December 25, 2014

Everything Is Coming Off The Boil Very Quickly

The Daily Mail reports on the UK. “House prices are falling all over Britain as the property market ends the year with a whimper. The value of the average home fell in nearly a third of UK postcodes in the three months to November, according to property website Hometrack. In London, the worst-affected markets include previously booming Wandsworth, Lambeth, Southwark and Lewisham – as well as Knightsbridge, home to the rich and famous. The softening of the market follows a clampdown on risky mortgage lending by the Bank of England, and worries that some areas have become overpriced.”

“‘Everything is coming off the boil very quickly,’ said Hometrack’s Richard Donnell. ‘We have had a huge surge of pent-up demand coming into the market from January 2013 onwards, but we are now running out of people who want to move or can afford to move.’”

The Poker News Report. “Macau casinos have seen their collective market value decrease to the tune of $75 billion. Casinos in Macau are heavily reliant on high rollers. Macau is a Chinese territory and the only region in China where casino gambling is allowed. The country’s president, Xi Jinping, is on a mission to wipe out corruption and believes that a number of high rollers may be laundering money through Macau casinos. It is believed that a crackdown will soon be waged by the Chinese government on efforts to move money through Macau — money that was perhaps obtained via ill-gotten means.”

Want China Times. “Gu Liping, the wife of newly disgraced Chinese official Ling Jihua, has an insatiable appetite for money and sex that puts her husband’s alleged corruption to shame, reports our Chinese-language sister paper China Times. Ling, 58, became the latest casualty in President Xi Jinping’s sweeping anti-graft campaign. In 2003, Gu established Youth Business China (YBC), a non-profit program aimed at promoting youth entrepreneurship.”

“YBC is alleged however to be merely a front for Gu to make lucrative land and property investments and is used to conceal exchanges of money for power, with claims that the charity owns property worth at least 3 billion yuan (US$480 million) in the Shanghai area alone. Certain media reports allege that Gu owns two luxury properties in Japan with a combined market value as high as US$500 million, and that her family controls bank accounts in Japan and Singapore which together hold around 37 billion yuan (US$5.9 billion).”

From Asia One. “For €6.95 million (S$11.24 million), you can be the owner of a French Villa with views of the Mediterranean. According to South China Morning Post, the luxurious Cannes home was owned by former Politburo member, Bo Xilai, who has been jailed for bribery, corruption and abuse of power. ‘China had vowed to confiscate the mansion but it was unclear who put it up for sale or whether the government had made any progress in its effort to seize the property,’ Reuters reported.”

Mine Web on Australia. “Australia cut its iron ore price estimate for next year by 33% as surging output in the world’s top exporter outpaces Chinese demand growth, adding to a surplus. China, which buys 67% of global seaborne supply, is set to record its weakest annual growth since 1990. ‘The current market oversupply is expected to prevail through the start of 2015 in response to a likely ongoing cyclical downturn in China’s housing sector,’ the report said.”

The Courier Mail in Australia. “Gold Coast businessman Peter Drake has lost control of all of his assets to a bankruptcy trustee and been forced to hand his passport to a Brisbane court. The LM Managed Performance Fund collapsed in March last year when the directors appointed corporate paramedics. LM attracted investors and sank their money into the development of a $1 billion Gold Coast housing estate with features designed by gardening guru Jamie Durie and surfing champion Kelly Slater. At its peak, LM boasted it managed $3 billion in its nine funds.”

The New Zealand Herald. “A woman who bought an Auckland apartment to get on the property ladder has been left ‘financially strained’ and says the property is now worth about half what she paid for it. Joo Yom bought her three-bedroom apartment for $436,500 in 2007. Although city-wide capital values have risen on average 34 per cent since 2011, with some shooting up more than 50 per cent, the value of Ms Yom’s property has dropped to $425,000 - $11,500 below what she paid.”

“Ms Yom wants to sell her fifth-floor apartment, but has been told by real estate agents this was ‘not a good time.’ Some had told her the apartment could fetch ‘about half’ what she paid seven years ago - about $100,000 less than the $344,000 she borrowed to buy the property. Ms Yom said her foray into buying an apartment had left her suffering from stress, anxiety and insomnia. ‘I have had no overseas holidays since 2007 and have been forced to watch every cent because of all the outgoing costs I have to pay.’”

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Comment by taxpayers
2014-12-24 06:34:00

sign yanked next door in taxpayer supported 22151

Comment by Housing Analyst
2014-12-24 11:48:51

The deluded sucker. Sell later for even less?

Comment by Ben Jones
2014-12-24 06:36:42

‘America’s Federal Reserve is headed down a familiar — and highly dangerous — path. Steeped in denial of its past mistakes, the Fed is pursuing the same incremental approach that helped set the stage for the financial crisis of 2008-2009. The consequences could be similarly catastrophic.’

‘Consider the December meeting of the Federal Open Market Committee, where discussions of raising the benchmark federal funds rate were couched in adjectives, rather than explicit actions.’

‘This bears an eerie resemblance to the script of 2004-2006, when the Fed’s incremental approach led to the near-fatal mistake of condoning mounting excesses in financial markets and the real economy. After pushing the federal funds rate to a 45-year low of 1% following the collapse of the equity bubble of the early 2000s, the Fed delayed policy normalization for an inordinately long period. And when it finally began to raise the benchmark rate, it did so excruciatingly slowly.

In the 24 months from June 2004, the FOMC raised the federal funds rate from 1% to 5.25% in 17 increments of 25 basis points each. Meanwhile, housing and credit bubbles were rapidly expanding, fueling excessive household consumption, a sharp drop in personal savings, and a record current-account deficit — imbalances that set the stage for the meltdown that was soon to follow.’

‘The Fed, of course, has absolved itself of any blame in setting up the U.S. and the global economy for the Great Crisis. It was not monetary policy’s fault, argued both former Fed Chairmen Alan Greenspan and Ben Bernanke; if anything, they insisted, a lack of regulatory oversight was the culprit.’

‘This argument has proved convincing in policy and political circles, leading officials to focus on a new approach centered on so-called macro-prudential tools, including capital requirements and leverage ratios, to curb excessive risk-taking by banks. While this approach has some merit, it is incomplete, as it fails to address the egregious mispricing of risk brought about by an overly accommodative monetary policy and the historically low interest rates that it generated.’

‘In this sense, the Fed’s incrementalism of 2004-2006 was a policy blunder of epic proportions…today’s Fed seems likely to find any excuse to prolong its incremental normalization, taking a slower pace than it adopted a decade ago.’

Comment by Ben Jones
2014-12-24 07:06:13

‘It was not monetary policy’s fault, argued both former Fed Chairmen Alan Greenspan and Ben Bernanke; if anything, they insisted, a lack of regulatory oversight was the culprit.’

Never mind that the Fed was tasked with regulatory oversight in the first place, swooping in to stop subprime lending more than a year after the industry had collapsed. And now we have Subprime Mel running the show at the GSE’s.

Comment by Whac-A-Bubble™
2014-12-24 18:51:22

Crazy economic times we live in. I look forward to enlightening the grandkids about this debacle some day.

Comment by Jingle Male
2014-12-25 04:32:41

Wiil that be in 30 years? Just about the time you could fully amortize a home Loan!

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Comment by Housing Analyst
2014-12-25 11:22:05

Remember Jingle_Fraud…. “if you have to borrow for 15 or 30 years, it’s not affordable nor can you afford it.”

Comment by Prime_Is_Contained
2014-12-25 14:55:18

Just about the time you could fully amortize a home Loan!

Fair point; we are already one decade past the point where I didn’t think it could continue for much longer!

Comment by Ben Jones
2014-12-24 06:38:56

‘UBS Group AG is flagging risks from China’s $1 trillion worth of unhedged foreign debt as forecasters see bets against the greenback unwinding in 2015.’

‘The world’s second-largest economy is exposed to shifts in currency and interest rates as never before because of expanding international trade and easing foreign-exchange regulations, said Stephen Andrews, head of Asia banks research in Hong Kong at UBS. Daiwa Capital Markets has a $1 trillion estimate for carry-trade inflows since 2008, bets on the difference between yields in China and overseas. It sees a 5.7 percent drop in the yuan next year.’

‘The renminbi is heading for a 2.8 percent loss in 2014 as the dollar gains on Federal Reserve plans to raise interest rates and the People’s Bank of China cuts borrowing costs to support a flagging economy. Capital controls and record foreign-exchange reserves will help the PBOC cope with any similar situation to 1997’s Asian financial crisis, when firms struggled to repay debt as currencies slumped, Andrews said.’

“This could get very uncomfortable very quickly,” he said in a Dec. 12 interview. “I boil it down to its basics. You’ve borrowed unhedged and leveraged: you’re at risk.”

Comment by Dman
2014-12-24 06:53:55

A couple trillion in local government debt, a few trillion in shadow banking, a few trillion more in an epic housing bubble; it’s a good thing China has all those foreign reserves it can use to pay the bills. But wait, if they sell all those U.S. and Euro bonds to pay the bills, their currency will skyrocket, and their export economy will collapse, along with their financial system. This is starting to get interesting.

Comment by Jingle Male
2014-12-25 04:39:48

It seemscto me using their foreign currency reserves to pay debt would drive their currency lower as they raid the savings account.

Comment by Ben Jones
2014-12-24 06:43:14

‘In London, where a scramble for homes led to buyers in some areas making sealed bids above the asking price earlier in the year, 29% of prices have been discounted.’

‘Among the properties listed on the website with discounts of 50% are a two-bedroom penthouse flat in Manchester which is now up for sale at offers over £1m, and a three-bedroom home in London’s Docklands being sold for £1.375m.’

Well, that all turned around very quickly.

Comment by Albuquerquedan
2014-12-24 13:20:56

From China Daily:

Last month, Alibaba Group Holding Ltd’s Jack Ma invited 1,600 former employees to its home turf in Hangzhou, capital of Zhejiang province. The company’s $25 billion initial public offering had made many of them wealthy and he urged them to start businesses that would be meaningful in the long term.

“He knew a lot of us got rich and wanted to tell us not to waste our money,” said Sun Shuihua, who worked at Alibaba for a decade. “He told us to treat our wealth responsibly.”

Sun, 36, has already started. She is spending 5 million yuan ($804,000) to set up an online retail business, becoming part of a generation of Alibaba workers who have made their fortunes and are now putting the money into startups.

China is beginning to emerge as a legitimate contender to Silicon Valley as the center of the technology industry, fueled by an Alibaba IPO that brought in more money than any in history. Chinese technology companies have raised $30.3 billion in IPOs this year, compared with $4.97 billion for their US-based peers.

“Today in Hangzhou, you could be having dinner at a night market and you’ll hear people around you talking about their startups,” said Wang Huadong, a Beijing-based partner at Matrix Partners China, which manages $1.2 billion of assets. “You are seeing a wave of people trying to set up their own businesses, trying to find the next big opportunity.”

Chinese startups benefit from the country’s position as the world’s largest Internet market, with 632 million users. Venture investments in Chinese companies climbed to $8.1 billion in the first three quarters, more than double the $3.5 billion for all of last year, according to Ernst & Young LLP. China trails only the the United States, where venture investments were $37.3 billion this year.

Hangzhou, a city of 8 million, is emerging as the latest technology hub in China due to the wealth created from Alibaba, adding to those in Beijing, Shanghai and Shenzhen. Alibaba shares have surged more than 60 percent since its IPO, giving the company a greater market valuation than General Electric Co.

Jenny Lee, a Shanghai-based partner at GGV Capital, said Hangzhou accounts for a third of about 20 investments the firm has made in China this year, compared with none a year ago. GGV manages $2.2 billion of funds and invested in Alibaba before the IPO. The startups are mainly focused on e-commerce, location-based services and Internet finance, areas where Alibaba employees hold expertise, Lee said.

Co-founded by Ma in 1999, Alibaba gives many employees company shares, usually in the form of stock options or restricted shares, which they can hold onto after they quit. Rachel Chan, a company spokeswoman, declined to say how many employees have shares worth more than $1 million.

Comment by Ben Jones
2014-12-24 06:45:33

‘Sue Munden bought her five-bedroom house in the southwest London district of Streatham in November after negotiating the price down to 610,000 pounds, about 100,000 pounds less than a similar home on the street sold for in April.’

“I did look earlier in the year, but I wasn’t able to have an offer accepted at a level I was comfortable with,” said Munden, who was surprised to get the property for 90,000 pounds ($141,000) less than the offer price. “I thought house prices were too high.”

‘Munden said the discount she secured on her home in Streatham will shield her in case values continue to fall. “I felt it was good value for money which would protect me from any potential weakening in London house prices,” she said.’

Comment by Blue Skye
2014-12-24 08:55:16

It’s called a falling knife Sue, not a shield.

Comment by Ben Jones
2014-12-24 06:49:30

‘Several of China’s real estate tycoons have taken a bearish view recently on the country’s softening housing market. Even Ren Zhiqiang, a property mogul known for his controversial comments about housing prices, has said that nothing can now stop the market from falling.’

‘These tycoons may have good reason to be pessimistic…Housing prices in third- and fourth-tier cities have limited room to rise now that populations in these locales have more or less peaked. Many of these lower-tier cities also lack the industries needed to support local economic activity and employment.’

‘How to digest housing inventories will become a big question for developers. At present, Chinese developers are sitting on some 600 million square meters of unsold property, a record high.’

Comment by Ben Jones
2014-12-24 06:52:01

‘Media reports say that tens of thousands of affordable housing units in the Baishawan district of Qingdao, Shandong Province, have gotten a frosty reception due to their remote location and lack of supporting infrastructure.’

‘Acting under command from central authorities, it seems that some local governments have rushed ahead with poorly conceived plans to build as many affordable homes as possible without consideration for the needs of people who might live there.’

”Many affordable housing units are like those found in Baishawan: isolated in remote districts where land is cheap. According to reports, such projects could be located as much as three hours away from the nearest urban center, making commuting impractical. What’s more, many such projects are also located far from basic facilities such as hospitals and supermarkets.’

‘With few people willing to relocate to such far-flung residences, it’s hardly surprising that so many developers have had difficulty recouping their costs from affordable home construction.’

Comment by Ben Jones
2014-12-24 07:10:55

‘The nation’s official commodities forecaster has slashed its iron ore price forecast by a third and warned China’s voracious­ appetite for steel may wane next year. Australia will also pocket $18 billion less from its iron ore exports in 2015 despite shipping out an extra 48 million tonnes, the Department of Industry­ says.’

‘The price of iron ore, Australia’s biggest export item, will average $US63 a tonne next year, the department has said in its resources and energy update for the December quarter.’

‘Its latest forecast is 33 per cent lower than the $US94 a tonne the Bureau of Resources and Energy Economics predicted in September.’

‘It warned any growth would largely depend on the success of measures being rolled out by the Chinese government to boost that nation’s cooling property market. “If recently announced stimulatory measures fail to result­ in a housing sector rebound there is a risk that China’s steel consumption may decline in 2015,” the update warns.’

Comment by Blue Skye
2014-12-24 08:57:22

Ignoring the fact that demand already collapsed in 2014.

Comment by Ben Jones
2014-12-24 07:14:08

‘Falling demand for dairy products in China helped drive down New Zealand’s goods exports by 9.5 percent year on year in November, the government statistics agency said.’

‘Dairy exports drove the fall, plunging 27 percent in value, with the quantity down 3.1 percent. The fall in dairy reflected the record high levels exported, mainly to China, in November 2013.’

“The fall in export values reflects a return from the high values late last year, led by China,” international statistics manager Jason Attewell said. “The trend for exports to China is 42 percent lower than the series peak in December 2013, and is now at similar levels to 2012.”

Snapping up all those NZ dairy farms may not have been such a great idea after all.

Comment by Blue Skye
2014-12-24 08:59:40

Say Cheese!

Comment by Housing Analyst
2014-12-24 07:14:51

Elk Grove(Sacramento), CA Sale Prices Dive 4% YoY; Plummet 11% QoQ As Prices Fall Statewide

Comment by Jingle Male
2014-12-25 11:02:40

HA, you should read the link before you post. Prices were up 7% this year. Forecast to rise 5% next year. The market data shows a seller’s market with 7 of 10 metrics showing strength! Ho, ho ho, Merry Christmas!

Comment by Housing Analyst
2014-12-25 11:06:19

Wishful thinking Jingle_Fraud. Prices down 4% and falling.

Comment by Jingle Male
2014-12-25 15:25:12

It right there in the link you posted. Everyone reads your post and sees you are absurd.

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Comment by Housing Analyst
2014-12-25 15:51:18

Falling prices are a positive trend indeed Jingle_Fraud.

Here’s another.

San Diego, CA Sale Prices Crash 10% YoY As Demand Plummets To Multi-Decade Lows

Comment by Ben Jones
2014-12-24 07:51:56

‘Among the lowest rates in the province the previous year at 1.8 per cent, Estevan’s vacancy rate jumped to 12.5 per cent in October 2014. The city also had the one of the highest rents with an average two-bedroom apartment going for $1,240 per month.’

‘Estevan Mayor Roy Ludwig said developers are finally catching up with demand. “We have two or three different developers in town working hard and it is starting to bear fruit,” Ludwig said. “I think we are in a little bit of a lull and it has allowed the developers to catch up and now we have some extra product on the market.”

“For a time there it was insane,” he said, adding a number of motels have also been recently built. Oil companies would book rooms and pay for them just so they would have the availability and sometimes not even have them filled. It is nice to see we have some more availability.”

‘Rob Denys, Estevan’s land development officer, said there is a lot more product on the market. “The last two years in terms of multi-family development has been pretty significant,” Denys said.’

Comment by Housing Analyst
2014-12-24 07:55:45

Riverside, CA Sale Prices Plummet 6% YoY As Rising Inventory Looms

Comment by Ben Jones
2014-12-24 08:28:33

‘A former party official from a city in northeast China’s Liaoning province has returned after over two and a half years in self-imposed exile in the United States and turned himself in for disciplinary violations, the Beijing News reports.’

‘Wang Guoqiang arrived in Beijing on Monday and handed in a written confession that specified how he violated the law and abused his position for personal gains. Wang also said he would be willing to assist the investigations.’

‘Wang fled to the United States with his wife in May 2012, after allegedly taking more than 200 million yuan (32 million US dollars), and had been hiding there ever since.’

‘China has enhanced cooperation with foreign countries to bring back corrupt government and party officials. Law enforcement authorities in the US are collaborating on the ongoing investigations into the case.’

Comment by Blue Skye
2014-12-24 09:04:02

“authorities in the US are collaborating…”

Who knows if this means any more than county records being open to the public. Could it matter that China has a habit of imprisoning family members in cases of corruption?

Comment by Guillotine Renovator
2014-12-24 16:44:00

“‘Wang fled to the United States with his wife in May 2012, after allegedly taking more than 200 million yuan (32 million US dollars), and had been hiding there ever since.’”

What are his real estate holdings here? And, what is going to happen to them?

Comment by Guillotine Renovator
2014-12-24 16:45:05

These kind of people are not welcome here, at least by my standards. Why are we allowing these crooks anyway?

Comment by Raymond K Hessel
2014-12-25 07:35:52

Au contraire. Our corrupt oligarchs welcome their corrupt oligarchs.

Comment by AmazingRuss
2014-12-25 16:53:34

We let them in to recover all the cash we gave them for cheap walmart crap. Sell them over priced assets, depreciate them, then round up the once rich immigrants and send them home to be executed.

Comment by Housing Analyst
2014-12-24 08:34:58

Mission Viejo, CA Sale Prices Crash 16% YoY; Sellers Slash As Housing Correction Accelerates

Comment by Housing Analyst
2014-12-24 08:43:34

“China house prices fall 3.7% in November, third straight decline”

Comment by In Colorado
2014-12-24 11:37:50

Gold Coast businessman Peter Drake has lost control of all of his assets to a bankruptcy trustee and been forced to hand his passport to a Brisbane court.

Got multiple citizenships?

Comment by Jingle Male
2014-12-25 04:25:09

“……$1 billion Gold Coast housing estate with features designed by gardening guru Jamie Durie and surfing champion Kelly Slater.”

One of the more curious sides of the bubble phenom: Gardners and surfers become development sponsors, consultants and designers, rolling in money, right up to the time they lose their over valued homes to foreclosure. It probably felt good for a while, just like the strawberry picker and his $1 million mcmansion in Hollister.

Comment by Housing Analyst
2014-12-25 10:18:03

You just described yourself Jingle_Fraud.

Comment by Puggs
2014-12-24 14:19:36

It ain’t too merry if you bought a sarcophagu… I mean house this year.

Comment by Realtors Are Liars®
2014-12-24 18:00:06

realtors are liars

Comment by Housing Analyst
2014-12-25 11:10:09

Bellevue, WA Sale Prices Plunge 12% YoY As Price Declines Spread

Comment by Whac-A-Bubble™
2014-12-26 00:25:10

Why is it again that people are buying houses nowadays, at the very point when fundamentals are poised for the next leg down in home prices (2007-08 rerun)?

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