 78 residential projects worth a combined Bt55 billion this year, despite the central bank’s warning about oversupply. ‘Some locations may be oversupplied, but not the overall market. Our customers represent real demand, buying homes in which to stay rather than for speculation,’ he said.”
“Pruksa also has its own measure in place to control speculative demand by refusing to sell to those wishing to buy more than 10 units, he added.”
From Adelaide Now. “Foreign investment in Western Australia’s property market has doubled in recent years, with experts fearing it is adding to the rising cost of real estate. Real estate agents said about one in 10 off-the-plan apartments in Perth were now bought by Chinese investors. Metropole Property Strategists director Michael Yardney said local buyers could be caught paying too much for off-the-plan apartments because the presence of cashed-up foreign buyers was keeping prices artificially high.”
“‘On completion, valuations for many off-the-plan purchases have come in 10 per cent to 15 per cent below contract price. Unfortunately some local investors have also been caught and paid too much for the properties,’ Mr Yardney said.”
The Daily Telegraph. “He’s Sydney’s most determined seller. Nick Papadopoulos has had his house on the market for nearly two years but he refuses to budge a cent on the price. It has failed to sell after two auctions, three different agents, countless open-for-inspection days and even a feature spot on a reality renovation television show. The retired engineer has even tried to sell it himself, with a home-made sign out the front.”
“Mr Papadopoulos, who bought the tired old terrace for about $60,000 in the early 1980s, parted with approximately $30,000 for the TV show’s renovation blitz. But Mr Papadopoulos, 73, reckons his three-bedroom two-storey terrace house in tree-lined George St, Redfern, is worth every bit of its $839,000 price tag. After 688 days on the market, he said the house is just waiting for the right buyer. ‘I don’t know why it doesn’t sell. I suppose I just need to wait for a buyer,’ he said.”
‘The royal order related to land grants and construction loans will lead to a reduction in the Kingdom’s current exorbitant rents and property prices, a spokesman for the Ministry of Housing was quoted as saying in local media…They believe there has been a real estate bubble in the Kingdom, which will soon be deflated by the government’s action to either build houses and provide them to citizens at reduced prices, or provide land and construction loans.“The market will sooner or later witness a big decline in prices, since the supply is huge, and could in its first stage satisfy a large part of the demand,” said Ibrahim Al-Ubaid, a real estate expert.’
‘Speaking to the Financial Times, Zhang Ke, a senior auditor at Chinese accounting firm ShineWing, warns that local government debt is “out of control” and may lead to a bigger financial crisis than the US housing market crash. “We audited some local government bond issues and found them very dangerous, so we pulled out,” Zhang, who is also vice-chairman of China’s accounting association, told the FT “Most don’t have strong debt servicing abilities. Things could become very serious.”
‘Debts soared when Beijing loosened constraints on local government borrowing in 2008 to help authorities weather the global financial crisis. Local authorities, from provincial governments to village councils, are estimated to owe between 10 and 20 trillion yuan ($1.6-3.2 trillion), or the equivalent of 20-40 percent the size of the Chinese economy. Though Beijing has attempted to reign in local government borrowing, Zhang says the situation is “out of control” and the nature of the debt means it’s difficult to predict when the bubble may pop.’
‘KBank executive vice-president Chatchai Payahanaveechai said KBank targeted to lend 270 billion baht to homebuyers this year, up 50 billion baht from 2012. The new loans will focus on first-home buyers, mainly to meet real demand to reduce risk. As well, it has scrapped the zero-rate campaign for mortgages that began last year to better manage risk amid concerns of rising household debts and property speculation.’
“Our rejection rate for mortgage loans has risen by 2-3% from the beginning of the year to around 30-35% on average, due mainly to higher debt burden of consumers,” he said. At 18% of the country’s gross domestic product, Thailand’s overall mortgage loans do not indicate a bubble. By comparison, the ratios in Malaysia and Singapore are 30% and 70% respectively.’
‘Australia’s biggest mining companies have suffered heavy falls on the stock market in recent days, with BHP Billiton’s share price hitting a nine month low. Anxiety in the resources sector has intensified after China released data on its property sector which points to a sharp rise in house prices in Beijing and Shanghai. A senior economist says there’s speculation now that the Chinese government will have to act quickly to slow the property market and cool the economy.’
‘DAVID TAYLOR: Huw McKay, this latest property prices data out of China, does it have the potential to break the back of China’s economy?
HUW MCKAY: Oh look, I do not think so. Real estate in China is driven by leverage to a point…
DAVID TAYLOR: The market reaction to day must tell you something though?
HUW MCKAY: Look, I think the market reaction, as I said, which happened at the open, and this data came out afterwards at a time when sentiment was already very fragile and confidence was not high, that leaves the market very vulnerable to big moves almost on any new information.
Break the back of the Chinese economy is a very strong and emotive term. So certainly we’re in the midst of another real estate cycle and we’re moving into the tightening phase, perhaps quite quickly. And certainly that has implications where Chinese growth is going to come in later this year and early next year.’
For how long has China trotted out faceless individuals in some agency or other who express “concern” and the need to “closely monitor” the situation? Yet nothing of substance has been done.
Every country with a housing bubble has people in positions of political or economic authority who pretend to occupy the role of contrarian. In this country, for instance, there are a couple of Fed governors who do this regularly. The lack of policy change long ago convinced me that statements from such persons are performances, the function of which is to dissipate any energy outside the system seeking real reform.
The reversal in commodity prices, coupled with the slowdown in china, will have a devastating affect on the Aus/NZ economies (+RE).
‘Although economic figures for March indicated a more stable economy in China, overcapacity continues to trouble the country’s industries. ..the sub-index for finished product inventories went over 50 after declining for eight consecutive months, indicating a worsening situation of excess production capacity. Authorities said China has to cope with overcapacity in traditional manufacturing and emerging industries in the coming years. Otherwise, bankruptcy, debt and unemployment may cause a financial crisis.’
“Overcapacity has exposed structural weaknesses in the process of China’s industrialization,” said Li Yan, director of industrial policy research with the Ministry of Industry and Information Technology, or MIIT.’
‘China’s latest large-scale governance of overcapacity happened after the world financial crisis in 2008, which was followed by a slack economic recovery and a new round of investment plans.’
‘According to MIIT data, output totaling 720 million tons resulted in a loss of 28.92 billion yuan ($4.67 billion) for the country’s iron and steel industry in 2012. This was not a special case. In 2012, 93 percent of electrolytic aluminum enterprises suffered losses, considering the gap of 7 million metric tons between the industry’s real output and capacity, MIIT said.’
It’s a crash, it’s global, and no amount of lies or printing of fiat money will stop it.
It looks to me like hedge funds anticipate a sufficiently major crash to trigger a flight-to-quality move into gold. Gold and Treasurys tend to both rise when a panic results in a rush to the exits out of risk assets.
Hedge funds add to bets that gold prices will rise: CFTC data
April 19, 2013, 5:22 PM
Data from the Commodity Futures Trading Commission’s Commitments of Traders report released Friday showed that managed money, which include hedge funds and commodity trading advisors, took advantage of the recent, steep drop in gold prices to cut down their “short” bets — bets that prices will go lower.
Managed money traders raised their net “long” positioning, or bets prices will go higher, by 21,675 contracts to 68,662 contracts net long, according to Gene Arensberg, editor of the Got Gold Report. Managed money, which had recently built up a record short position in gold, covered 12,411 shorts to show a “still high” 54,025 contracts of short gold futures, he said.
“Managed money covered a goodly portion of their huge short position and they increased their net long position, but they still hold a very large gross short position,” said Arensberg.
“Remember that up until Tuesday, there was little incentive for shorts to cover, as gold and silver had been straight down the prior week, and especially Friday and Monday, and did not bounce appreciably until late in the day on Tuesday,” he said.
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This is not an area in which I claim any expertise. But even a novice Main Street investor should look at this sort of thing and be scared away. Irrational markets can be tolerated, but irrational and manipulated markets cannot.
Irrational markets can be tolerated, but irrational and manipulated markets cannot.
Makes sense. But what happens when everything but cash is irrational and manipulated, and the cash is being eroded away?
I wish I had the answer.
April 22, 2013, 9:39 a.m. EDT
Treasurys turn higher after Chicago Fed
By Ben Eisen, MarketWatch
NEW YORK (MarketWatch) — Treasurys shed early losses Monday after the Chicago Fed released its national activity index showing U.S. growth was below the national trend-line in March.
The index recorded a -0.23 in March, a swing downward from the +0.76 recorded in February. Positive readings indicate above-average activity while negative readings show below-average growth.
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Why should a bad existing home sales number trigger a selloff on the NASDAQ? Makes no sense…
10:03a BREAKING
Stocks maintain negative tilt after housing data
10:04a Treasurys extend gains on home sale decline
Some posters here have suggested the gold price decline was limited to paper, not physical.
If so, why are Indians snapping up the Precious™ in order to take advantage of fire-sale prices?
Indian gold rush amid plummeting prices
With prices crashing, there is frenzied buying ahead of a festival deemed auspicious for investment by many Hindus.
Deborshi Chaki Last Modified: 21 Apr 2013 12:40
Mumbai, India - With gold prices at their lowest in years, Indians are flocking to shops to buy jewellery ahead of Akshaya Tritiya, a Hindu and Jain holy day believed to bring good luck and success.
“My husband got me a Burmese ruby a year ago from Yangon, but I did not make a ring out of it because gold prices were rising constantly. Now I can make my gold ring with the ruby in it,” Kolkata housewife Sarbari Majumder told Al Jazeera.
The price of gold in the city has dropped by nearly $100 per 10 grams in just one week.
“I think it’s a great opportunity to invest in gold now - and, being in India, gold can never go to waste,” said 28-year-old financial analyst Hamsini Amritha.
“I have been saving to buy gold jewellery for some time now, but was reluctant to buy due to high prices,” the Chennai-based analyst told Al Jazeera.
The latest decline in gold prices globally has been the sharpest in the past three decades. “Globally gold prices are going down mainly because people believe that the global economy is going through ‘deflation’ and holding gold is no longer necessary to hedge against inflation” says Chirag Mehta, Fund Manager, Commodities at Quantum Mutual Fund, a Mumbai based Asset Management Company.
“There are also concerns that few a European countries beginning with Cyprus and followed by Spain and Greece will be forced to sell ‘gold’ as part of their restructuring plan” explains.“The worry is that all that extra gold flooding the market will dampen demand as well as prices globally and this has triggered a sell off ” he says.
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Funny. Just last week, gold was cratering, and there was a rush to the exits. Now, it’s up $100 per ounce over the low, and rising.
Gold is fine.
Gold is money. I don’t look at it as an investment. I agree with the words below:
http://www.kitco.com/ind/Laird/2013-04-23-Gold-is-Fine.html
The Economic Times (India Times)
Commodities’ price crash: Recovery sign or a new recession?
Swaminathan S Anklesaria Aiyar Apr 21, 2013, 11.51AM IST
The price of gold, oil and many other commodities crashed last week. The stock markets zoomed and economists smiled, suddenly seeing positive consequences in three areas: inflation, the trade deficit and the fiscal deficit.
These three factors had earlier dragged down the economy to its lowest growth rate for a decade, just 4.7 per cent in the last quarter. But the global commodity crash should reduce inflation in India too, cheaper imports should shrink the trade deficit, and the fiscal deficit should shrink because oil and fertiliser subsidies will reduce. This is a triple helping of manna from above. Does it mean that the worst is over, and that the flagging Indian economy will now take off?
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Geez, that was a long post…
Still, no doubt, that other Ben (bald, beard… you know…. works for Da Fe) will reassure us that this does not constitute a bubble, that it all will be “contained”, that any havoc would of course be “unprecedented” and “unanticipated”.
Netherlands finally looking a bit wobbly. ‘Bout time.
And, in face of all that, my NYC rent continues to rise. Sigh…
Why complain when rents are half the cost of buying?
Tactic 3 from the Losing Debater’s Manual: Straw Man.
As per, “Why complain when rents…”
Just sayin’…
What’s a straw man?
Is the global investment banking community about to pull the plug on the great Chinese capitalistic communist economic experiment?
Gordon G. Chang, Contributor
Op/Ed
4/21/2013 @ 2:16PM
Global Banks Are ‘Divorcing’ China
Could HSBC say “zaijian” to China? (Photo credit: Joybot)
HSBC Group is expected in the next few months to sell its 8.0% stake in the Bank of Shanghai. The financial services giant could receive as much as $800 million from its shares in the second-tier Chinese lender.
Why do analysts think HSBC will unload its holding soon? It looks like the Bank of Shanghai is set to raise $2 billion by selling newly issued stock, on the Shanghai and Hong Kong exchanges, with a value of up to 30% of its existing shares. The listing could occur before June, so HSBC will have to act now if it does not want to be trapped by a lock-up period, typically imposed on existing shareholders for periods of up to a year.
Two years ago, nobody thought HSBC would ever dispose of major Chinese assets. Now, there is talk it might get rid of all of them.
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Gordon Chang?
Nice links Ben….We truly got a world wide housing mania going on…6-8 years ago the common link was loans to anyone that could fog a mirror, securitize and bundle them, and pedel them off too some unwary pension fund in Iceland….
Whats the world wide common thread now ?? “Interest Rates”….And its not as much the borrowers this time around…Its now the cash investors seeking some kind of yeild, or perceived safety….
Twenty+ years of falling home values in Japan shows that low interest rates will not suffice to indefinitely prop up U.S. home prices.
to indefinitely prop up U.S. home prices ??
Its not about the U.S…..Its a world wide phenomenon as Ben’s research shows…And the common thread is Central Bank intervention…
‘low interest rates will not suffice to indefinitely prop up U.S. home prices’
The low rates and QE are making things much worse, IMO. We now know where the trillions in money creation are going. All the while, many millions of people are being denied returns on savings. There’s the large mis-allocation of capital that should be flowing into productive sectors of the economy. If I can find this bubble activity by searching the internet, I know the central banks can see it.
Not only do they see it, it’s what they want and are striving for.
We truly got a world wide housing mania going on
What’s even scarier is that in most countries housing is even MORE unaffordable than here at home.
This isn’t going to end well.
This is very true. House prices in Auckland, NZ are now significantly above the peak a few years ago. Same with China, London and Canada.
House prices in other countries have always been less affordable. Their systems aren’t set up to encourage citizens to own land. They are socialists, so they like the idea of the government having a large stake in everything. The decreased affordability comes from government subsidies and control.
“One way or another, the irrational enthusiasm must be wrung out of the property market, and soon. Soaring prices complicate life for ordinary people looking for housing, while they elevate the risk of further turbulence.”
________________________________/
What a radical opinion that is. Looks like somebody took the red pill. Unless this is the officially-sanctioned phony contrarian opinion of the type I wrote about above.
I’ve not been to Dubai, but I’m still trying to understand why there ever was a market for ultra-luxury housing in a desert country where people are advised not to spend more than 15 minutes at a time outdoors in the summer. Plus, the indoor ski resort could not be a clearer indication of a place where hubris is out of control.
Are the new developments being built by the same slave labor that was stranded in the country in 2008?
It’s a place with zero taxes.
Although, everything else is much more expensive.
Bulletin U.S. indexes mixed as stock market struggles to rebound from worst week of year
U.S. existing-home sales hit the skids as spring arrives
April 22, 2013, 10:00 a.m. EDT
Existing-home sales decline 0.6%
By Ruth Mantell
WASHINGTON (MarketWatch) — Existing-home sales declined 0.6% in March to a seasonally adjusted annual rate of 4.92 million, as longer-term trends posted substantial gains, pointing to a continuing recovery, the National Association of Realtors reported Monday. Sales of existing homes in March were 10.3% higher than during the same period in the prior year. Meanwhile, median prices hit $184,300 in March, up 11.8% from the same period in the prior year, the largest year-over-year price growth since November 2005. Low inventory is supporting prices. Also, sales of higher priced homes have seen large gains over the past year, as distressed-home sales have decreased. Economists polled by MarketWatch had expected a pace of 5.03 million existing-home sales for March, compared with an original estimate of a 4.98 million rate in February. On Monday, NAR revised February’s rate to 4.95 million. Inventories rose 1.6% in March to 1.93 million existing homes for sale. The months’ supply rose to 4.7 in March from 4.6 in February.
“Overseas property investors seeking a buoyant property market in the Eurozone should take a long hard look at Latvia and Estonia”
The great thing about the Baltic states is that the people there tend to like Americans, since America never recognized the USSR’s ownership of those countries. Nice places to visit, too.
As far as a great place to invest money in property? Ha. Don’t do it, unless you enjoy the thrill of your money on a terrifying roller coaster ride.
Latvia has a shrinking population.
Over 10% of the country moved out in the past 5 years. Mostly those between the ages of 20-30 have immigrated.
Housing prices in Southern California show big gains in March
April 17, 2013|By Alejandro Lazo
Southern California’s median home price rose 8% in March from February and increased 23.4% year-over-year.
Southern California’s housing market is headed toward the spring shopping season with strong price gains and a steady improvement in sales.
The robust price gains — driven by a low inventory of homes listed for sale, more move-up purchases and fewer foreclosures — should help solidify a recovery that began last year, experts said.
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It’s not a recovery; it’s a rebubble.
‘They’re calling it the great “senior sell off” and it’s scaring suburban America. Still recovering from the housing market crisis of 2007-09, America’s latest concern is a looming glut of unsellable suburban homes as ageing baby boomers seek to downsize.’
‘In many ways Australia’s social trends have echoed those of the US. Our own baby boomers are advancing towards retirement, with the proportion of over 65s nearly trebling from 8.8% in 1971 to around 21% by 2026 and 28% by 2056.’
At least they’ll have room for their underemployed boomerang kids and their families in those unsellable houses.
The sale will be forced when they all die in the next 10-15 years.
The sale will be forced when they all die in the next 10-15 years.
Or their Lucky Ducky heirs will keep the house. That’s how it works in the 3rd World.
In America, the heirs tend to want to sell it quick so they can get the cash to feed their own alligators. I don’t think they’ll want to make payments on dad’s house.
“all die in the next 10-15 years.”
Demographics will be a challenge, but they won’t all die in the next 10-15 years.
The big bulge from boomers is a bit later…the first wave is relatively small…they just turned 67 years old. Not even the first wave will “all die” in the next 10-15 years.
Sure, there will be some 92 year old survivors. Not very many though. Most will check out around 72-75 years old… first wavers in 5 to 8 years.
Per the Social Security administration:
A man who turns 65 has a life expectancy of 83.
A woman who turns 65 has a life expectancy of 85.
People who die young drive down the overall life expectancy.
You’re off by a decade in your assumptions.
A man who turns 65 has a life expectancy of 83.
A woman who turns 65 has a life expectancy of 85.
How about the average mileage on the mobility scooter?
The “die young” crowd lived like grasshoppers in their 20s, counting on youthful metabolism to maintain their looks, then married in their late 20s or early 30s and started families, then (oops) no time to hit the weights or swim the miles. Another decade or two of sedentary lifestyle, long commutes, teenagers causing stress, and that makes three or more decades of obesity. Hence death in the late 60s / early 70s.
The lucky ones born with a golden spoon who don’t have to work, have time for both fitness and families. They live longer. Or for those whose careers are involved in fitness perhaps. Then the ones with the genes.
Some people decided early on that they cannot have all three: savings/career, relationships/family, and health. It’s all a matter of priority. Do you want to die happy with grandchildren at a debilitating 70? Or do you want a healthy, alert, strong age 70 and stave off the debilitation until 90? Miracle drugs might be developed in those 20 additional years to remove most of the debilitation and not have it return again until age 110.
“America’s latest concern is a looming glut of unsellable suburban homes as ageing baby boomers seek to downsize.”
Nobody* could have seen it coming!
* Except we did.
Here (and probably in other areas), the bizarre thing about the concept of seniors “downsizing” into some new place is that the new place is often more costly than the old place e.g. here I could sell my house for $ 200 K, but the town house/semis’ marketed to “active adults” aka seniors are $ 250 K - 300K plus you are expected to pay some sort of HOA fee, you have less space, have to live closer to annoying neighbours; all for the doubtful advantage of not having to mow a lawn or shovel the driveway.
Dave, you’ve summed up why my mother refuses to sell the house. Especially when it comes to the annoying neighbors part.
If you think I get annoyed with the people around here, don’t make my mother mad. Just don’t. There’s a former neighbor of hers who left the area, oh, about 25 years ago. My mom STILL badmouths her.
My father in law lives in one of those places. He’s nearly deaf, won’t buy a hearing aid, and is addicted to the shrieking pundit channels. His neighbors have begun to complain about the noise.
I cannot imagine being trapped in their situation.
And if you live in CA, your property taxes with your current house are protected under prop 13…they would reset higher if you sell and buy a different, more expensive house.
they would reset higher if you sell and buy a different, more expensive house ??
Yes, but not one that is cheaper in some counties…I believe their are about 5 counties in California that allow a one transfer of your tax base Santa Clara County being one of them…
That is true. If you don’t have that particular protection, even selling to buy a cheaper house can potentially raise your property taxes (that’s what happened to my parents).
This is especially the case if you leave to go to a state where p taxes are higher than CA (which is a lot of states).
Nice link…Thanks Ben…
‘Slovenia is facing serious challenges,” EU Economic and Monetary Affairs Commissioner Olli Rehn told Reuters on Thursday, calling for decisive action to restructure and recapitalize the banking sector among other urgent measures.’
‘The combination of state ownership, a tight-knit political network, and bad management helped trigger the lending spree from state banks that, following a collapse in real estate prices, has gone sour.’
http://finance.yahoo.com/news/insight-eurozone-backwater-slovenia-became-143516906.html
“Overseas property investors seeking a buoyant property market in the Eurozone should take a long hard look at Latvia and Estonia. Both countries have seen remarkable average house price rises in the fourth quarter of 2012…”
Translation: ‘Those of you who missed the earlier opportunity to hurl your bodies into the path of an speeding, financial-freight-train now have one last chance… In scenic Slovenia!’
Forget about banking regulators. This has nothing to do with lenders anymore. The money is coming from investment firms such as Blackstone. It’s hilarious. Because investment firms are not regulated as much as banks, there isn’t much that governments can do to intervene in the Rebubble. They can’t really stop it from happening, and they can’t really do anything about the inevitable crash. They could reduce the number of building permits they issue, but they never do. I think this one will crash on a dime.
I took a look at Blackstone’s latest quarterly report. I discovered that last quarter (not this quarter), they spent 2-3x their normal spend on RE. Then, this quarter, they only spent 1/2 of their commitment for the quarter, and 1/2 of last quarter’s spend.
Last quarter’s giant spend coincides exactly with the steep decline in inventory in Phoenix. I guess they couldn’t spend all their money this quarter because they bought up all the inventory last quarter.
What government regulation could possibly stop this from happening? None! It’s their money and they can spend all of it on RE if they want. They will crash rental prices and be forced to sell into their own bubble.
Last quarter’s giant spend coincides exactly with the steep decline in inventory in Phoenix. I guess they couldn’t spend all their money this quarter because they bought up all the inventory last quarter.
What government regulation could possibly stop this from happening? None! It’s their money and they can spend all of it on RE if they want. They will crash rental prices and be forced to sell into their own bubble.
Here in Tucson, I’m noticing a little uptick in the resale inventory. Much of it appears to be houses that were bought as investments during the previous decades. I guess the owners are tiring of the landlording game.
I’m also seeing a veritable sea of apartments, houses, duplexes, triplexes, etc. with “for rent” signs creaking in the breeze.
Methinks we have too many rentals chasing too few tenants.
Look for some gasbag politician to suggest outlawing birth control to remedy the situation.
‘Swedish apartment prices jumped 8 percent last year and have soared 38 percent since late 2007 to a record, according to Svensk Maeklarstatistik, which compiles monthly data on Swedish home prices. A 200 square-meter (2,150 square-foot) apartment in downtown Stockholm now costs $1.9 million, on average. That’s prompted some analysts such as Bengt Hansson at the National Housing Board to warn the market is in the grip of a bubble’
‘As central banks in the euro zone, the U.S. and Japan respond to the global economic crisis by keeping interest rates at record lows, some of the world’s richest countries are struggling to contain overheating fanned by easy money.’
‘Sweden’s central bank signaled last month it’s unlikely to ease policy further amid concerns it could boost credit growth, after cutting rates four times since December 2011. Instead, it plans to raise its benchmark repo rate, currently at 1 percent, in about a year, the bank said Feb. 13. An interest rate increase combined with higher unemployment may tip the housing market in the other direction, Jens Hallen, director for financial institutions at Fitch Ratings, said last month.’
‘The average price for an apartment in central Stockholm stood at 61,878 kronor ($9,531) per square meter at the end of February, up more than 25 percent in the past four years, according to Maeklarstatistik. In Helsinki the average price of three-room apartments in its most central neighborhood was 5,340 euros ($6,865) per square meter last year, 28 percent lower than in Stockholm, according to government data and Bloomberg calculations.’
‘In central Oslo, prices are closer to those in the Swedish capital, at 52,600 Norwegian kroner ($9,028) per square meter, according to data from the Association of Real Estate Agents. In London, the price of a “mainstream apartment” is $12,254 per square meter, while in Paris, it’s $7,281, according to Knight Frank data.’
‘Swedish households owe, on average, the equivalent of a record 173 percent of their disposable incomes to their banks, the Riksbank estimates. Governor Stefan Ingves has repeatedly warned that keeping interest rates too low for too long risks exacerbating risks in AAA-rated Sweden’s mortgage market.’
‘Cash-strapped first-time condo buyers in Surrey are about to get a shot at their dream home — as long as they’re prepared to live in a space the size of a dorm room. A new development called Balance in Whalley is offering what the company calls “Canada’s smallest-ever condominiums” — units starting at 297 square feet — and that’s including the balcony.’
‘The smallest suites at 297 square feet start at $109,000. Sixty per cent of all the suites are under 305 square feet. There are just 32 parking spaces, so residents without cars don’t have to purchase one, and few amenities — just one meeting room and a co-op car. Balance buyers will need incomes of at least $22,000; people making $17 an hour and up. The 307-square-foot show suite, at $126,000, was a tight squeeze.’
‘Developer Tien Sher President Charan Sethi says they’re designed to meet the needs of a younger generation and a working-class demographic with small salaries, but big dreams of owning their own homes. “To a certain degree, It’s what you can afford, he said. “If you are making $17 an hour and your dream is to buy a new home, I’m sorry, but you can’t. The idea is to try and see if we can fulfil that dream of yours and give you a very basic home first, and from there you can flourish and do the next one.”
“We have to start thinking about what the next generation wants,” he said. “It’s not what I want, or what some of you may want. The next generation wants a pad of their own that they can call their home. They don’t entertain at home … their dining room is actually restaurants.”
‘When Sethi pulled down the murphy bed, which doubled as a couch, the foot was only a few feet from the kitchen counter — it was almost possible to make breakfast from bed.’
If you can’t afford to live in anything bigger than 300 sq ft, then you can’t entertain at restaurants. That would be very expensive.
‘The first eligible buyers selected by lottery for flats in Greenview Villa in Tsing Yi, a subsidised housing project by the Hong Kong Housing Society (HKHS), were invited last week to choose their units. Guess how many turned up?’
‘On the first day, just 60 per cent of the first 160 showed up. By Saturday, only 802 of the 1,600 applicants called appeared, and 717 flats were sold. This was in sharp contrast to the frenzy when the development was launched in January that led to the flats being oversubscribed almost 60 times.’
‘All that was needed was the payment of a token sum to be considered for placement through lottery and to enter into a formal agreement to buy only on choosing a flat.’
‘Prices were set at between HK$2.4 million and HK$5.1 million, or an average of HK$6,510 per square foot in terms of saleable area. HKHS has said the prices were about 30 per cent lower than the market rate for new units in the area. The scheme also assures buyers mortgages of up to 90 per cent of the property price from banks and other recognised financial institutions.’
‘Incentives such as these probably explained the overwhelming response when the project was launched. But things have gone downhill since.’
More on the hedge fund buying.
“There are thousands upon thousands of families that have bad credit and can’t qualify to buy a home,” Prestia said in a telephone interview. [ed. note: They can't buy at the prices the government wants.]
Buying sprees by investment firms such as Mullen’s means they are often paying a premium, according to Bruce Norris, president of the Norris Group, a closely-held real estate investment firm in Riverside, California. Norris paid $131,000 for a nine-year-old five-bedroom house in October that he fixed and resold to Fundamental REO for $175,000 the same month, according to property records.
“If those guys bought from us, we sold at retail,” Norris said in a telephone interview. “They aren’t finding deals. They’re just finding inventory.”
http://www.bloomberg.com/news/2013-04-22/goldman-backs-mullen-in-rentals-after-subprime-short.html
Subtle change in the discussion. More talk of finding deals and buyer affordability.
In other words, these “institutional investors” are just as d-u-m as the banks ever were.
Yup, they’re really talented. There’s nothing like paying above the retail price.
“Yup, they’re really talented. There’s nothing like paying above the retail price.”
And it’s the wisdom in this statement that makes you unique.
The days of buying in bulk at a discount are over. You can still get one-off opportunities, but you need to make 100 offers at below the ask to get a few takers who are willing to go along with the certainty of a cash close for the lower price.
However, that kind of effort doesn’t work for guys trying to deploy billions. It works OK with a group trying to deploy millions.
The “value play” in buying homes for rent is in the process of ending…now we see the “momentum play” kick in.
The days of paying grossly inflated prices for what is always a depreciating asset are over.
Fundamental REO has at least three potential exit strategies, according to its marketing materials: sell homes one by one in six to eight years to capture price appreciation; sell in bulk to institutional investors such as insurance companies seeking cash flow; or go public as a real estate investment trust.
If big funds sell en masse in a few years, it may add downward pressure on house prices at a time when today’s low mortgage rates will be history, said Josh Rosner, an analyst with research firm Graham Fisher & Co, who warned in early 2007 that subprime loan-linked securities posed risks to the economy.
“It’ll be interesting to see if people who are used to buying and selling assets can be committed to holding assets, or efficient in managing and disposing of them,” he said.
It seems that nesting instinct even clouds the judgment of never-been-married single women when it comes to the home purchase decision.
Why would a single somebody who is grossly unprepared for retirement want to blow money on a falling-knife home purchase?
OH I SEE: Nesting instinct!
Single Female Boomers: Choose Your Castle Carefully
by Casey Dowd
Published April 11, 2013
FOXBusiness
Female baby boomers might have helped crack the glass ceiling, broke college student stereotypes and re-crafted the image of working mothers, but new research shows they are grossly unprepared for retirement.
According to the Transamerica Center for Retirement Studies, close to half of baby boomer women do not have a retirement strategy and more than half expect to work after 65 or simply do not plan to retire. What’s more, a new Metlife Study finds women in the U.S. live, about an average 8% longer than men, meaning they should plan on having more savings.
Single, female baby boomers face unique issues when it comes to retirement—specifically when choosing housing, according to retirement expert and author Jan Cullinance. Her new AARP book, The Single Woman’s Guide to Retirement is packed with specific details to help take the guesswork out of retirement, and she answered the following questions on what single women should look for when buying their retirement home. Here is what she had to offer:
Boomer: What makes boomer single women special when it comes to owning or buying a home?
Cullinane: Single women make up the second largest contingent of home purchasers, according to the National Association of Realtors. One out of every five homes is purchased by a single woman, twice as many as compared to single men. Single women see homes as more than just a place to live, it’s a symbol of success,and provide roots and security. And, with more than 25 million single (never-married, divorced, widowed) women over the age of 45 in the United States, it’s a huge and growing demographic.
…
It’s global, it’s different this time, it’s happening to all the usual suspects. OMFG, the Fed did it. They blew another real estate bubble. We were wrong.