December 17, 2014

What Would Have Been Unthinkable

Bloomberg reports on the UK. “Bank of England Governor Mark Carney said the selloff in emerging markets may worsen, posing the risk of higher borrowing costs and weaker growth in core markets. Even as U.K. banks’ exposure to Russia is ‘very modest,’ and ties between the two countries ‘relatively limited,’ Carney said the central bank was ‘not complacent at all about the dynamics in the global economy.’ ‘There is a risk that, in economies where core inflation is already weak, particularly some parts of the euro area, low headline readings further depress expectations of future inflation,’ the BOE said in the report. This ‘could result in slower rates of growth of nominal incomes, increasing the burden of existing debts.’”

“Tighter lending standards may still be contributing to a slowdown in mortgage approvals and might be deterring borrowers and banks from high-risk loans, officials said. ‘High household indebtedness continues to pose risks to financial stability,’ so recommendations in June against risky mortgages “continue to act as insurance against a significant deterioration in lending terms,’ the BOE said.”

RTE News reports on Ireland. “In a review of risks to the Irish economy, the Central Bank noted that house price growth in Dublin is now higher than that recorded at the peak of the property bubble in 2006. House price growth in Dublin has been above 23% since June. The Central Bank said Irish households remain highly indebted, leaving them vulnerable to economic shocks, falls in income and rises in interest rates. There has also been a rise in the number and value of mortgages in very long term arrears - classed as more than two years overdue.”

“It warned that in the current low interest rate, low inflation environment increasing numbers of investors are searching for yield - a return on their money - and that this is increasing the risk of volatility in the financial system. The Dublin office market and Government bonds - which have benefited from the inflow of foreign funds - are vulnerable to a change in investor sentiment if higher yield opportunities present elsewhere.”

Reuters on Canada. “Fort McMurray has long drawn thousands with jobs that paid six-figure salaries to a region that produces more crude than anywhere else in the Western Hemisphere. But a slide in oil prices since June has fueled a sense of unease in the community of nearly 73,000 which for over a decade has rarely known anything but the good times. Some signs of a looming slowdown can already be seen in the local property market. New housing starts in the municipality of Wood Buffalo comprising Fort McMurray and nine surrounding hamlets are forecast to fall 62 per cent this year, according to the Canada Mortgage and Housing Corporation.”

“Two-story-high ‘now leasing’ signs that adorn some downtown apartment blocks, would have been unthinkable at the height of the recent decade-long boom when, as mayor Melissa Blake put it, the city had ‘more people than places to put them.’ ‘There seems to be a lot of layoffs up here so people are just kind of holding on to their money,’ said Sandy Mastel, a manager at Raven Truck Accessories and Motor Sports.”

The National on Dubai. “The property broker CBRE is predicting that if the price of Brent crude continues to drop for a sustained period then the huge government-owned funds tasked with spending surplus cash on assets abroad may cut back on their ambitious plans to buy European trophy assets. ‘The biggest impact is potentially on the international property markets than the local markets,’ said Nick Maclean, the managing director of CBRE’s Dubai office. ‘And the sovereigns in the GCC are such an important component of new cash for the international markets that if that is withdrawn a little then it has an impact.’”

“CBRE said housing rents in Dubai rose 1 per cent during the final three months of the year, cancelling out a 1 per cent fall recorded during the third quarter. At the same time sales prices increased 18 per cent over the year – down from 30 per cent in 2013. The company added that more than 20,000 new homes are expected to enter the market during the course of the next 12 months, which ‘could have a deflationary impact on sales and rental rates.’ It said there were 65,000 new units potentially going to be delivered over the next three years.”

ABC News in Australia. “The rural town of Katherine has gone from a well-publicised housing shortage to an ‘unusual’ lack of rental demand, according to a real estate agent. Territory Rural’s Alison Ross told 105.7 ABC Darwin that Katherine housing demand had anecdotally dwindled to its lowest level in almost a decade. ‘There hasn’t been this certain number [of houses] available for quite some time,’ she said. She put the trend down to several factors, including economic downturn, the development of additional defence housing, and the scaling back of mining operations at Roper River and Pine Creek.”

“The mayor of Katherine, Fay Miller, said the housing market had noticeably dropped, but this was partly due to cyclical factors. She said mining redundancies and new housing developments were contributing to the rental glut, but things were not set in stone. ‘I’m sure that we will see things start to pick up again [and] that those rates will certainly improve.’”

Smart Property in Australia. “With almost double the number of listings on the market in Western Australia compared to last year, one real estate commentator has warned against overpricing properties for sale. ‘The days of coming up with a dream price, then adding on another 10 per cent, are well and truly over. Today’s buyer is much more informed and simply does not have the time to be deciphering over-priced properties,’ said RE/MAX WA managing director, Geoff Baldwin.”

Quartz on China. “Between 2003 and 2012, $1.3 trillion slipped out of mainland China—more than any other developing country—says a report by Global Financial Integrity, a financial transparency group. $725 billion—more than half of the outflows from the last decade—has left since 2009, just after the Chinese government launched its 4 trillion yuan ($586 billion) stimulus package. The government’s June 2013 crackdown on fake trade invoicing caused a seize-up in liquidity, pushing banks close to a meltdown. This precarious relationship with liquidity might partially explain ‘Operation Fox Hunt,’ the crackdown on Chinese government officials who have fled China or transferred assets to family members abroad.”

“With China’s real estate market in the doldrums, its economy slowing, and its leader cracking down, the ‘foxes’ have more reason than ever to sneak their spoils overseas. Making sure they don’t isn’t just a matter of legality, but of protecting China’s financial system from freezing up once again.”

Want China Times. “Luo Fei, mistress of China’s former railways minister and transportation bureau chief Zhang Shuguang, has been sentenced to five years in prison for taking bribes. The court ruled that the monetary support she received from Chang constitutes a bribe, reports our Chinese-language sister newspaper China Times. Zhang is 25 years older than Luo and is married. He has been known for being a ‘naked official’ since his wife and children emigrated to the US, where they bought houses and opened companies.”

“His expenses increased dramatically when he was courting Luo. Zhang called Ge Jianming, president of railway equipment maker KTK Group and asked for money. Ge handed Zhang a black briefcase containing two million yuan (US$325,000) in cash. Zhang set aside 700,000 yuan (US$113,000) of the savings to pay for his and Luo’s daily expenses and used the remaining and his own savings to buy a house as a gift to her.”




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69 Comments »

Comment by Whac-A-Bubble™
2014-12-17 06:16:10

Any chance the oil price collapse will prove to be one of the main precipitating factors to end the global housing mania?

Comment by Shillow
2014-12-17 06:42:56

The stock market must be protected at all costs. Whats the Gain since Jan 1?

Comment by Shillow
2014-12-17 07:52:20

Looks like it is about 5-600 points now. Can this be erased by years end?

Comment by Ben Jones
2014-12-17 08:49:39

‘(Reuters) - OPEC members which backed an output cut at the group’s meeting last month are coming around to the view of Saudi Arabia that they need to focus on market share, further reducing the chance of any action to defend prices.’

‘While Venezuela - which campaigned for output cuts in the run-up to the Nov. 27 meeting - has continued to call for measures to prop up prices, other nations which usually back such action such as Iran and African members have been silent. “The producers have not blinked. We are just watching and selling oil at whatever the price is,” said a delegate from an OPEC country which in November had wanted an output cut.’

‘This means there is greater unity behind the view of OPEC’s core Gulf producers, which signalled this week they are prepared to wait as long as a year to see the market stabilise, despite a plunge in prices to below $60 (38.19 pounds) a barrel, the lowest since 2009.’

‘OPEC was expected to address the problem in November by trimming production, but Gulf producers led by Saudi Arabia blocked calls from poorer members to reduce supplies, arguing the group needed to fight for market share.’

‘A delegate from a second OPEC country which had backed a supply cut said any action to support prices would need to include non-OPEC Russia, which so far has shown no sign of backing down on its refusal to cut output. “Despite the pain, we agree OPEC can’t cut alone,” the delegate said.’

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Comment by Albuquerquedan
2014-12-17 09:43:54

WTI is back over $57 a barrel. The panic seems to have past. The world is counting on one million more barrels from the US this year. However, if drilling declines in the US just by 1/3, we will have no increase. 2/3 of the drilling in the fracking areas just offsets the rapid decline in the wells.

 
Comment by Whac-A-Bubble™
2014-12-17 09:48:32

It’s easy to see through the Saudi’s winning strategy:

1) First flood the market to put the frackers under.

2) Expand market share as the frackers drown in oil.

3) Once the frackers are gone from the game, tighten the reins on supply in order to return to oligopoly profits.

 
Comment by Albuquerquedan
2014-12-17 09:48:57

BTW, the dollar is spiking today, so the market at least expects the “considerable time” language to be removed from the Fed’s statement.

 
Comment by Albuquerquedan
2014-12-17 09:57:26

“It’s easy to see through the Saudi’s winning strategy”

From the poster who just days ago was talking about oil going back down to $10.

The Saudis can’t expand their market since their fields are old and tired. This is simply economic warfare by Saudi Arabia and the U.S. on Russia and Iran. But as the Russians are saying, they are a people that survived Leningrad and Stalingrad, they can certainly outlast Obama’s feeble attempts to get them to reverse the annexation of Crimea and their involvement in the Ukraine. Biden’s son’s enrichment was not a reason for our involvement in the Ukraine.

 
Comment by Albuquerquedan
2014-12-17 10:02:14

Biden’s son’s enrichment was not a reason for our involvement in the Ukraine.

For clarification was not a good reason to intervene in the Ukraine. However, I think the primary reason was that Obama wanted revenge for what Putin had done to him on the Syrian situation but it backfired rather badly for Obama.

 
Comment by Whac-A-Bubble™
2014-12-17 16:53:05

“From the poster who just days ago was talking about oil going back down to $10.”

I merely raised the question of whether this could happen again now, given it did during the last Russian currency crisis (1998). I realize it is tempting for you to misconstrue my posts.

 
 
 
 
 
Comment by Ben Jones
2014-12-17 06:20:06

‘Stephen Jen landed in Hong Kong in early January 1997 as Morgan Stanley’s newly minted exchange-rate strategist for Asia. He was soon working around the clock when investors began targeting the region’s currency pegs, first felling Thailand’s in July. The rout spread through Asia before rocking Brazil and Russia. It led to the collapse of Long-Term Capital Management, an event that introduced the Federal Reserve-brokered bailout.’

‘If the 48-year-old native of Taiwan, with a PhD from Massachusetts Institute of Technology, sounds a little jaded now, it’s not without some reason. He worries that many emerging-market analysts are too young to remember the late 1990s. Instead they learned the ropes in an era dominated by the rise of Brazil, Russia, India and China — a supposed one-way bet to prosperity.’

“Many became EM specialists after the term ‘BRIC’ was coined in 2001 and don’t know any serious crisis,’’ says Jen, who now runs the London-based hedge fund SLJ Macro Partners LLP.’

‘The youngsters are about to be schooled. Jen says echoes of 1997-1998 may be at hand. Investors woke up today to Russia’s 1 a.m. interest-rate increase to defend the ruble. There’s the mounting likelihood of a Venezuelan default. Stocks from Thailand to Brazil are reeling. The Fed hasn’t even begun raising interest rates.’

‘Jen is bracing for more pain. “At some point, the risk of fractures in parts of EM will rise sharply,” said Jen. While unwilling to draw up a blacklist for now, he says exchange rates reveal emerging-market dangers. Russia’s ruble, Brazil’s real, Mexico’s peso, Turkey’s lira, the South African rand and Indoniesian rupiah have all hit the skids.’

‘The biggest causes for worry, bigger than a recession in Russia or the oil-price plunge: the slowdown in China, which has already upended commodity prices, and the likelihood U.S. growth will propel the dollar higher and suck assets out of emerging markets.’

Comment by Combotechie
2014-12-17 06:47:43

“The Fed hasn’t even begun raising interest rates.”

And my bet is they won’t.

Comment by iftheshoefits
2014-12-17 07:12:32

As much as I hope your bet is proven wrong, I tend to believe you are right.

 
Comment by Shillow
2014-12-17 07:26:15

And be blamed for the inevitable Crater in YOY stats coming this Spring and Summer? Never.

 
Comment by Blue Skye
2014-12-17 07:37:18

Deflation is here. What the Fed did to bring us here in years past will play the lead role. I rather think that defaulted dollar loans will play a larger role than future interest rates for a while.

 
 
 
Comment by Housing Analyst
2014-12-17 06:20:10

Dublin-Livermore, CA Sale Prices Turn Negative YoY As Speculators Dump Properties

http://www.zillow.com/livermore-ca-94568/home-values/

 
Comment by Housing Analyst
2014-12-17 06:22:11

Riverside, CA Sale Prices Sink 5% YoY; Plunge 12% MoM As Demand Plummets

http://www.zillow.com/highgrove-ca-92507/home-values/

 
Comment by Ben Jones
2014-12-17 06:24:48

‘For the second time in less than a week a local government financing vehicle in China looks set to not complete a bond sale as scheduled after investors discovered the notes won’t receive state backing.’

‘A 1 billion yuan ($161 million) offering of securities scheduled to be sold yesterday by a financing unit in Urumqi, the capital city of China’s northwestern Xinjiang province, may not proceed after investors refused to hand over the money, Caixin reported today, citing people it didn’t identify. China’s top economic planning agency, the National Development and Reform Commission, will have the final say on whether the bond sale will be canceled or not, Caixin said.’

‘The news comes just days after another LGFV — Changzhou Tianning Construction Development Co. — pulled a 1.2 billion yuan issue planned for Dec. 15. On Dec. 11, the finance bureau of Tianning district in Changzhou city said the bonds wouldn’t be categorized as government debt and the local authority wouldn’t be responsible for repayment, reversing a previous statement.’

“Investors are wondering which local governments will issue similar statements,” said Liu Dongliang, a senior analyst at China Merchants Bank Co. in Shanghai. “Losing government support means losing the guarantee that there will be no default.”

‘Investors were surprised by the fact Urumqi State-Owned Asset Investment Co.’s notes weren’t going to be categorized as government debt, according to Caixin’s report. The issuer and Cinda Securities Co., the bonds’ main underwriter, agreed the sale should be canceled, it said.’

‘Yields on five-year AA rated corporate debt in China averaged 6.29 percent on Dec. 15. The rate touched 6.37 percent on Dec. 10, the highest since August.’

‘Local governments had some 17.9 trillion yuan of regional liabilities as of June 2013, up 67 percent from the end of 2010, state audit figures show. LGFVs sold 125.8 billion yuan of bonds in November, the least since January, according to data compiled by Bloomberg.’

 
Comment by Housing Analyst
2014-12-17 06:27:24

Rocklin-Roseville, CA Sale Prices Plunge 6% YoY As Inventory Floods Market

http://www.zillow.com/rocklin-ca-95678/home-values/

 
Comment by Ben Jones
2014-12-17 06:30:37

‘Some factors came into play in 2014 which could have a huge impact on the global luxury market. First is Chinese President Xi Jinping’s much-publicised campaign to cut down on extravagance and root out corruption which has led to the sale of luxury goods slumping by as much as 50%.’

‘China was the hottest and fastest-growing market for luxury goods and the slowdown has led to top international brands like Giorgio Armani and Dolce & Gabbana closing their flagship stores on the Bund in Shanghai. The currency devaluations in Russia, Japan, Brazil and Indonesia are altering shopping and spending patterns globally. Then, there is the lingering economic slide in Europe.’

‘The most authoritative tracker of the luxury market is Bain & Company, and its latest prediction is that worldwide sales of personal luxury products will rise a mere 2% this year, at the slowest pace since 2009. Events in China are casting the longest shadow. The crackdown has affected a number of Western luxury brands’ hopes in the fast-growing economy, with Burberry, Rémy Cointreau and LVMH all witnessing a slowdown during the third quarter.’

“With luxury goods, we are seeing the emergence of a new normal,” said Claudia D’Arpizio, a Bain partner in Milan, the fountainhead of the global luxury market.’

Comment by Ben Jones
2014-12-17 08:07:43

‘Jewelry shops in Shuibei in Shenzhen’s Lohu district have seen a drastic reduction in custom, as the local gold market is experiencing a chill, similar to the cold front sweeping the region.’

‘Local jewelry shops report that their sales have plunged 40%-50% this year, according to Chinese-language Shanghai Securities News. The status of jewelry vendors in Shuibei mirrors the situation of China’s gold and jewelry market as a whole, as the region is the largest jewelry trading center in the nation.’

‘Zhao Bin, general manager of a local jewelry company, said that the company’s sales of gold-related products have slumped 60% this year, notably investment-oriented products, such as gold coins and gold bars, according to Shanghai Securities News.’

‘The sluggish business at local jewelries nowadays contrasts sharply with the hectic scene in April 2013, when Shenzhen citizens, many of them housewives, swarmed to the stores, in frantic pursuit of gold, as gold prices began to drop, from the persistently high levels previously. Managers of local jewelry shops reported surges in gold sales then, quadruple or even quintuple the previous volume. Some even made purchases worth several millions of yuan, seriously overstraining supply.’

‘Those investors have been trapped in their investments, suffering ever greater loss, as gold prices spiraled downward, according to the news organizations.’

 
 
Comment by Ben Jones
2014-12-17 06:38:08

‘Mortgage fraud remains a national problem as loan applications have seen misrepresentations increase on an annual basis for three consecutive years, according to data from LexisNexis Risk Solutions.’

‘Nearly three-fourths of all mortgage loans reported in 2013 involved some kind of fraud or misrepresentation, the Atlanta-based company said. Comparatively, this figure was 69% in 2012 and 61% the year before.’

“The results of this study clearly demonstrate that the mortgage industry is making progress in combating fraud in some areas, such as appraisal fraud, but still has a lot of work to do in other areas, such as misrepresentation on credit documentation, which leapt from 5% in 2012 to 17% in 2013,” Coyle said.’

‘One out of every eight suspicious home loans nationwide exist in Florida, according to the annual LexisNexis Mortgage Fraud Index, which puts our state once again at number one for mortgage schemes.’

‘But the report indicates that the rate of fraud has fallen a bit. Florida’s index of 529 is more than five times the expected rate of fraud, but it’s the first time in years that the state’s fraud index has been less than seven times the expected rate.’

‘Mortgage fraud is rising nationally and remains more active in Nevada than in almost every other state, a new report shows. Overall, Nevada had the second-highest rate of mortgage fraud last year, according to LexisNexis. The company gave Nevada a mortgage fraud index tally of 221, meaning its rate of fraud was more than twice the expected rate, based on loan-origination volume.’

‘Nevada has held the No. 2 ranking since 2010.’

Comment by Housing Analyst
2014-12-17 06:43:10

‘Mortgage fraud is rising nationally

Rising from already rampant levels.

What is it about housing that elicits so much fraud, deceit and attracts so many criminals?

Comment by Combotechie
2014-12-17 07:13:05

“What is it about housing that elicits so much fraud, deceit and attracts so many criminals?”

1. It’s promoted and protected by the U.S. government because it’s considered vital to economic health AND …

2. Most voters are homeowners/homebuyers.

So if there is fraud and deceit and housing attracts so many criminals its because this type of behavior is winked at - it’s winked at because the end result is high RE prices.

 
Comment by iftheshoefits
2014-12-17 07:14:23

Too low of a barrier to enter the profession?

 
Comment by Shillow
2014-12-17 07:30:16

It attracts so many fraudsters because people in RE are already on the path of dissembling and lying. Just another step or two on that path.

Its like strippers then turning into prostitutes. You’re already giving the lapdance, why not make some bigger money quick?

Comment by Housing Analyst
2014-12-17 07:57:10

They’re like a crime ring of Barney Fifes.

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Comment by Ben Jones
2014-12-17 09:11:23

Mel Watts just had a meetup in Las Vegas and said he wants a cut of the action.

 
 
 
 
 
Comment by Housing Analyst
2014-12-17 06:39:57

Lake Forest Park(Seattle), WA Sale Prices Dive 6% YoY; Inventory Balloons As Speculators Bail Out

http://www.zillow.com/lake-forest-park-wa/home-values/

 
Comment by Ben Jones
2014-12-17 06:41:58

‘With 4,000 listings up for sale, Winnipeg has become a buyer’s market. WinnipegREALTORS say MLS listings at the end of November are up 20 per cent from 2013 – 1,500 more homes up for sale than usual over the past 10 years.’

‘Peter Squire, MLS market analyst, said the buyer’s market isn’t a concern, it’s just a change that’s providing more opportunities. ‘Change isn’t a bad thing,” he said. “We’re just pointing out that there is a lot of inventory we’re carrying into the last month.We’re trying to present it as an opportunity to buyers who have lost out in prior years when the market was more heated.’

 
Comment by Ben Jones
2014-12-17 06:44:03

‘Housing prices in Lower Mainland are predicted to rise a modest three per cent in 2015, while Canada’s highest prices, in Vancouver, will be sustained by demand from Mainland Chinese buyers. That’s the view from RE/MAX’s 2015 national housing outlook, in a relatively optimistic report.’

‘RE/MAX’s report says average residential prices in Greater Vancouver increased from $781,517 in 2013 to $838,400, and are projected to rise to $863,600 in 2015.’

‘There has been speculation that the flood of cash pouring from China into Vancouver real estate will be limited with the ending this year of a federal immigrant investor program. The South China Morning Post has reported a replacement program will be much smaller in scope, and will subject applicants to rigorous audits. But Raven says the perception among realtors is “the tap” will stay open.’

“Many realtors have told me that the way business is done (in China) is very different, and the wealthy can always find a way to get their money out.”

Comment by Ben Jones
2014-12-17 06:46:58

‘Canada is set to sign a deal with China to return ill-gotten assets seized from those suspected of economic crimes, the official China Daily reported yesterday, as Beijing works to track down corrupt officials who have fled overseas. The world’s No 2 economy has vowed to pursue beyond its borders a search, dubbed Operation Fox Hunt, for corrupt officials and business executives and their assets.’

‘But Western countries have balked at signing extradition deals with China, partly out of concern about the integrity of its judicial system and treatment of prisoners.’

‘With the deal, Canada — one of the top two destinations for suspected economic fugitives from China — becomes the third nation to agree to help Beijing bring such offenders to book, following offers this year from France and Australia.’

‘The pact will cover the return of property related to people who would have fled to Canada and would have been involved in corrupt activities, Canada’s Ambassador to China, Mr Guy Saint-Jacques, told the China Daily in an interview.’

‘China has extradition pacts with 39 countries but not the United States or Canada, the two places suspected economic fugitives are most likely to go, the Foreign Ministry says.’

‘This month, France said it was ready to help track down people suspected of corruption who may be on French soil. In October, the Australian police agreed to assist in the extradition and seizure of assets of corrupt Chinese officials, the media said.’

Comment by Ben Jones
2014-12-17 07:04:04

‘Some pockets of the country now have as much as 6.9% of condominium apartments foreign-owned, according to a survey from Canada Mortgage and Housing Corp. on the rental market.’

‘It’s the first time the contentious issue of foreign ownership has been tackled by the Crown corporation, which earlier this year was criticized for an extensive report on the Toronto and Vancouver condo markets which did not address the issue.’

Well that put the issue to rest. Oh, wait:

‘The issue of foreign ownership in the housing market has been a contentious issue in Canadian real estate and Evan Siddall, the president of CMHC, has acknowledged there is “data gap” that he wants the Crown corporation to plug.’

‘In an interview with the Financial Post in October, Mr. Siddall said the research arm of CMHC was also tackling the foreign ownership issue and looking for more data from the banks.’

“We are looking at information that lenders have because lenders have clients,” said Mr. Siddall. “The problem is people buy through nominees and corporations and they are allowed to do that. We need to look for ways to pierce that. The way we do that with Canadians is we phone. We can’t phone people in Singapore or Hong Kong, we don’t know who to call. We need to try and look through to the extent we are legally allowed to do so and that we are not accessing privacy information.”

 
Comment by In Colorado
2014-12-17 08:59:02

‘With the deal, Canada — one of the top two destinations for suspected economic fugitives from China — becomes the third nation to agree to help Beijing bring such offenders to book, following offers this year from France and Australia.’

I guess we’ll be getting more “investors” in the USA.

 
 
Comment by Blue Skye
2014-12-17 07:42:59

“the wealthy can always find a way to get their money out”

but not their mistress.

Comment by In Colorado
2014-12-17 11:54:56

but not their mistress.

They can get new ones here.

Comment by Albuquerquedan
2014-12-17 15:25:20

A lot of the Tiger Woods’ mistresses are available they should be green and recycle.

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Comment by Ben Jones
2014-12-17 07:06:40

‘As everyone well knows in Regina, we have been experiencing several years of economic, population and community growth in our city. One of the most obvious and profound beneficiaries of this growth has been the residential housing industry and the more than 5,000 people who are directly or indirectly employed in the industry.’

‘In 2001, Regina had 626 new housing starts. A decade later, 10,332 homes were added to the Regina area housing supply. Since 2011 (including our estimate of where we will end up at in 2014) 10,066 new homes have been added.’

This is important for two reasons. Over the past year, there has been a fair bit of speculation the industry has significantly overestimated housing demand, resulting in “significantly higher new home inventory” as Canada Mortgage and Housing Corp. stated earlier this week.’

‘I would not completely disagree; there is some excess inventory for the short-term in the Regina market. What this means for home buyers is this could be a great time to look at some of the built-up inventory as an opportunity to purchase a newly built home.’

 
Comment by Ben Jones
2014-12-17 07:10:58

‘Australia may have survived the global financial crisis, but China’s appetite for coal and iron ore kept the recession wolf that stalked other countries from our door. That’s all changed now as the latest rise in the jobless rate to 6.3 per cent from 6.2 per cent tells us. Joblessness now sits at a 12-year high.’

‘The economy is still creating jobs, with 42,700 new ones emerging in November, but it needs to create tens of thousands more each month if employment is to stabilise. The trouble is all but 1800 of those were part-time jobs and the number of people who’d like more work is growing as a result.’

‘You don’t have to look far to see signs of economic weakness. The most recent GDP figure had the economy growing at only an annualised 2.2 per cent mid year, only two-thirds of the long-term trend. And in the last week reports tell us consumer and business confidence are on the skids. Ominously, the big department stores David Jones and Myer are reportedly planning to start their Boxing Day sales before Christmas, and not because Santa is coming early. It’s because shoppers are reluctant to reach for their wallets.’

‘For the past decade or more our national income has been driven by a rampaging resources industry that grew to account for about eight per cent of our economy when traditionally it was closer to two per cent.’

‘The multi-billion dollar projects the boom underpinned are mostly built and that means a lot of those people in fluoro jackets earning six-figure salaries are losing their jobs and heading back south in reduced circumstances.’

‘That’s taken a lot of cash out of the economy as will the current collapse of commodity prices driven by oversupply created by a lot of those new projects.’

‘So we are looking for a new economic champion but there is none stepping up to the plate.’

 
Comment by Ben Jones
2014-12-17 07:15:41

‘With rental yields contracting in many of Australia’s capital cities, one property research firm has warned investors to steer clear of certain property price brackets. Aviate Group’s Neil Smoli said investors with a larger borrowing capacity are often tempted to purchase more expensive investment properties, despite their questionable performance.’

‘Mr Smoli highlighted properties around the $1 million mark as particularly risky choices, and said properties around half the price tend to perform much better.’

“Firstly, there is concentration risk to consider,” he said. “Just like purchasing two investment properties in the same development represents an inappropriate risk, so does committing too much money to a single property. If the suburban market were to inexplicably turn, or if the property was subject to unforeseen circumstances, the risk exposure to the investor is too great.”

“To generalise, investors with a $1 million borrowing capacity would be much wiser to purchase two properties priced around $500,000 each instead of putting all their eggs in one basket. The capital growth opportunity generated is greater and the risk is more evenly spread.”

“Sound investment properties” generally yield around five per cent per annum, he said, which can be jeopardised if the purchase price is too high. Mr Smoli cites an example of an investor who recently purchased a $1 million property in Sydney’s northern suburbs, which generated a yield of just 1.8 per cent.’

‘Mr Smoli said this represented a $32,000 shortfall when compared to what an investor should typically expect from property yields. “The differential rents achievable between a $1 million property compared to a property half the price is not proportionate, and it’s up to the investor to fund that shortfall,” he said. “Hence more expensive investment properties can quickly become too arduous to hold, regardless of the financial position of the investor.”

 
Comment by Ben Jones
2014-12-17 07:24:39

‘A company owned by Dubai’s government plans to open four hotels in the sheikdom next year to expand the supply of mid-priced rooms in a market dominated by luxury accommodation, its chief executive officer said.’

‘Wasl Asset Management’s Hesham Abdullah Al Qassim said the three-star properties will each have 150 to 200 rooms and will be managed by Hilton Worldwide Holdings Inc. and Hyatt Hotels Corp. Wasl plans to build 19 hotels before end of 2017, he said.’

“We want to fill the gap,” Al Qassim said by phone. “If you look at what’s available in the market you’ll find that more than 50 percent are five-star hotels. This isn’t healthy.”

‘Five-star hotels in the city cost 2,000 dirhams ($550) or more per night, while three- and four-star hotels command nightly rates of 367 dirhams to 735 dirhams, according to Filippo Sona, director of hotels in the Middle East and North Africa at Colliers International.’

‘Wasl already owns 10 hotels and two golf courses in Dubai. The company is also Persian Gulf city’s largest landlord with more than 30,000 homes. Dubai aims to double its hotel rooms to 160,000 by 2020, Helal Saeed Almarri, director general of the Dubai Department of Tourism and Commerce.’

‘Occupancy rates dropped 2.5 percent to 85.5 percent in November as the number of rooms climbed 7.3 percent, STR Global said in a Dec. 10 report. Revenue per available room slid 9.2 percent, while average room rates fell 6.9 percent to 977.84 dirhams ($266), according to the report.’

‘Wasl built a twin tower Hyatt Regency complex on Dubai Creek and for the first time will sell properties to foreigners. One of the towers includes 463-rooms, five-star hotel set to open in March that will be held by the company. The second tower has 405 serviced apartments for sale starting on Dec. 15.’

“We wanted to enter the freehold market with a completed project, where buyers can see and touch the homes they are buying before they buy,” Al Qassim said.’

 
Comment by Ben Jones
2014-12-17 07:28:51

‘A troubling statistic from the Bank of Canada today: About 12 per cent of Canadian households are so deeply in debt that they could be in big trouble when interest rates inevitably rise.’

‘The Bank of Canada didn’t say they’ll be in trouble, by the way. It simply cited the fact that the 12 per cent have a total debt-to-income ratio that tops 250 per cent. But any financial adviser will tell you that you’d better get your act in gear. Fast.’

‘And the fatter the debt, the bigger the shock in terms of servicing it when rates rise. That 12 per cent has been steady over the past few years, the central bank said in its semi-annual review of the financial system, but it’s double the level of 2000.’

“These highly indebted households carry about 40 per cent of overall household debt,” the Bank of Canada said. “Low interest rates may not only encourage some households to take on high levels of debt, but they may also encourage some financial entities to lend to riskier borrowers,” it added.’

‘Just last week, Fitch Ratings also sounded the alarm on household debt levels in Canada, warning that the “Canadian consumer has essentially had to lever up to keep pace with the growth in house prices.”

‘Canadians are carrying $1.8-trillion in debt, some $1.3-trillion of it in mortgages.’

‘As The Globe and Mail’s Barrie McKenna reports, the central bank also said it’s monitoring the “significant growth” in auto lending, and uninsured mortgages that have “grown markedly” in the past while. “A more worrisome aspect of this trend is that a sizable proportion of new, uninsured mortgages are being issued to riskier borrowers.”

‘The Bank of Canada also attempted to put a figure on the overvalued housing market, saying its new model suggests prices have been inflated by at least 10 per cent since 2007, and overvaluation could now be in the area of 10 per cent to 30 per cent.’

 
Comment by Ben Jones
2014-12-17 07:32:12

‘Spooked by a shock slump in economic growth and a weaker dollar, Australians have become deeply pessimistic in the lead-up to Christmas at the same time as investors have taken an even greater share of the mortgage market from first-home buyers.’

‘Despite the prospect of cheaper petrol as global oil prices fall, consumers are more pessimistic about job security, house price growth and the wisdom of buying major households items than at any time since 2010, according to a Westpac survey of consumer confidence.’

‘Separate data from the ABS showed first-home buyers’ share of the home loan market fell to 11.6 per cent in October from September, the lowest level since records began in the early 1990s as investors’ share of the home loan market by value rose to a record high of 41.4 per cent. The value of loans to investors in October, $12.1 billion, was almost 20 per cent greater than the same period last year over the 12 months to ­October, while loans to owner-occupiers rose 5.7 per cent to $17.1bn. The average mortgage for first-home buyers rose to $315,000 compared with $332,000 for all borrowers.’

 
Comment by Ben Jones
2014-12-17 07:34:43

‘Sales of private homes in Singapore fell 68% in November, from a year earlier, as the government’s lending curbs hit purchases. The city-state’s housing market may face “fire sales” with mortgage defaults as the government’s property curbs hit home sales and prices, City Developments, the island’s second-biggest developer said in November.’

‘Home prices in the tiny nation have been on the decline for over a year now. But Singapore’s longest stretch of property price declined since the global economic crisis may not be sufficient to encourage a relaxation in housing curbs, Deputy Prime Minister Tharman Shanmugaratnam said in October.’

‘Earlier in October, National Development Minister Khaw Boon Wan said it was still not the right time to terminate the government’s cooling measures and that there was still room for prices to moderate.’

 
Comment by Ben Jones
2014-12-17 07:39:08

From India:

‘Go for a hard bargain as developers look to dispose unsold inventory’

‘With developers looking for ways to sell-off their projects experts say that home buyers are getting discounts or freebies to the tune of anywhere between 10-15 per cent and if they bargain hard they can get a sweeter deal. “It is a good time for investors as they can get good deals. Since the deals are going to be around for some time home buyers can do a proper search and go for a good developer offering a good deal,” said Sandeep S Katiyar, CEO, Century 21, a global real estate franchise sales organisation. As the scenario is not looking too bright for real estate players even in the festive season, they are looking to keep things going by offering huge discounts.’

 
Comment by Larry Littlefield
2014-12-17 07:39:59

The arrogance of prosperity.

In 1977 my family moved from New York, which was slumping, to Tulsa, which was booming. The attitude in Tulsa wasn’t that people there were lucky because the price of oil was up, but deserving they were better than other Americans, with conservative Christian values.

Then the price of oil plunged.

By 1987 I was back in NY, which was booming. The attitude there wasn’t that New Yorkers were lucky because of a stock market and junk bond boom, but deserving because they were smarter than other Americans.

Then the stock market and junk bond market crashed, and the crack epidemic got going.

You had the Asian Tigers with their Asian values in the mid-1990s, Silicon Valley in the dot.coms in the late 1990s, the whole mortgage/housing industry in the 2000s.

And now it is rolling around to the energy producing states and counties again. The bumper sticker from the mid-1980s was “God give me another oil boom, I won’t screw it up this time.” If they didn’t, it will be a miracle.

 
Comment by Ben Jones
2014-12-17 07:42:33

‘China’s real estate industry will focus on selling its mounting inventory amid price corrections and possible collapses of small property developers in the coming year, industry insiders said. Wang Jianlin, China’s second-richest man and president of the Wanda Group, claimed the real estate industry had entered a state of “new normal”, saying the industry would neither boom nor bust in the next year.’

‘In the January-November period this year, China’s home sale value dropped by 7.8 percent year on year, a huge contrast from the 26.3 percent surge registered in 2013 and the 10 percent increase in 2012, according to the National Bureau of Statistics.’

‘New housing projects also declined nine percent in the January-November period from a year earlier. “Overall, the industry is in overcapacity,” Wang said. “Some real estate businessmen have a fantasy that through monetary stimulation, the market may have a big boom in 2015. That idea is impractical.”

‘Wang, however, also dismissed concerns over a house market crash, saying moderate leverage levels, strong government leadership and urbanization potential would prevent China from such a bust. “Stop imagining that China’s property market will collapse. There is no possibility for that,” Wang said.’

Be sure and stamp your feet Wang. Just so everyone gets your last point.

Comment by Blue Skye
2014-12-17 07:49:29

“Stop imagining that China’s property market will collapse”

“Will” or “already”? The collapse in commodities is a sure indication that less material is being used on a global basis and in particular in China. Still, everyone is saying their own economy is growing. The world is running on imagination.

 
 
Comment by Ben Jones
2014-12-17 07:57:44

A repost from yesterday:

‘Four of the largest investors involved in the single family rental market have a potential of $1.2 billion in gained equity, or a 23 percent return, on properties purchased in the last three years (and that is just among the subset of properties with sufficient sales price and valuation information available).’

‘Among the largest institutional investors involved in the single family rental market, Blackstone/Invitation Homes had the most purchases with price and value information available over the past three years with 14,108, followed by American Homes 4 Rent (12,811), Colony American Homes (4,935) and Fundamental REO/Progress Residential (3,208).’

“With the pop in prices last year and normal historical price increases this year, investors are testing the market with their inventory.”
-Mike Pappas, CEO and president of Keyes Company, covering the South Florida market.’

“We are starting to see institutional investors release their hold-and-rent inventory back into the market as prices reach near peak prices.” -Chris Pollinger, senior vice president at First Team Real Estate, covering the Southern California market.’

‘States with the highest percentage of gained equity returns on institutional investor purchases were Delaware (63 percent), California (47 percent), New Hampshire (44 percent), Oregon (42 percent), New York (39 percent), and Colorado (38 percent).’

‘States with the most potential dollar value in gained equity on institutional investor purchases over the past three years were California ($1.9 billion), Florida ($1.4 billion), Georgia ($662 million), Arizona ($546 million), Illinois ($486 million), and North Carolina ($442 million).’

Metro’s with biggest equity returns include San Francisco, Portland, San Diego, Los Angeles. Metro areas with the most institutional investor purchases with price and value information available over the past three years were Atlanta, Miami, Phoenix, Chicago, Charlotte, Las Vegas, Tampa and Dallas — all with more than 5,000.’

‘Metro areas with at least 1,000 institutional investor purchases over the past three years with the highest percentage of potential returns on gained equity were San Francisco (63 percent), Portland (50 percent), San Diego (47 percent), Los Angeles (46 percent), and Riverside-San Bernardino in inland Southern California (46 percent).’

‘Metro areas with the most potential dollar value in gained equity on institutional investor purchases over the past three years were Miami ($611 million), Atlanta ($609 million), Los Angeles ($568 million), Phoenix ($512 million), and Chicago ($464 million).’

http://www.realtytrac.com/content/news-and-opinion/where-wall-street-is-most-likely-to-cash-out-of-the-single-family-rental-market–8200

Comment by Blue Skye
2014-12-17 08:07:05

“potential returns…”

They overbid on the way into their market distortion. How much will they undercut in lockstep on their way out?

 
 
Comment by Ben Jones
2014-12-17 08:56:29

‘As Denmark becomes the latest country to present its proposal on bank capital rules designed to fight asset bubbles, the International Monetary Fund is taking the opportunity to list its misgivings.’

‘Countercyclical buffers, which banks are supposed to build during boom cycles so that they have enough reserves to absorb losses when markets turn, are “a blunt instrument,” according to James Morsink, IMF mission chief for Denmark’s financial system stability assessment.’

‘The fund’s main concern is that such a buffer “applies to all exposures, so there’s no focus on areas where lending is growing particularly fast,” Morsink said by phone. His agency is now urging Denmark to consider other measures.’

‘The comments come as Denmark prepares to unveil its proposal on how big its counter-cyclical buffer should be and under what circumstances it needs to be triggered. Yet the IMF’s criticism suggests the extra layer of capital risks distorting credit markets rather than promoting financial stability. The effect may be greater when banking systems dwarf the economies they operate in.’

“If you have shocks, it’s going to have a bigger effect if the balance sheets are bigger, and if they’re connected, it’s not going to have an effect just on a part of the financial system,” he said. “It’s going to be transferred rapidly to the other parts of the financial system.”

 
Comment by Ben Jones
2014-12-17 08:59:40

Serge Pun, executive chairman of Yoma Strategic Holdings, spoke to The Irrawaddy on Tuesday to discuss the recent ADB loan, the resumption of full services at Yoma Bank, and the need to balance the rights of landowners and the needs of developers in an overheated property market which is also seeing an increasing number of land disputes.

‘Q: Do you think the real estate market in Burma is currently experiencing a bubble?

A: The definition of a bubble is fake demand in a market. It’s not a real market, it’s a speculative market. We have a very strong labor-intensive industry but we don’t have the infrastructure for high tech industry. Low cost labor-intensive industries can’t support expensive land plots. [So] the bubble will definitely burst.

There is some demand in residential areas, but if developers build apartments on expensive land, following standard building codes, will that stay affordable for buyers? Who will buy them? As long as buyers can pay, it will continue, but when they can’t buy, the bubble will burst.

Q: Are people still paying exorbitant amounts for land in Burma?

A: Yes, some people are still able to afford to pay these amounts in residential areas. For example, at my Star City housing project in Thanlyin Township, the land prices are about 150,000 kyats ($145) per square foot. In our experience, this is about the maximum [that property buyers can afford].

Office rental costs are another issue; rental prices in Yangon today are higher than in Singapore. It has stayed this high because of low supply and high demand. The rental price downtown is nine dollars per square foot. Some people can afford to pay, but most can’t.

 
Comment by Ben Jones
2014-12-17 09:10:02

‘With house prices rising across many markets in the United States, it’s starting to look like the housing market is on the path to healing. Unfortunately, when we look at one metric, it’s also starting to look like the housing bubble is back.’

‘At $305,000 in October 2014, the median selling price of a new home is now up $42,400 from its pre-Great Recession peak of $262,600 in March 2007 and up $100,800 from its post-Great Recession low of $204,200 in October 2010. That’s an increase of 49.4 percent in just four years.’

‘Now, let’s look at the other component in this equation. Here is a chart showing what has happened to median household income since 1984′

‘As you can see, nationwide statistics show that housing became increasingly unaffordable in the late 1980s, rising from a median multiple of 3.4 in 1984 to 4.4 in 1988 and 4.2 in 1990. There was a slight downward readjustment after the recession in 1990 and during the period between 1991 and 2000, housing remained relatively affordable with the median multiple remaining between 3.7 and 3.9. This is largely because median household income kept pace with rises in the value of homes. This began to change during the first decade of the new millennium; increases in median housing prices outpaced increases in median household income, resulting in the median multiple rising to 5.1 in both 2006 and 2007. According to Demographia, the national market for new family homes would be considered severely unaffordable at this level.’

‘As we all know, housing prices readjusted significantly downward during and after the Great Recession, with the multiple hitting a low of 4.2 in 2009. Since then, save for 2012, the national median multiple has continued to rise, hitting the highest level that it has been at in two decades during 2014 when it hit 5.2 in July 2014.’

‘Demographia’s analysis of the median multiple suggests that these high multiples are unsustainable; families simply cannot afford to continue to buy homes in markets where price increases substantially outstrip growth in household income. The Great Recession proved this as median house prices fell to more affordable levels. Interestingly, it looks like housing market history is repeating itself.’

 
Comment by Albuquerquedan
2014-12-17 09:36:52

The Chinese stock market is reaching about four year highs, it anticipated the economic slowdown for several years and is now on a tear. It is said that the U.S. stock market looks ahead about six months, I cannot find a reason why China’s does not do the same:

http://europe.chinadaily.com.cn/business/2014-12/17/content_19108256.htm

Comment by Blue Skye
2014-12-17 10:50:23

The US stock market anticipates Central Bank stimulus. Now that the China economy is crashing, maybe they are using the same expectation.

Comment by Albuquerquedan
2014-12-17 10:58:14

Crashing 7.1% growth? But the rest of the point has some validity but in the end it would only cause the stock market to go up if they were not worried about profits in their stock market decreasing or the companies actually going out of business which would be a crash.

Comment by Housing Analyst
2014-12-17 11:01:58

7% gdp is a 50%+ decline. And it’s still falling.

This is a result of collapsing demand.

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Comment by Albuquerquedan
2014-12-17 11:34:39

7% gdp is a 50%+ decline. And it’s still falling.

Strange math, just like those that claim that a decline in the increase of government is a cut. Ten percent growth when your GDP in 5 trillion is 500 billion. 7% growth when your GDP is 10 trillion is 700 billion some collapse in demand.

 
Comment by Housing Analyst
2014-12-17 12:02:32

China GDP was 15%. It’s now 7% and falling.

Sorry Dan.

 
 
Comment by Blue Skye
2014-12-17 11:59:57

Consider that your “7% growth” is false propaganda. All signals point in the other direction.

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Comment by Albuquerquedan
2014-12-17 13:08:13

“Consider that your “7% growth” is false propaganda”

As opposed to true propaganda? No, all the signals point to a rapidly growing service economy and a stagnant manufacturing economy. But even that misses the rapidly expanding high tech economy, while China rationalizes the old industries such as textiles, steel and concrete. Once that process is finished probably in the next year even the manufacturing economy will begin to expand at a pace far above most of the world.

 
Comment by Housing Analyst
2014-12-17 13:19:38

It’s a rapidly deflating economy founded on borrowed money as evidenced by a 50% decline in GDP.

 
Comment by Blue Skye
2014-12-17 13:29:01

“rapidly growing service economy…”

Debt collectors, prison guards and riot police? One of the poorest countries on the planet and hopelessly mired in fraud and debt. They borrowed $1.5 Tr externally this year. The game is changed, but not to a “service economy”. Now you admit the manufacturing miracle is over? Like trying to nail jello down.

 
Comment by Albuquerquedan
2014-12-17 13:51:43

I do not know how you can read that post and say that I said their manufacturing miracle is over. I said that they are transitioning from old manufacturing to new manufacturing.

 
Comment by Albuquerquedan
2014-12-17 13:59:33

A country capable of engineering projects such as this, we do not even dream of doing things like this, we have no plans to duplicate the creation of the interstate highway system:

http://usa.chinadaily.com.cn/china/2014-12/16/content_19096766.htm

 
Comment by Blue Skye
2014-12-17 14:32:19

“the signals point to…a stagnant manufacturing economy…”

There it is. And it is in contraction, not stagnant.

As for the high tech magical thinking, their boom in that is over too. That is my business and China has seized up there too. I am not saying they’ve collapsed, just that they’ve stopped adding production facility (primitive as it was). They are tech followers, not tech leaders, so a slowdown is deadly.

 
Comment by Albuquerquedan
2014-12-17 14:48:22

Tell it to Samsung, I do not think it would agree.

 
Comment by Blue Skye
2014-12-17 15:30:29

+1 for dan.

OK, but it seems that everybody is kicking Samsung’s posterior. The Chinese copies are cheap but not superior as far as I know. We’ll see what happens.

 
Comment by Albuquerquedan
2014-12-17 16:02:01

Have you checked out BYD auto? I hate lithium batteries so I find their electric cars interesting. It is China on the cutting edge.

 
 
 
 
 
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