What Our House Price-Dominated Society Deems Failure
A housing bubble report from around the globe. Aeon Magazine, “Keeping a woman is common among powerful Chinese men. A study by the Crisis Management Centre at Renmin University in Beijing, published this January, showed that 95 per cent of corrupt officials had illicit affairs, usually paid for, and 60 per cent of them had kept a mistress. Local estate agents target provincial officials and businessmen looking to put their money into Beijing’s property bubble, and the men fill up the apartments, bought as investments, with their women. ‘Half of the apartments are empty,’ Shanshan explained. ‘And the other half are full of girls.’”
Want China Times. “Wenzhou’s banking authorities confirmed rumors of 15,000 houses in Wenzhou nearing foreclosure after surveying 42 financial institutions. It has assured the public that “the situation is under control,” though shaking guarantee companies might not second the opinion, the Shanghai-based Jiefang Daily reports.”
“Wenzhou banks, as of the end of July, reported only 580 cases of foreclosed houses, and 2,584 houses with non-performing loans (NPLs). Of the 580 cases, 183 involved mortgages, and 397 involved mortgages with ‘collateral plus guarantees,’ said the report. Nosedives in the Wenzhou property market of up to 50% have forced some property buyers to stop making payments to the lenders and drop their guarantees to companies as their mortgages have exceeded the property’s market value. Many have literally abandoned property.”
Free Malaysia Today, “The property ‘cooling down’ mechanisms to be implemented by the Johor government to slow down foreign property ownership in the state will severely affect foreign direct investment (FDI) inflows, said a well-known developer. IJM Land, CEO Soam Heng Choon said foreigners will not stop buying properties in Johor, given Iskandar Malaysia’, development is a major property buying booster, but will definitely slow down their investment participation and dampen buying sentiment.”
“He said there are many high-end property developments that are currently undertaken in Johor — not to attract the locals but merely to cater to the evergreen foreign demand, especially from Singaporeans. He also questioned the relevance of the state government’s approvals to all the high-end projects, if it wants to implement the cooling down measures. ‘I think the state government must ask themselves, if they want to cool down the market for foreign buyers, then why do they allow more high-end projects? The fact is that for higher-end properties in Malaysia, we still need foreign buyers to come and support us, especially for properties over RM1,000 per sq ft,’ he told The Malaysian Reserve.”
Stuff New Zealand. “First home buyers, shut out of the market by new restrictions to lending rules, are better off not owning a home at all rather than purchasing one to find it’s no longer worth what they’ve paid, Prime Minister John Key says. ‘All of us who own a house, either want its value to be maintained, or to slowly rise. What we actually don’t want, even if we think we want it, is for house prices to rise rapidly. The reason for that is that creates a bubble, eventually the bubble bursts and the market collapses and it causes all sorts of very long term problems.’”
“He said some first home buyers could still borrow with a high loan-to-value ratio, but there were risks involved with that. ‘If you’re a first home buyer that… buys a home for $400,000 and then the next week it’s worth $250,000, for the next decade you’re paying off the $150,000 of equity you no longer have.’”
The Sydney Morning Herald in Australia. “It is a worldwide phenomenon called ‘Generation Rent’ - and it has landed in Australia. A new report has found that permanent renting is becoming a way of life for Australians of all ages. Miranda Pade thinks she would have to move out of Sydney to afford her own home. Sydney’s median house price of $640,000 is beyond the means of most people in their 20s, especially if they do not have a partner or family to help them financially.”
“‘It’s unclear to me at the moment where I’d get the deposit,’ said the 26-year-old, who rents in Summer Hill while studying for her master’s degree. ‘You’d need at least $100,000 and who has that kind of money?’”
The LA Times on Brazil. “Over the last year, the center of South America’s largest city has been markedly transformed, with nearly 50 abandoned buildings occupied by squatters from Brazil’s many sem-teto, or roofless, movements. The occupation protests at the buildings, where red flags hang from windows, are meant to pressure the government to provide adequate housing and give working families a place to live.”
“In both rich and poor neighborhoods of Sao Paulo, a metropolis of 11 million, property values have more than doubled in the last four years, leading to increased housing costs for those least able to afford them. In the seedier parts of downtown, a tiny one-bedroom apartment overlooking scenes of drug use and prostitution costs $450 a month; meanwhile, the minimum wage is $310 a month.”
“‘There will be an explosion of occupations over the next few years,’ predicts Guilherme Boulos, national coordinator for the MTST, a larger sem-teto organization,who met with President Dilma Rousseff during a wave of economic and social protests in June. ‘We told her the only way to create a sustainable housing policy in Brazil is to stop the rise in housing prices.’”
The Nanaimo Bulletin in Canada. “Housing experts say progress on Nanaimo’s new conference centre hotel has put the city on the cusp of a real estate revolution. Sellers plan to adjust property descriptions to appeal to the Asian market and contact hotel owner SSS Manhao to offer free tour services. ‘They are already coming and a lot of properties, especially high-end properties, are being sold to Chinese buyers … but when [there are] 70,000 … think about it – that’s basically the population of Nanaimo more or less,’ said Victor Kiritchenko, a real estate agent with Re/Max Nanaimo. ‘It will bring your market up enormously.’”
The Spectator in the UK. “Now that the middle class squeeze has become my sujet du bore at the fancy north London dinner parties I attend, I was interested in Saturday’s New York Times piece about what foreign billionaires are doing to our insane property prices. One statistic really stuck out: An astonishing £83 billion worth of properties were purchased in 2012 with no financing — all cash purchases. That’s $133 billion.”
“As Charles Moore once observed, the London property market is the world’s largest money-laundering operation. How, I wonder, does this benefit Londoners, except for the increasingly small group of wealthy property owners? It also strongly resembles a bubble, which is why I have little confidence in George Osborne’s economic policy and why talk of a recovery reminds me of those spoof Onion headlines from 1929. ‘Stock Market Invincible: ‘Buy, Buy, Buy!’”
“There’s been an exodus of middle-class Brits from London this century, but it can’t all be attributed to oligarchs pushing up prices; allowing parts of the city to become dominated by poor, often unskilled immigrants from developing countries has also raised the costs of failure (or what our house price-dominated society now deems failure). This is not to blame anyone; neither the rich Russian nor the poor Bengali immigrant working every hour God gives for his family is at fault for the drastic change of our city, but they’re part of the crummy game we’re all forced to play.”
http://wallstcheatsheet.com/stocks/can-home-builders-give-the-housing-market-a-second-wind.html/?ref=YF
second wind? wow this 2nd bubble lasted ? 14 months?
Maybe if we completely destroy the dollar we can get one more next summer that lasts for about 3 months…just long enough for the last of the insiders to get out, and suck the last of the dumb money in before we let it tank.
“First home buyers, shut out of the market by new restrictions to lending rules, are better off not owning a home at all rather than purchasing one to find it’s no longer worth what they’ve paid, Prime Minister John Key says. ‘All of us who own a house, either want its value to be maintained, or to slowly rise. What we actually don’t want, even if we think we want it, is for house prices to rise rapidly. The reason for that is that creates a bubble, eventually the bubble bursts and the market collapses and it causes all sorts of very long term problems.’”
“He said some first home buyers could still borrow with a high loan-to-value ratio, but there were risks involved with that. ‘If you’re a first home buyer that… buys a home for $400,000 and then the next week it’s worth $250,000, for the next decade you’re paying off the $150,000 of equity you no longer have.’”
Mr. Banker-I have assembled a strike team to eliminate this threat and we are standing by, ready to deploy. Awaiting your authorization.
Funding will be through the usual channels.
Wasn’t it the Kiwis who refused to allow US Navy ships to dock in their ports?
Cowards are a freeking nuclear free zone.
Like that will keep the zombies at bay.
‘If you’re a first home buyer that… buys a home for $400,000 and then the next week it’s worth $250,000, for the next decade you’re paying off the $150,000 of equity you no longer have.’”
This ‘equity’ thing is laughable. There is no such thing as ‘equity’. Either you own it or you don’t.
But this is what happens when you do something so stupid as pay $400k for a house. There isn’t a house on the planet worth $400k.
“… buys a home for $400,000 and then the next week it’s worth $250,000, for the next decade you’re paying off the $150,000 of equity you no longer have.’”
Apparently negative equity is real — $150,000 of negative equity in the above example, for instance.
There are some houses with gold-leaf wallpaper, but I’d say there are very few houses worth $400k.
There are ones in Malibu rent for $10k a month.
So that’s why they’re empty.
‘Selling season is in full swing in China’s real estate market. Unexpectedly, despite the strong demand, a large number of banks have ceased to issue home mortgage loans during this period, traditionally September and October, arguing that credit lines have been exhausted. Other banks have opted to call off favorable interest rates or boost interest rates and have extended the approval procedure for home mortgage loans.’
‘The bank’s reluctance to issue new loans has stirred doubt over whether the country’s real estate bubble is about to burst.’
‘Ping An Bank Co. Ltd. has called a halt to home loans, while Industrial Bank and Bank of Communications said their Beijing branches have increased benchmark interest rates of a home loan by 10 percent, and that of a loan for a second home by 20 percent or even more. In addition, borrowers have to wait one month or 45 days to get a commercial loan, rather than the past time frame of 10 to 15 working days.’
‘What makes banks so dispirited about issuing mortgages? Blame declining profits and mounting risks…In some sense, the risks from housing bubbles seem to have come into reality, which spurring banks to be more cautious about home loans.’
Why would a bank be cautious about giving loans? Isn’t China gonna bail ‘em out?
‘TORONTO – Kylemore Communities’ Patrick O’Hanlon says his company is offering a $35,000 voucher towards a BMW with the purchase of a condominium in his Markham community.’
‘Another eye-catching realtor ad offers a free 2013 Honda Civic when you buy or sell a home for $2 million or more, a free 2013 Nissan Versa if you’re in the $1.2 to 1.99 million range, a $7,000 Yorkdale Mall shopping spree from $600,000 to $1.19 million or a $3,000 Apple Store gift card for those from $300,000 to $599,000.’
‘While the condo market cooled in September with prices slipping 3.7 per cent in downtown Toronto and 1.8 per cent in the suburbs, market analyst Jason Mercer said when you look at the same type and quality of condominium apartment from one month to the next, it’s a different story.’
“If you look at our benchmark price…you actually see pricing up by about 2 per cent,” said Mercer, Senior Manager of Market Analysis at the Toronto Real Estate Board. “So the story with pricing over the last few months has been somewhat of a flat-line trend: some months up, some months down on a year-over-year basis.”
free bmw ? is that an indication of a top?
where are the condo hotels……?
Can you get a BMW for $35k? There goes the “luxury” perception, anywayz.
Maybe a 1 series.
‘Another eye-catching realtor ad offers a free 2013 Honda Civic when you buy or sell a home for $2 million or more, …’
Do Torontons living in $2 million homes drive Honda Civics?
Oh my…
NICE!! Everybody quiet down-the Canadian Fat Lady is about to start singing…
The contagion effects of simultaneously collapsing Canadian and Chinese housing bubbles should be quite an awesome spectacle to behold.
Got popcorn?
Wouldn’t it be a hoot if the filthy-rich, all-cash, Chinese investors who all swooped-in and snapped-up available housing for 50% over asking price suddenly began selling en masse as prices plunged, attempting to save some of their wealth from this “investment”?!?
Like the UK article says, it’s just money laundering.
I hear ya’ Ben- but even if it was ill-gotten Renminbi that they weaseled out of China, they still won’t be keen to lose 50% of it in a housing crash. Know what a multi-millionaire wants more than anything else in the whole, wide world? MORE money.
Or to put it another way, the marginal utility of a dollar is greater for a rich guy than for a poor guy. Hence the more money that goes into the hands of the 0.1%, the better off society as a whole becomes.
‘I wrote a few weeks ago about housing bubbles and the misconceptions commonly related to the term. A bubble is typically an illusion of economic strength which draws buyers in, whilst masking underlying fragilities - and in some areas of Australia, the recent investor lead rally in property prices from an already inflated base is concerning.’
‘Our politicians continue to miss the point, as Tony Abbot said on 3AW last week; “Don’t forget … if housing prices go up, sure that makes it harder to get into the market, but it also means that everyone who is in the market has a more valuable asset.”
“What a sad world it is, when the most essential item young and old aspire to alike, for both their health and continued well being, gradually becomes less affordable over time, requiring a greater level of debt to be serviced despite the somewhat falsely perceived advantage, that low interest rates somehow make the buying environment and purchase of property easier.”
“And yet as a direct consequence, we have falling rates of ownership – particularly in the younger generations, an increase in overcrowding of accommodation, rising waiting lists for social housing, and the average age of ownership for those not benefitting from a gifted deposit, pushing closer to 40 years.”
“The housing market no longer revolves around promoting home ownership for the sake of personal well being, it’s Australia’s largest domestic asset class with an aggregated value of over $4 trillion, and understandably it’s now suggested that ASIC should recognise it as such.”
“My only comment to those with short-term spectacles on who think the recent boom is good news - enjoy it whilst it lasts, because I suspect it won’t end without unpleasant consequences.”
“What a sad world it is, when the most essential item young and old aspire to alike, for both their health and continued well being, gradually becomes less affordable over time, requiring a greater level of debt to be serviced despite the somewhat falsely perceived advantage, that low interest rates somehow make the buying environment and purchase of property easier.”
Like I say, people around the world have been brainwashed into accepting that housing is supposed to be utterly unaffordable.
As long as there is excessive printing, brought on by easy credit, there will be bubbles. Fundamentally, there is the value of a house based on location and ones desire to live in it, or the investment return it offers. (Or owners equivalent rent?)
In Fiatsville, there is the price of a house obtained with other peoples money, generally priced above fundamental value. Why not live high when the risk is on someone else?
Sure, there are houses worth $400k just as there are houses worth $1 Million. But even these prices can be distorted by the prospect of ever depreciating currency.
So the questions are, when will the Fed stop devaluing the dollar through excess credit creation? And when will the .gov stop subsidizing housing?
That said, until I see rents fall considerably, I’ll continue to seek out properties that offer decent returns on equity. It’s a fool who buys strictly on speculation of capital gain.
Linked is a broad brush guideline, but in many secondary markets, buy to rent makes sense here.
http://www.housingviews.com/2013/08/28/rent-vs-buy-and-inflation-adjustments/
For sure, nothing depreciates like a stack of receipts for rent paid.
Is Australia in the ‘Mother of All Dwelling Booms’ or is it a GINORMOUS BUBBLE?
This is a great find!
Sounds like Australia’s “dwelling market” is headed down the same long-term path of price collapse the U.S. market is on. Enjoy your “dwelling boom” while it lasts!
Are we in a dwelling boom, a rally, bubble or a recovery? Inside our bubble mentality
By Catherine Cashmore
Monday, 19 August 2013
Page 1 of 3
The jury’s out on whether Australia is entering the ‘mother of all dwelling booms’ as Robert Gottliebsen took note to warn in Business Spectator last week.
And whilst the construction sector continues to fall short of expectation, the established housing market, most notably in Sydney although also reflected in other states – has moved.
War stories are emerging from buying and selling agents of auctions attended where the prices have exceeded the reserve by 10-20%.
In turn, vendors are reassessing their expectation of value based on neighbouring results – and with more talk of prospected drops to the cash rate, purchasers are shopping lenders to see how far their budget will stretch.
When prices start to rise – in some areas quite dramatically so – there is always heated debate over whether it’s a bubble. The term itself is somewhat over used perhaps because of the image it invokes.
A bubble gives the impression the market is a flimsy airless balloon which – like a row of standing dominoes – will quite suddenly, irreversibly and dramatically ‘pop’ falling into an endless abyss.
For some commentators – the very fact that this hasn’t yet occurred in Australia is enough to demonstrate the theory incorrect. In other words, you can only define a true bubble whilst viewing the devastating aftermath.
However, a bubble does not have to fall into the definition posed above. They are not always easily deflated, and there are plenty of different particularities between the policies and lending requirements that have played into the house price ‘corrections’ other countries have already experienced post GFC, that differ from those we have in Australia.
Furthermore, in economies highly exposed to the residential sector, where central banks and governments have the ability to manipulate policy and the amount of cheap credit that flows into mortgage lending, it’s possible to ‘prop’ and temporarily prevent falling house prices that would otherwise occur in line with a challenging macro outlook.
In Australia this would include, rising unemployment, lower prospects for wage growth, an aging headwind of retirees lowering the participation rate, and the gradual winding down in the mining sector – to name but a few.
And whilst this will bear relevance in moderating the level of price appreciation long term, there are plenty of ingredients in the pot to ignite the current environment which is causing a range of voices to warn of bubble like conditions in fragmented areas of our established capital city terrains.
…
‘Wenzhou’s banking authorities confirmed rumors of 15,000 houses in Wenzhou nearing foreclosure after surveying 42 financial institutions…Wenzhou banks, as of the end of July, reported only 580 cases of foreclosed houses, and 2,584 houses with non-performing loans’
It’s almost like somebody is lying.
The one who is not will be redirected probably quite soon.
‘Half of the apartments are empty,’ Shanshan explained. ‘And the other half are full of girls.’
So they put more than one mistress in each apartment? Dang, Chinese mistresses sure do shoot low. Most guys would give a mistress her very own place.
That is a very creative approach to reducing the blight of vacant homes created by the real estate bubble.
I don’t think the wording actually ruled out each one having her own place.
Yeah, I noticed that. It was weasel-wording. It allows the possibility of one girl in each place, but does not rule out having more than one in each place. Whenever I read weasel-wording, I give the benefit to the more negative conclusion. I figure that must be the reason for the wording. It could be lack of English translation skills, but it’s kinda funny to imagine like these overcrowded sweat-shop apartments full of mistresses.
Take it from me, never put two mistresses in the same place. Nothing but a headache.
I had a roommate during my college years who had two girlfriends (technically, based on what went on behind closed doors, mistresses). They knew about each other, but somehow he kept them both on a string in long-term relationships. So far as I am aware, they never occupied his living space at the same time.
“Nosedives in the Wenzhou property market of up to 50% have forced some property buyers to stop making payments to the lenders and drop their guarantees to companies as their mortgages have exceeded the property’s market value. Many have literally abandoned property.”
Is it different there in Wenzhou, or is the Chinese bubble collapsing? I suppose with the highly censored Chinese press, a bubble could collapse with no reporting until much later.
‘Nosedives in the Wenzhou property market of up to 50% have forced some property buyers to stop making payments’
Funny how that works. Prices fall, hand can’t write check.
“Prices fall, hand can’t write check.”
Positive equity is very liquid; negative equity is frozen.
It seems the tsunami flood of quantitative easing has inflated property bubbles on every continent of the globe!
“… allowing parts of the city to become dominated by poor, often unskilled immigrants from developing countries has also raised the costs of failure…”
If these people came from “developing” countries, then they would not have moved. People don’t flee a place that is developing. They stay and realize their gains. They are coming from opressed countries, flat out.
If the globalists really wanted to save the world (they don’t), then they would peddle their influence to improve conditions in oppressed countries. Instead, they encourage the industrialized world to import as many slaves as possible from these oppressed places, or to export as many jobs as possible, whichever is more profitable. Then the International Monetary Fund (global banksters) has the gaul to chide the United States when the whole thing starts to fall apart at the seams, calling on us to fundamentally fix the problem, rather than patching the symptoms.
The United States can only fix its own problems by abandoning this “Free” Trade nonsense, and all this fake “open borders” nonsense. The same goes for England, Canada, and whatever other country is suffering from such massive influxes of oppressed immigrants, legal or illegal. It is unbalanced.
Maids and cooks gotta live somewhere.
With the mistresses?
“‘It’s unclear to me at the moment where I’d get the deposit,’ said the 26-year-old, who rents in Summer Hill while studying for her master’s degree. ‘You’d need at least $100,000 and who has that kind of money?’”
Take a page out of Romney’s play book and borrow the money (or have it gifted) from your parents. Nearly every young family we know who has bought in San Diego over the past ten years has taken this approach.
Romney didn’t borrow money, according to his wife, they just sold some stock. Doesn’t every 22 year old have a 7-figure portfolio?
I wasn’t referring to how he got started, but rather to his advice during the 2012 campaign for young people interested in starting a business.
It actually is not bad advice; if I have any dough left by the time one of my kids is ready to start a business, I may even propose to bankroll it. It most likely would be a better use of savings than sinking it into a downpayment on an overpriced debt trap.
Of course the advice would work a lot better for more American households if they hadn’t let Wall Street’s great blood sucking vampire squids bleed them dry.
Mitt Romney to students who want to start their own business: Borrow money from your parents
Both Romney have Obama have been visiting college campuses in recent weeks in attempt to woo young voters
By Aliyah Shahid / NEW YORK DAILY NEWS
Saturday, April 28, 2012, 11:13 AM
Mitt Romney has some simple advice for students who want to start their own business: Just borrow money from your parents.
The presumptive Republican presidential nominee made the suggestion Friday during a pit stop at Otterbein University in Ohio.
Romney pointed to sandwich chain Jimmy John’s, in which owner Jimmy John Liautaud borrowed $20,000 from his father (in return for 48% of the business) to start the shop.
“We’ve always encouraged young people: Take a shot, go for it. Take a risk, get the education, borrow money if you have to from your parents, start a business,” said Romney, whose wealth is estimated upwards of $250 million.
He has been battling the perception he’s out of touch with regular Americans.
“This is kind of an American experience,” Romney said of Jimmy John’s.
…
You need $20,000 just to start a Coffee cart on the street today. Apples to apples Mit.