If Investors Find It Difficult To Exit, The Market May Crash
Some housing bubble news from around the globe. The South China Morning Post, “On paper, Vancouver is not a wealthy city. But it is a city that is attractive to wealthy overseas buyers, mostly from mainland China, who are driving up prices. Investors are either securing their money in real estate for several years, or purchasing pre-sale properties and flipping them for tremendous profits. Developer Thomas Fung has an office and retail project under construction, and already has had several of the pre-sale purchasers flip their spaces for around 50 to 60 per cent profit.”
“Because of residential property investments, certain parts of the city are underpopulated. In downtown Vancouver’s Coal Harbour, an estimated 23 per cent of all condos are empty. The wealthy owners have not rented them out. ‘People who can afford to buy those condos are so rich they don’t even care about the return on their investment,’ Fung said.”
The Telegraph on China. “China’s shadow banking system is out of control and under mounting stress as borrowers struggle to roll over short-term debts, Fitch Ratings has warned. ‘The credit-driven growth model is clearly falling apart. This could feed into a massive over-capacity problem, and potentially into a Japanese-style deflation,’ said Charlene Chu, the agency’s senior director in Beijing.”
“Concerns are rising after a string of upsets in Quingdao, Ordos, Jilin and elsewhere, in so-called trust products, a $1.4 trillion (£0.9 trillion) segment of the shadow banking system. Bank Everbright defaulted on an interbank loan 10 days ago amid wild spikes in short-term ‘Shibor’ borrowing rates, a sign that liquidity has suddenly dried up. ‘Typically stress starts in the periphery and moves to the core, and that is what we are already seeing with defaults in trust products,’ she said.”
The Edge Malaysia. “A recent poll among auctioneers revealed that a number of local and foreign buyers have not been servicing their loans for high-end property purchases made a few years ago, during the height of the luxury high-rise residential property boom in Kuala Lumpur. Most of these owners have tried to sell or rent out their units but find it difficult to sell residences priced above RM 1 million. ‘Eventually, these buyers decide that they would rather lose their 10% down payment than to continue being stuck in this situation,’ said auctioneer Dan Tan.”
“‘I have been told there is a condominium along Jalan Tun Razak that is currently only 60% occupied. The development was completed four years back,’ says auctioneer Abdul Hamid PV Abdul. Abdul Hamid add that although there have been numerous industry reports regarding an obvious oversupply of condominiums in the KLCC area, more high-end, high-rise developments are set to be launched.”
The Saigon GP Daily in Vietnam. “The People’s Committee of Ho Chi Minh City convened a meeting on June 4 with related departments associated with housing and construction to discuss the ongoing crisis of unsold housing inventory in the City. Around 308 condominium blocks in HCMC have had to put on hold all construction for lack of buyers and frozen property market. Since the beginning of the year, 1,877 apartments were sold, accounting for 13 percent of total apartment inventory but 12,613 apartments are still unsold.”
The Times of India. “Builders across the country have been worried as unsold housing stock have been piling up in the recent months. Chennai’s unsold housing stock, for instance, has risen from 20,000 units a year ago to 45,000 units now as per a study conducted by international realty consultant Jones Lang LaSalle. Sales have dipped across seven major markets in India in the first quarter of 2013, said JLL chairman and country head Anuj Puri.”
“About 35% of Chennai suburbs unsold housing stock is on the OMR, said India Property CEO Ganesh Vasudevan. ‘If investors who have funded the projects find it difficult to exit, the market may crash as it happened in the case of NCR,’ he said.”
The New Zealand Herald. “A bank economist has warned of consumer spending sprees and widespread economic fallout if house price rises continue, just as QV showed the sector continuing to rocket ahead. Felix Delbruck, Westpac Institutional Bank senior economist, worried about the effects of a rocketing market, saying it was true that, about two years ago, people had been paying down debt, but that trend now appeared to have reversed. Mortgage growth had picked up since early last year ‘and indeed now seems to be growing slightly faster than household incomes. Mr. Delbruck said borrowers could remortgage, ‘effectively using the house as an ATM.’”
“QV operations manager Kerry Stewart said Auckland prices were still very high and a ’somewhat desperate’ feeling was emerging among buyers searching for good houses at reasonable prices. The speed with which people had to make an offer had seen some forgo the usual due diligence.”
Bdaily Business News in the UK. “Announced during the Budget, Help to Buy helps people purchase properties with deposits as low as 5% but has also been criticised by the IMF, outgoing Bank of England Governor Sir Mervyn King and former Chancellor Alistair Darling. Early results however show the scheme to be exceeding expectations with 4,000 new homes sold in the two months since it was announced. Figures out this week have also shown output in the construction industry rising for the first time since last October, with house builder Bellway also reporting a boost in sales.”
“Ajay Jagota of KIS Lettings, who manages properties for 700 landlords believes that despite the dangers Help to Buy could yet prove a crucial catalyst to economic recovery. He said: ‘Of course Help to Buy runs the risk of fuelling a new housing bubble, especially if demand for homes starts to seriously exceed supply - but if it is properly-implemented and only ever used (as) a short-term measure there’s no reason to believe the sky is about to fall on our heads.’”
“‘It seems to me that Help to Buy’s critics are judging it only on the basis of the most apocalyptic worst-case scenario – they’re like people who won’t go to hospital when they’re sick in case the ambulance crashes. If you won’t do something because of a hypothetical risk, you won’t do anything. If you look at the details the government’s financial exposure is minimal, and if lenders behave cautiously – which is there is every reason to presume they will, giving their recent reticence to lend at all – the risks should be minimised, especially if the government manages the situation effectively,’ he said.”
The Foreigner on Norway. “Estate agents are signalling people must be prepared for it to take longer to sell their homes. ‘The last three-month growth rate is now at 0.8 per cent if you calculate average growth from the previous three. It hasn’t been this low since 2009,’ senior analyst Katrine Godding Boye at Nordea said to Aftenposten. ‘This spring has been weak price-wise.’”
“Property sales major Eiendomsmegler1 CEO Odd Nymark said ‘We note that the market has been a little slower in the last three months. There are no housing types that stand out, it’s across the board. It’s is a bit strange since this is peak season.’”
“An Oslo resident Marianne Klemp told the paper she is still struggling to find a buyer for her central Oslo two-room apartment and has now had to reduce the price. ‘There was one person a day who came to the first two viewings and a total of about five people at the next ones. I’ve just got an offer of 200,000 below the sales price, but it’s 150,000 less than what I paid for it two years ago,’ she explained.”
‘Taiwan is faced with an enormous housing bubble, which has only become worse due to loose monetary policies implemented by major economies since the global financial crisis began in 2008. One must first understand the reason causing property prices to climb for the past 11 years, despite an oversupply and low-occupancy rate in Taiwan real estate market. The answer is simple. Since the financial crisis, almost all major economies have coupled low interest rates with loose monetary policy, causing a huge increase in capital flow and money supply and freeing up funds for speculative investment in real estate. In Taiwan the incentive to invest has been even stronger due to a sudden drop in estate and gift taxes after amendments to the relevant laws in 2009.’
‘While investors competed to put this easy money into property, it was easy for those in the housing business and speculators to ramp up prices.’
‘SINGAPORE: The overall median cash-over-valuation (COV) for resale HDB flats last month was the lowest in 10 months, with analysts saying it could drop further. The overall median COV dropped by S$4,000 to reach S$26,000 in May, the lowest level since last July. Propnex CEO Mohd Ismail said the curb imposed on loans for HDB flats is a major factor. He said: “One of the key reasons why the COV started to dip was… the MSR - mortgage servicing ratio. With the new implementation, the ability for a buyer to take loans has been very much reduced.”
“From the usual 40 per cent of someone’s income, it’s been reduced to 35 per cent if someone is buying public housing from HDB loan. For example, PRs and private property owners, or those who don’t qualify for a HDB loan, will be subjected to financial institutions - banks. In the past, prior to the cooling measures, one could utilise 50 per cent of their income toward servicing their mortgage. But ever since the January cooling measures, it’s been reduced from 50 per cent to 30 per cent - and that’s a huge cut.”
‘How will the Abenomics gamble effect Japan’s largest neighbour, and the world’s second biggest economy, China? Not well, it is predicted. State-controlled newspaper ‘China Daily’ said against the Yen, the value of the Chinese Yuan had increased significantly, while the value of the currencies of India, South Korea and Thailand had also increased.’
“This development may curb the economic recovery of these countries,” the newspaper said last week. “The stock and debt markets of these countries, too, may come under pressure, because fears of the Yen depreciating further could force more international short-term capital to flood their markets. That would not only cause their stock and debt prices to fluctuate, but also could lead to inflation.”
‘There’s little love lost between the two, so the negative stance is hardly surprising. But more worryingly, University of Limerick economist Stephen Kinsella said the Japanese policies could cause the current property bubble in China to burst. “China is already in a bubble. If Japan is inflating, it’s changing the terms of trade with China and that could really harm China because it would pop the Chinese real estate bubble early.”
That the bubble has reared its ugly head in Saigon of all places just goes to show how people around the globe have been brainwashed into believing that housing is supposed to be unaffordable and just how fubar’d the global situation has become, with expensive housing sitting empty in the four corners of the world.
The possibility of animosity between China and Japan is just one of a couple of historically troubled international relationships, the existence of which is discounted by conventional wisdom, that could play a big role in the near future. Another would be Germany and Russia.
I don’t think Germany and France will have another conflict, but with what’s coming, I don’t think anything is impossible.
“State-controlled newspaper ‘China Daily’ said against the Yen, the value of the Chinese Yuan had increased significantly, while the value of the currencies of India, South Korea and Thailand had also increased.’
“This development may curb the economic recovery of these countries,” the newspaper said last week. ”
Oh, you mean China’s pisced because Japan is devaluing its currency on purpose? Pot, meet kettle.
I don’t know if this is still the case, but when I was working in S’pore in the late 1990’s, the government endowed all citizens at birth with a personal fund of about $2M USD from which they could draw for educational or medical expenses, higher education, or purchasing/leasing state-approved real estate. Public housing projects were cheap and ubiquitous and it seemed the vast majority of private homeowners were expats — mostly English-speaking and colonially-oriented.
Cars had a 100% registration tax, cost double what they would in the US to purchase, and could only be licensed through a lottery, but the place still had the highest per capita ownership of Rolls Royces in the world, and you could pick up your telephone, press 9 and have a taxi at your door in less than five minutes. Food orders and deliveries were equally simple and prompt.
Global Crater
Probably followed by global war
Yes.
Falling housing prices to dramatically lower and more affordable levels results in Armegeddon according the the Housing Crime Syndicate.
I never did buy into the logic of how rising home prices was the ticket to make all Americans better off.
I have the feeling that the destruction of this fallacy is nigh at hand.
Not lower housing prices, but all the creditors that will get stiffed. If the trillions in MBS’s become worthless, a lot of powerful people are going to be really pissed.
They won’t be “worthless”. They’ll merely be worth what the underlying asset is worth. In this case, a house.
“If the trillions in MBS’s become worthless, a lot of powerful people are going to be really pissed.”
Doesn’t that pretty much explain why the Fed takes $40 bn of these a month onto its balance sheet?
They won’t be “worthless”. They’ll merely be worth what the underlying asset is worth. In this case, a house.
True, but if your predictions of 65% price drops come true, they will still lose most of their money, and probably demand a bailout, while rattling sabers.
Demand all you want.
Demand all you want.
Like I said, while rattling sabers. And the Nuke club will just keep growing.
Witness all the fuss China makes over a disputed, worthless, uninhabited island. Now tell them that the trillions in bonds they own are worth 30 cents on the dollar.
True, but if your predictions of 65% price drops come true, they will still lose most of their money,
Does the value of the MBS include the interest payments? If I buy a $300K house at 10% down and 4% interest over 30 years, I will pay $455K all told. How much do they buy the MBS for? $100K, $455K or something in between? Could the bondholders lose money even if the house retains its value?
How much do they buy the MBS for? $100K, $455K or something in between?
None of the above. The way you asked the question makes me suspect that you could use a primer on bonds.
The MBS all get sliced, diced, and mixed together. At the end of the day, they are NEW bonds, backed by the collateral, but still just new bonds.
They bought a bond for $X; that is called the “face value”. The bond pays some interest on a stated schedule; that is called the “coupon”. The bond will exist for some length of time, after which it will pay out the face value; that date on which it pays out the face value is called the “maturity date”. The payment-weighted-average-time of all of the cash-flows that the bond will pay out over its lifetime is called the duration (usually only interesting when talking about a larger pool of bonds, but each bond has one as well).
So in your example, the $270K mortgage got sliced and diced, and every bond buyer who bought a piece of that pool (assuming only a single tranche) got a fractional part of that $270K mortgage. The $270K would contribute to the face value of many bonds, in the aggregate total of $270K. The interest that you quote as part of the total pay-off is what contributes to the coupon payments.
Could the bondholders lose money even if the house retains its value?
To address your last question: because the _market_ value of a bond fluctuates over time, the bondholder can always lose money by selling. If they hold to maturity, then the market value means nothing, but the stream of coupon payments and the final face-value payment are what a bondholder cares about.
The bondholders can also lose money even if the house retains its value, because the process of paying a bank to service the loan (while in default) has costs, reclaiming the collateral via foreclosure has costs, (possibly) fixing it up to market it has costs, paying a RE agent to sell it has costs, they may pay closing costs, etc, etc.
So clearly even a property that maintains its value can cost the bondholders quite a bit…
Thanks to extreme globalization with frictionless capital flows, when and if the Fed takes away the punch bowl this time around, the entire world-wide housing bubble is at risk of a cascading debt default to depression.
‘One of these days I am going entitle an article “You Are Going to Lose All of Your Money and Be Very Unhappy About It,” but today is not that day, despite all of the reasons we have to be cautious and defensive.’
‘Those reasons include Japan’s tragicomic inability to destroy its own currency; the strong signal our own highs in money-printing have been reached, at least for this iteration; the unwinding of longstanding bond market complacency as evidenced by rising swap spreads and swaption volatilities; the unwinding of yen and dollar trades into a host of markets ranging from Canada to a who’s who of emerging markets; and, finally, today’s topic, the unprecedented surge in normalized real interest rates.’
‘Japan has demonstrated during all of its Lost Decades how simply printing money does not lead to inflation; indeed, to the extent negative real rates simply enabled low-productivity government transfer payments globally, they short-circuited the creation of money and credit in the banking system. The prospect of central banks ending their monetization of public debt meant fiscal stimulus would contract at the same time monetary stimulus was slowing. This meant real interest rates had to rise to start to ration capital to higher and better uses; restated, we might see an actual market rate for money once again in our lifetimes.’
http://finance.yahoo.com/news/dissecting-jump-real-interest-rates-140000467.html
‘Japan has demonstrated during all of its Lost Decades how simply printing money does not lead to inflation; indeed, to the extent negative real rates simply enabled low-productivity government transfer payments globally, they short-circuited the creation of money and credit in the banking system.’
And yet central bankers manage to maintain the faith; DAMN THE TORPEDOES!
‘One of these days I am going entitle an article “You Are Going to Lose All of Your Money and Be Very Unhappy About It,”
And the really bad news is that some of those people who are gonna get screwed have armies and some even have nukes.
That is why I am buying Real Estate. They can never take away my real estate and you can never lose money…
‘One of these days I am going entitle an article “You Are Going to Lose All of Your Money and Be Very Unhappy About It,” but today is not that day, despite all of the reasons we have to be cautious and defensive.’
Thanks to extreme globalization with frictionless capital flows, when and if the Fed takes away the punch bowl this time around, the entire world-wide housing bubble is at risk of a cascading debt default to depression.
Which is why I doubt they will take the punch bowl away anytime soon, and that all the talk of ending QE3 is just that: talk.
Whether the Fed continues it’s price fixing attempts isn’t the point. Massively inflated prices of anything always results in collapse. Especially on houses because they depreciate.
Massively inflated prices of anything always results in collapse.
I don’t believe that we have ever had a case of a bubble being propped up quite explicitly by someone with infinitely-deep pockets.
This time really is different. Will it end differently? I somehow doubt it. But past results may not be a good indicator of future performance.
‘all the talk of ending QE3 is just that: talk’
While most in the financial media watch the central banks, what has resulted from recent monetary policy is more important, IMO. From the Telegraph piece:
‘Fitch warned that wealth products worth $2 trillion of lending are in reality a “hidden second balance sheet” for banks, allowing them to circumvent loan curbs and dodge efforts by regulators to halt the excesses.’
‘This niche is the epicentre of risk. Half the loans must be rolled over every three months, and another 25pc in less than six months. This has echoes of Northern Rock, Lehman Brothers and others that came to grief in the West on short-term liabilities when the wholesale capital markets froze.’
‘Overall credit has jumped from $9 trillion to $23 trillion since the Lehman crisis. “They have replicated the entire US commercial banking system in five years,” Mrs Chu said.’
‘The ratio of credit to GDP has jumped by 75 percentage points to 200pc of GDP, compared to roughly 40 points in the US over five years leading up to the subprime bubble, or in Japan before the Nikkei bubble burst in 1990. “This is beyond anything we have ever seen before in a large economy. We don’t know how this will play out. The next six months will be crucial,” she said.’
‘The real question is what this means for growth, and therefore for social and political risk,’ said Mrs Chu. ‘There is no way they can grow out of their asset problems as they did in the past. We think this will be very different from the banking crisis in the late 1990s. With credit at 200pc of GDP, the numerator is growing twice as fast as the denominator. You can’t grow out of that.’
I’ll point out again; in looking for news on China, there is zero serious reporting on real estate in the state-run newspaper websites. This came about in just the past 3 or 4 weeks. The only reporting on China’s real estate is coming from outside the mainland.
“‘Overall credit has jumped from $9 trillion to $23 trillion since the Lehman crisis. “They have replicated the entire US commercial banking system in five years,” Mrs Chu said.’”
There is no way this can’t end badly.
The Federal Reserve is out of money. They have no choice.
How can that be possible when you have a printing press?
They don’t have a printing press. The printing presses are controlled by the US Treasury.
Sure, the paper ones. But who cares about those? I like the ones where you just log in and add zeros.
Carl has it right.
The only printing press that matters is the infinitely-fast, digital one.
Who cares about paper?? The Fed can print to infinity and beyond.
I think we should get the paper presses warmed up as well, so that we can switch the dollar over to exponential-notation.
1 x 10^X; we can simplify it by only printing the value of X on each bill.
Old Fed: Lean into the wind.
New Fed: Chase the EF5 tornado.
Watching that video gives a stunning hint about the underlying reason for Tim Samaras’ demise, which is that the authorities issued directions for all residents to hit the roads and head south in the path of a 2.6 mile wide EF5 tornado. Clearly shelter-in-place (with advance preparation!) is the only way to go if there is any kind of population density in the path of a major twister.
Wow.
‘Seeking to reassure Americans after recent revelations about the intelligence community’s surveillance program, President Obama said Friday in San Jose that ‘Nobody is listening to your telephone calls. That is not what this program is about. What the intelligence community is looking at is phone numbers and duration of calls. They’re not looking at names and not looking at content.,’ Obama said. Plus, he said, should intelligence officers ‘actually want to listen to a phone call they have to go back to a federal judge’ to obtain a court order.’
‘National Security Agency discloses in secret Capitol Hill briefing that thousands of analysts can listen to domestic phone calls. That authorization appears to extend to e-mail and text messages too. Rep. Jerrold Nadler, a New York Democrat, disclosed on Thursday that during a secret briefing to members of Congress, he was told that the contents of a phone call could be accessed ’simply based on an analyst deciding that.’ If the NSA wants ‘to listen to the phone,’ an analyst’s decision is sufficient, without any other legal authorization required, Nadler said he learned.’
‘The Washington Post disclosed Saturday that the existence of a top-secret NSA program called NUCLEON, which ‘intercepts telephone calls and routes the spoken words’ to a database. Earlier reports have indicated that the NSA has the ability to record nearly all domestic and international phone calls — in case an analyst needed to access the recordings in the future. A Wired magazine article last year disclosed that the NSA has established “listening posts” that allow the agency to collect and sift through billions of phone calls through a massive new data center in Utah, “whether they originate within the country or overseas.” That includes not just metadata, but also the contents of the communications.’
Thank heavens my phone calls are so boring, any NSA agent who listens in on them is likely to either start crying or fall asleep.
Speaking truth is a threat to the rotten, corrupt system. You’re a target but do not fear it.
It is not corruption or violating the Constitution if democrats are in charge…
Don’t be disingenuous, plenty of liberals are upset about this.
Interesting point. Lots of liberals are upset, but we’ll have to wait and see if they can rein in Obama any more than the conservatives who were upset with Bush reined him in. I predict “no”. But I’m open to pleasant surprises.
If this testimony is true, then Obama now has to answer for his “Nobody is listening in on your phone calls” statement.
IIRC, I believe that in 2006 Senator Obama wrote a blog entry on DailyKos dot com which defended FISA. He was lambasted by the kos community. I don’t want to look it up now, but if anyone wants to wade into the muck of a liberal website, you can search diaries by author.
I post comments on that site from time-to-time, and have done so for many years. The only time Obama authored a piece (in Daily Kos parlance, a “diary”) was to explain why he and other Senate Democrats had not filibustered the Roberts nomination to the Supreme Court. He followed up with a second diary a month later. He has not written anything on FISA that I could find.
For what it’s worth, Obama regularly is lambasted by many of us on the Daily Kos, and I say “us” loosely, because the site has over 250,000 members and many opinions can be found there, including the exact thing 2banana wrote above.
William Binney tried to warn us, but there are too many pro-cop, pro-military, pro-big-government REDNECKS in this country. He was written off as some sort of wacko, even though his career is impressive. Republicans are supposed to hate big government, and Democrats are supposed to hate war, yet neither party has been willing to stop this insane expansion of military rule. Why do people love big brother so much?
I don’t know of any real rednecks the like big govt or anything else that comes from the coast. But they have been successfully convinced that the D agenda is even worse…with the full cooperation of the Ds. They just like cops and military because they have more influence and job opportunities there and because they do honestly believe in law and order and national defense…until it comes to get them.
Shoeshine boy moments, anyone?
John Paulson bets on housing, says gold is only 2% of assets under management: report
June 17, 2013, 10:59 AM
Hedge fund manager John Paulson, who made billions betting against subprime mortgages as the housing bubble burst, has been scoring big gains lately by going long on mortgage insurers, CNBC reported.
Paulson has been playing companies like Radian and Genworth, which are purer plays on a housing recovery than banks. The insurers profit only as long as homeowners keep making payments and foreclosures remain low.
Paulson told his investors that Radian could hit $20 by 2015, according to the report.
In addition, Paulson has holdings Hartford Financial , Conseco, and title insurer Fidelity National Financial.
Paulson has also told his investors not to pay attention to reports of big losses on the company’s gold holdings because they represent such a small portion of assets under management.
– Tom Bemis
“…because they represent such a small portion of assets under management.”
They also reveal something about his investing style. Since he got lucky and made a bundle on the subprime mortgage debacle, he assumes he now can walk on water and work miracles.
His massive losses on gold suggest otherwise. Caveat emptor.
He was probably using gold as a “hedge” which, in my opinion, is just lazy.
June 17, 2013, 10:56 a.m. EDT
Home-builder confidence hits seven-year high
By Ruth Mantell, MarketWatch
Confidence among home builders leaped in June, despite rising interest rates. Builder confidence levels are far higher than those typically associated with the current level of single-family-home building.
WASHINGTON (MarketWatch) — A gauge of confidence among home builders jumped in June, hitting the highest level since 2006, on more optimism about future and current sales, according to data released Monday.
The National Association of Home Builders/Wells Fargo housing-market index rose to 52 in June — the first time the index has reached above a key reading of 50 since 2006 — from 44 in May. Readings above 50 signal that builders, generally, are optimistic about sales trends.
…
the first time the index has reached above a key reading of 50 since 2006 — from 44 in May.
That should translate into increased housing starts this summer, no?
If so, it should translate into a spring shock in 2014, as this inventory exist the builders’ pipeline…
June 17, 2013, 4:09 a.m. EDT
U.S. stock market futures sharply higher
By Barbara Kollmeyer
MADRID (MarketWatch) — U.S. stock market futures moved sharply higher on Monday, tracking gains for Asia and European markets.
I would say this bubble has popped.
Oh, and Ms. Klemp will look back on this offer fondly…
and wish she took it.
—————————-
“An Oslo resident Marianne Klemp told the paper she is still struggling to find a buyer for her central Oslo two-room apartment and has now had to reduce the price. ‘There was one person a day who came to the first two viewings and a total of about five people at the next ones. I’ve just got an offer of 200,000 below the sales price, but it’s 150,000 less than what I paid for it two years ago,’ she explained.”
“…Marianne Klemp…”
Soon to become Verklempt with tears of joy!
“‘People who can afford to buy those condos are so rich they don’t even care about the return on their investment,’ Fung said.”
Oh yeah? Well then why do they do it? Wouldn’t it be more convenient to hide their cash in a Swiss bank account?
Diversification?
Craterization?
It hasn’t stopped Larry Ellison. For the life of me I don’t know why he owns so many houses.
Can you imagine being on the hook for all that depreciation?
For the life of me I don’t know why he owns so many houses.
He’s run out of other ways to be considered excessive?
“and if lenders behave cautiously – which is there is every reason to presume they will, giving their recent reticence to lend at all ”
This all depends on whether or not the lenders expect to be bailed out of any consequences wrought by irresponsible lending to foot-loose and fancy-free borrowers.
I rented a condo in Coal Harbour for a trip I took up there. Nice area and yes it did seem like a lot of the condos had the lights off at night. And it’s also true that a lot of the Chinese investors don’t care. That’s their “just in case” condo bought as a “just in case all hell breaks loose in China, I have a place I can call home in Canada”. In Canada, you get the equivalent of a green card by investing a certain amount in the country. I think it’s $500K, but it could be a different amount. Buy a $500K condo, boom, you have a green card. If the condo appreciates, great, a little bonus. If it drops in value, oh well, you still have the green card and that’s what really matters.
If they can get of China…when the time comes.
What will Canadia do with all those new-found, dirt-poor Chinese people who had to flee their home country and almost certainly lost everything but the condo? Do these Chinese people have mortgages?
Dirt poor? They buy these condos in cash. And do you really think these people are stupid enough to not park money in Canada and the US and Europe for the “just in case” scenario? Seriously man, you live in an alternate reality.
Exactly, it’s about diversifying. If the condo craters in value, they’ll have their stash in a few banks.
Slithers:
What evidence do you have that the Chinese buyers of condoze in Canadia paid cash? What evidence do you have that they hid their cash in Canadia, the US, and Europe too? If it’s in Canada, the US, or Europe, then it’s not hidden.
The article clearly states that the Chinese do not care whether they make or lose money on the condoze. If this were the case, it would stand to reason that they simply would have hidden their money in Swiss bank accounts, since that would carry much less risk.
Your theory is that the Chinese are buying Canadian condoze in exchange for a green card. If this is true, then you are banking on a collapse of China. Citizens do not typically fare well in a national collapse.
If you think that Chinese speculators of Canadian condoze are actually immune to a collapse of their national economy, then you are living in a cave, ’cause you’re a troll.
“Your theory is that the Chinese are buying Canadian condoze in exchange for a green card. If this is true, then you are banking on a collapse of China. Citizens do not typically fare well in a national collapse. ”
You understand so little about the world……
You understand even less about the concept of diversification and risk management.
Housing Analyst, or whatever your name is today, they most likely have a Swiss account or 2 and a Canadian account or two and an American account or two. You see, sane people don’t stuff all their money under one mattress like you do. They diversify, they invest in a variety of instruments real estate being one of them. Diversification minimizes risk. It’s finance 101. It may be a foreign concept to a dude who thinks he can build houses for $50/sq ft including land. But trust me on this one.
People have been predicting the collapse of Vancouver real estate for 30 years. And yet here we are all that time layer and a 2 bedroom condo goes for $1M.
Slithers:
Your ad hominem attack did nothing to further the conversation. Tell us the truth. Are you a troll?
HA HA HA! This is fantastic, the king of ad hominem attacks complaining about an ad hominem attack. Dude you are truly a national treasure.
Slithers…… buying a depreciating asset like a condo at a retail price isn’t “investing in real estate”.
You know Slithers….. as of last week you were a half step away from being $hitcanned from this blog for your perpetual stream of misrepresentations of the truth, gaffs and insults. You seem to have learned nothing here.
And trust me on this one….. We don’t “think” we can build for $50/sq ft. We build for $50/sq foot 5 days a week.
I have a proposition for you Slithers. Right here publicly.
Why don’t you demonstrate for us what it costs YOU to build using a simple take-off. It’s not difficult. Especially considering you’re in the construction business.
Go ahead. Consider this the blogs challenge to you. Publicly.
If it drops in value, oh well, you still have the green card and that’s what really matters.
So you’re saying that these Chinese have anchor-condos—similar to our concept of an anchor baby in the US.
Interesting…
Chill out!
Bulletin » Dow industrials gain 110 points in fifth straight triple-digit move
FT economics editor tweets ‘chill out’ after spooking market on Fed tapering
June 17, 2013, 4:09 PM
Monday’s market swoon has been pegged to an FT commentary piece by economics editor Robin Harding suggesting that that Fed Chief Ben Bernanke will signal the long-anticipated start of tapering of Fed bond purchases at this week’s meeting and press conference.
The swoon took more than 100 points off the Dow in afternoon trading. The index recovered somewhat in late trading after Harding tweeted that he was pleased his column was being read:
“…especially during blackout.”
If anyone is willing and able to explain that reference, please do so.
Empty housing in places with housing shortages.
The solution is obvious, if painful for the owners of those units and those who financed them.