Selling Pressures Are Starting To Build
A report from the Irish Independent. “The Knight Frank Global House Price Index shows Ireland’s 12 month price growth of 15pc running at the fastest rate of all 54 countries surveyed. Ireland tops the table ahead of Turkey (14pc), Dubai and the United Arab Emirates (12.5pc) and the United Kingdom (10.5pc). However Dublin’s market looks like it has already cooled as we head towards the end of the year and many properties left on the market are now having their prices reduced. An investor surge expected at the end of the year following the expiry of capital gains relief has not materialised.”
From Arabian Business.”Dubai’s real estate market recorded its first quarterly house price decline in four years, with prices falling more than five percent between June and September, Knight Frank said. Knight Frank said the current mismatch between demand and supply is behind the fall. ‘Residential sales have fallen sharply in recent months and there is a steady stream of new schemes reaching completion, which in turn is exerting downward pressure on prices,’ the real estate consultancy said. ‘For the first time in two years the Global House Price Index came close to falling into negative territory. Muted growth in the third quarter comes on the back of jitters over the global economy, a lingering malaise in Europe and, in the US, a slower-than expected housing recovery.’”
The Calgary Herald in Canada. “Calgary housing starts tumbled in November, with experts warning plunging oil prices could further slow new home construction in the region. Wayne Copeland, president of the Canadian Home Builders Association-Calgary region, said the industry understands a decline is inevitable after what’s been one of its strongest years on record. A prolonged slump in oil prices could further reduce construction.”
“‘Even the economists are seeing that we’re going to be seeing some slowdown in the next year to two years,’ Copeland said. ‘Of course, tied in with the oil prices it’s kind of a double negative for our economy.’”
The Australian. “Melbourne’s housing market outperformed other capital cities over the weekend when more than 1400 properties went under the hammer, while competition continued to cool between bidders in Sydney where clearance rates remained underwhelming. Sydney recorded its lowest clearance rate in 18 months on Saturday as 1028 properties were put to auction, said Australian Property Monitors senior economist Andrew Wilson.”
“‘We had a very skinny clearance rate of 70.5 per cent in Sydney; the first time we’ve had four weekends in a row below 75 per cent since the end of 2012,’ Dr Wilson said. While the property market tends to slow down before the summer months when the industry takes a vacation, the figures pointed towards a ‘weakening in the market,’ Dr Wilson said. ‘Sydney has run out of steam and is now matching the auction energy in Melbourne.”
“Brisbane recorded a clearance rate of 35.2 per cent, Adelaide 68 per cent, Perth 38 per cent and Canberra 62.1 per cent, according to RP Data. Next weekend is the final ’super Saturday’ of auctions and is expected to break records for listing numbers, while the weekend after is likely to see just 500 or so auctions across both Sydney and Melbourne.”
The Business Times on Singpore. “ANZ Bank flagged in a report that Singapore’s population growth is not enough to absorb the new housing supply between 2014 and 2017, with record completions of new homes posing a ’supply shock.’ Daniel Wilson, economist for ASEAN and Pacific at ANZ Bank, said that he expects non-landed property rents to fall cumulatively by up to 10 per cent by the end of next year, given the time lag between changes in vacancies and rents.”
“About 80,000 units are in the supply pipeline - including units under construction and planned development - way above the long-term average of about 60,000 units. Some 80 per cent of these units are already under construction and many will be hitting the market over the next few years, according to Mr Wilson. Mr Wilson said that a vacancy rate of 7.5-8.5 per cent is deemed the tipping point at which ‘intensified downward pressure on property rents manifests itself.’ But the overall vacancy rate for private homes could rise to a higher 8.5-9.0 per cent over the next two years, he projected. ‘Though the supply pipeline is well-anticipated, its impact has not been tested,’ he said.”
From Barron’s on China. “Few foreigners know China as intimately as Anne Stevenson-Yang does. She has spent the bulk of her professional life there since first arriving in 1985. Q: What about the much-predicted popping of the Chinese real estate bubble?”
“A: It is already under way, though in seeming slow motion. Government price data, such as its 70-city report, aren’t all that helpful since the numbers are cherry-picked and manipulated. But we do know that sales volume has been dropping this year. The Chinese home real estate market, mostly units in high-rise buildings, is truly bizarre. Many Chinese regard apartments as capital-gains machines rather than sources of shelter. In fact, there are 50 million units in China that are owned but vacant. The owners won’t rent them because used apartments suffer an immediate haircut in value.”
“It’s as if the government created a new asset class that no one lives in. This fact gives lie to the commonly held myth that the buildout of all these empty towers and ghost cities is a Chinese urbanization play. The only city folk who don’t own housing are the millions of migrant laborers continuously flocking to Chinese cities. Yet, they can’t afford the new housing.”
“Q: What would be the impact of a significant drop in Chinese housing prices? A: A huge proportion of financial assets in China both in the banking and shadow-banking system are exposed to the real-estate market. All of China’s major corporations are speculating on residential real estate with either cash reserves or borrowed money. Who wants to build, say, a shipbuilding plant when a company thinks it can make a lot more speculating in the housing market?”
“Families have more than half of their wealth in housing, including the less affluent in recent years who have taken to buying fractional shares in luxury apartments and town houses. Local governments, which rely on land sales to developers and real estate transfer taxes for something like 35% of their revenue, would be in a bad way in a housing-price bust. The psychology bolstering the housing market is changing despite all the efforts of the government to control prices. People are starting to realize that housing isn’t a one-way street to future wealth, and selling pressures are starting to build.”
From Barron’s on China. “Few foreigners know China as intimately as Anne Stevenson-Yang does. She has spent the bulk of her professional life there since first arriving in 1985. Q: What about the much-predicted popping of the Chinese real estate bubble?”
“A: It is already under way, though in seeming slow motion. Government price data, such as its 70-city report, aren’t all that helpful since the numbers are cherry-picked and manipulated.”
Bahahaha … but nevertheless Wall Street and others we will still use them.
“But we do know that sales volume has been dropping this year. The Chinese home real estate market, mostly units in high-rise buildings, is truly bizarre. Many Chinese regard apartments as capital-gains machines rather than sources of shelter. In fact, there are 50 million units in China that are owned but vacant. The owners won’t rent them because used apartments suffer an immediate haircut in value.”
This needs repeating: “In fact, there are 50 million units in China that are owned but vacant. The owners won’t rent them because used apartments suffer an immediate haircut in value.”
So it’s okay to have an apartment rot away because nobody lives in it but it’s not okay to have one rented out because renting one out will taint it as having been used. Got it.
“It’s as if the government created a new asset class that no one lives in. This fact gives lie to the commonly held myth that the buildout of all these empty towers and ghost cities is a Chinese urbanization play. The only city folk who don’t own housing are the millions of migrant laborers continuously flocking to Chinese cities. Yet, they can’t afford the new housing.”
Truly, this is f@cking amazing!
“Q: What would be the impact of a significant drop in Chinese housing prices? A: A huge proportion of financial assets in China both in the banking and shadow-banking system are exposed to the real-estate market. All of China’s major corporations are speculating on residential real estate with either cash reserves or borrowed money. Who wants to build, say, a shipbuilding plant when a company thinks it can make a lot more speculating in the housing market?”
Bahahaha … who wants to build a shipbuilding plant when there is an excess supply of ships?
It’s hard to pretend in this financial climate that a shipbuilding plant is profitable but apparently it is less hard to pretend that building millions of excess apartment units THAT ARE DESTINED TO NEVER BE OCCUPIED is the best way to go.
“Families have more than half of their wealth in housing, including the less affluent in recent years who have taken to buying fractional shares in luxury apartments and town houses. Local governments, which rely on land sales to developers and real estate transfer taxes for something like 35% of their revenue, would be in a bad way in a housing-price bust. The psychology bolstering the housing market is changing despite all the efforts of the government to control prices. People are starting to realize that housing isn’t a one-way street to future wealth, and selling pressures are starting to build.”
It really hurts me to say anything good about anybody, but truly, Ben, that was an excellent post.
Seems like quite a waste, why not just add a couple of stories onto the Great Wall?
“Many Chinese regard apartments as capital-gains machines rather than sources of shelter.”
Sounds as though there is no difference between Chinese and American residential real estate.
Chinese have a cultural preference for new housing (just like many Americans prefer new cars).
Also, note that often Chinese condos are sold unfinished (no toilets, appliances, etc) so it’s likely that most of those 50M apartments are unfinished and thus have less stuff to go wrong.
The Chinese government seems to be conducting a massive, unprecedented natural experiment into whether fundamentals matter, or if one can use smoke and mirrors to maintain high asset prices forever.
Time will tell!
Did China’s sudden and unexpected overnight move to tighten up lending standards leave you feeling angsty?
I couldn’t figure out why Wall Street sold off yesterday on no news whatever. Perhaps some had advance word of China’s crackdown on loose lending?
Big trouble in China makes for an angsty Wall Street
Big trouble in China as oil’s slide inspires visions of world peace
Published: Dec 9, 2014 8:05 a.m. ET
Critical intelligence before the U.S. market opens
By Shawn Langlois
Markets reporter
If what went down in Shanghai is any indication of the kind of action we’ll be seeing in the rest of the global markets throughout the day, this could be an uncharacteristically ugly December trading day. We’re supposed to be trimming trees, making lists and taking ridiculous family pictures next to some lights, with one of your daughters refusing to smile. And a dog that won’t sit still.
Fretting a gassed stock market shouldn’t be on the holiday agenda. But it’s not just the beatdown in China that will likely make for an angsty session, both at home and abroad. Word that the Fed is about to tweak its policy statement to signal the onset of rate hikes is also unsettling.
“If you are a stock-specific investor but interest rates factor into your forecast in any capacity, then this evening’s WSJ story is pretty important to you,” BTIG’s Dan Greenhaus said late last night. “Listen to what the Fed has to say… as they just may… raise rates… some day.”
Then there’s oil. Oh yeah, oil. Aside from being a potential stepping stone to world peace (see below), this precipitous drop to five-year lows is proving a bit too much, even for the sectors that should benefit, according to Jonathan Sudaria of the London Capital Group
“The geopolitical games being played out in the oil market at the moment are stirring up too much uncertainty and having unintended negative consequences right across the asset spectrum that could be the ruin of many a traders Christmas,” he said. “Equities have had a nice bounce since mid-October so traders will be forgiven for booking profits as we come to year end.”
In the early going, that’s exactly what they’re doing.
…
“What’s really going on is an old-style party purge reminiscent of the 1950s and 1960s with quota-driven arrests, summary trials, mysterious disappearances, and suicides, which has already entrapped, by our calculations, 100,000 party operatives and others. The intent is not moral purification by the Xi administration but instead the elimination of political enemies and other claimants to the economy’s spoils.”
Politics in China is a life long career.
…and at times a life-shortening one.
Still plenty of room for more Ghost Cities.
the Global House Price Index, that’s a new one to me.
as we all know -on the way down “sold” data gets real old
a rhyme
‘Conn’s Inc. said Chief Financial Officer Brian Taylor is stepping down immediately as the furniture company withdrew its guidance and disclosed planned changes to its management structure to recoup losses from its credit-financing business.’
‘Shares dropped 29% premarket to $24.91, and had already declined 56% so far this year through Monday’s close.’
‘The Woodland, Texas, seller of furniture and home appliances, which also reported swinging to a surprise loss in the third quarter, said it is creating a credit risk and compliance committee to address its credit operations, which the company acknowledges haven’t been “acceptably accurate.”
‘The big thorn in Conn’s side, amid its retail gains, has been its credit business. What the retailer once touted as a key competitive advantage–providing in-house financing for customers in urban markets with below-average credit scores and household income of between $25,000 to $60,000–is coming back to haunt it.’
“Customer credit scores continue to deteriorate,” said Chief Executive Theodore Wright, who noted that these losses have more than offset gains in the company’s retail segment. The proportion of customers in late-stage delinquency with a score below 550 increased this year, he said.’
‘Provision for bad debts was $72 million, an increase of $49 million from the prior-year period. “We recorded additional provisions for credit losses this quarter, based on the assumption that we will not realize any improvement in these trends over the next 12 months, despite the underwriting changes and improved collections execution,” Mr. Wright added.’
http://www.marketwatch.com/story/conns-finance-chief-steps-down-amid-credit-losses-2014-12-09
I’ll bet that furniture those folks have been buying on credit is awful nice! 😳 In the old days, they would hav repossessed it!
‘A top Chinese General under scanner for corruption was found to have 60 houses, 400 kgs of gold jewelry and expensive art works amounting to a staggering over USD 98 million, a state media report said today. His three siblings and his secretary, Qiao Xijun, were also arrested. Investigators are working to determine whether more than 40 other officers were involved in his alleged misconduct, it said.’
‘The China Daily also reported that Gen Dai Weimin, Dean of PLA’s Nanjing Political College was held for probe into corruption charges, especially allegations that he took bribes in connection with land and construction projects.’
‘The PLA was hit by major corruption scandals since early this year after several top officials including Gen Xu Caihou — the powerful Vice Chairman of Military Commission under former President Hu Jintao who controlled the armed forces till 2012– were found to have accumulated vast wealth.’
http://economictimes.indiatimes.com/articleshow/45436067.cms?utm_source=contentofinterest&utm_medium=text&utm_campaign=cppst
‘Dubai property prices declined by 5.2 per cent in the third quarter 2014, a UK-based Knight Frank report stated on Tuesday, but developers in Dubai continue to launch new projects as the emirate remains among the top global cities for real estate investment. “Dubai mainstream residential prices fell by 5.2% in the three months to September – the emirate’s first quarterly decline in prices in the last four years. The current mismatch between demand and supply is behind the fall,” said Kate Everett-Allen, International Residential Research, Knight Frank.’
“Residential sales have fallen sharply in recent months and there is a steady stream of new schemes reaching completion, which in turn is exerting downward pressure on prices,” she added.’
http://www.emirates247.com/property/price-decline-no-obstacle-to-launch-of-new-projects-in-dubai-2014-12-09-1.572658
Didn’t Ireland’s real estate market crater spectacularly just a few years ago, and now it’s bubbly again?
To quote George Takei: Oooohhhh Myyyyy!
Yep, it did, the Irish RE bubble and crash was at least as spectacular as our in the US, probably more so….I visited for a few weeks a few years before and after the crash and saw some of the effects (am Irish American, still have family there) Looks like the Irish collectively did not learn from Bubble 1.0 any better than we did. The crash helped kill the “Celtic Tiger” period and reintroduce the long and sad tradition of young people emigrating because there are few opportunities or jobs at home.
http://www.npr.org/blogs/parallels/2014/12/08/368770530/u-s-tech-firms-see-green-as-they-set-up-shop-in-low-tax-ireland
Here’s a fact that might surprise you: All of the top 10 U.S. companies that were born on the Internet — including Google, Amazon and eBay — have overseas corporate headquarters in Ireland.
The American tech sector is huge in Ireland. It’s growing rapidly — and having a huge impact on life there.
But the tax system that’s fueling the growth is also infuriating some people in the U.S. and Europe — and has Ireland reconsidering its tax code.
“The only city folk who don’t own housing are the millions of migrant laborers continuously flocking to Chinese cities. Yet, they can’t afford the new housing.”
This could work out very well indeed for the Chinese, as it did for Downtown Miami after the bubble burst and all the “luxury condos” became middle class apartments.
For the investors? Not so much. But one thing China needs is a more equal distribution of income, and that’s one way to get it.
Me thinks that Doug Short’s charts in the attached ’bout sum up the entire discussion on the future of the housing market down the road….
read on!!
http://www.advisorperspectives.com/dshort/commentaries/Demographic-Trends-in-Employment-Participation.php
^junk
Whaaaat?
North Bend, OR Sale Prices Crater 11% YoY As Housing Demand Plunges Nationally
http://www.zillow.com/prineville-or-97754/home-values/
A difficult number to fathom.
“50 million units in China that are owned but vacant”
A difficult number to fathom.
Also a low number, as the figure I saw used some time ago was 60 million, which is likely an undercount of the present number of vacant housing units.