This Normalising Is Not Good For The Fangnu
From Business Vancouver in Canada. “A new report from McKinsey Global Institute is warning that household debt levels are dangerously high in many developed countries, including Canada. The report calls for more action to reign in both household and government debt and to cool overheated housing markets. ‘We have to take note when a study compares us to Greece,’ said Chris Catliff, CEO of BlueShore Financial Credit Union, referring to a measure included in the report showing that the rate of Canada’s increase in debt-to-income has been second only to Greece from 2007 to 2014.”
“Wealthy immigrants from other parts of the world, such as China, the Middle East, Europe and the United States, continue to buy homes in Vancouver, he said. Vancouver’s real estate market might be in trouble if those wealthy immigrants were to stop coming to Vancouver and parking their money in houses. ‘We would be significantly hurt by it if it happened for a long period of time, but what you see in other jurisdictions is, they may stop coming, but will they sell?’ he said. ‘The house might be empty but it doesn’t mean it’s going to be sold.’”
This is Money in the UK. “Shares in some of the UK’s leading property names fell today as it emerged hedge funds have been taking out short positions against the London housing market-focused stocks in the belief that the London residential property market has peaked and is now headed for a downturn. The bets are a wake-up call for investors who have been riding the property wave over the past decade. There are now very real fears the capital could be left with an excess of expensive homes and no foreign buyers to snap them up - 54,000 luxury homes are planned or under construction in London, while just 3,900 were sold last year.”
“On average, the price of a flat fell by 9 per cent in central London between January 2014 and January 2015. Over the same time, the number of flats for sale in central London has increased by 64 per cent. Meanwhile since November 2013, the price of a typical flat in Belgravia has fallen 20 per cent, from £1,995,000 to £1,600,000.”
The Star Online in Malaysia. “There is growing evidence of softening demand for residential property priced at RM1mil and above, as buyers turn cautious amid a rising glut in the higher end of the market. ‘Currently, there is an oversupply of high-end condominiums and offices,’ VPC Alliance chartered surveyor and director James Wong said. This was evident, he said, as property developers had been launching fewer projects in recent months. Wong also said there had been a rise in property auctions, while banks were getting stricter in approving housing loans. ‘We have been seeing correctional signs since the fourth quarter of 2014. Coupled with the oversupply, we suspect this will not be a good year for the property market,’ he said.”
The Australian. “The fall in the price of iron ore has ended an era of astonishing rents in the Pilbara, according to local MP Brendon Grylls. In one of the starkest signs yet that the resources boom is over, a house in the Pilbara mining town of Port Hedland was passed in at auction for $360,000 at the weekend after it was bought for $1.3 million just four years ago.”
“Mr Grylls says small business operators left the town of Karratha in droves at the height of the construction phase of the resources boom because they realised it was more profitable to rent their homes than try to make money from a business. Mr Grylls said he paid $1350 a week rent for a Karratha house that fetched $2400 a week in 2012. ‘This normalising is not good for the Sydney investor who bought a place in the Pilbara sight unseen because their adviser told them it would be good for their negative-gearing portfolio,’ he said.”
The International Business Times on China. “Breakneck economic growth in China’s megacities has driven housing prices to record highs, and has made finding an affordable home difficult for millions of young people who don’t come from wealthy backgrounds. In Beijing, the average price per square meter in residential real estate has tripled since 2000. There’s even a term in Chinese — ‘fangnu’ or ‘house slave’ — to describe people who remain at jobs just so they can continue to afford mortgage payments.”
“After roughly six months of searching, Xu and his fiancée still haven’t found a place. ‘Most people nowadays will choose to live in the outskirts of Beijing for a better price,’ Xu said. As housing demand in Beijing increased in the mid-2000s, dozens of developers began building on the outskirts of the city, offering brand-new homes at more affordable prices in addition to cheaper rental options for young college graduates. But with the chaotic traffic and vast distances in Beijing, that’s too far for Xu.”
“So he waits, lest he end up like a cousin who, he said, ‘bought two apartments on the border of Beijing and Hebei,’ far from the city center: ‘He can barely pay the mortgage every month and they’re not even living in either apartment now, because they are too far away from the city.’”
The Times of India. “More than 100 residents gathered at Sarvanampatti to protest against a private infrastructure and housing company based in Sarvanampatti on Saturday as the company failed to complete construction of apartments before the scheduled deadline in 2011. The Sahara City Homes was announced in the city in 2003 and people started booking homes in 2008. According to residents, more than 700 customers booked homes and paid 90% of the amount by 2010. ‘It has been four years and not a brick was laid after 2010,’ said Lakshmi Narayanan, one of the investors.”
“In 2010, the builders informed clients that the building is being extended to nine floors from four floors. The customers were informed about the interests and the fees involved. ‘But after we paid the amount, the construction was stalled,’ said Anil Kumar, a client. The situation is worse for several NRI investors as many have invested up to 1crore. ‘For a 3BHK flat I have paid 1.07cr but the company is neither refunding nor completing the construction,’ said Babu, who is from Singapore.”
Santa Rosa, CA List Prices Plunge 10% In 2014; Sellers Panic
http://www.zillow.com/santa-rosa-ca-95404/home-values/
“Oil May Drop To $20/Barrel, Citi Analysts Predict”
http://www.marketwatch.com/story/oil-may-drop-by-more-than-30-a-barrel-from-current-levels-says-citi-2015-02-09
‘Aberdeen: In this city built out of granite on Scotland’s North Sea coast, a diamond merchant checks the price of oil every day. Until recently, the dealer, Oscar Ozdaslar, had been accustomed to North Sea oil workers stopping in to buy £3,500 (Dh19,600) diamond rings and earrings in his store on Union Street.’
“This Christmas was very quiet compared to the Christmas before,” said Ozdaslar. “The oil guys didn’t come in.”
‘At Cafe Boheme, a French restaurant across the street from Ozdaslar’s jewellery store, customers including Royal Dutch Shell cancelled about 30 Christmas bookings in December, said Dominique Mancellon, who owns and runs the eatery. Staff from companies including Shell, Statoil and Petrofac make up about half of his customers. Sales will fall about 10 per cent for the 12 months through July after increasing every year in the past decade, he said.’
“If the price of oil stays down, we’ll have to be very careful about how we run our business,” said Mancellon. The fillet steak, which costs 28.50 pounds and was a regular order for oil workers, has declined in popularity, Mancellon said. A white wine from Chateau Mont-Redon from his native Provence region going for more than 70 pounds a bottle was also popular before the oil rout. Sales are now down about 60 per cent as diners choose the house wine instead.’
‘Project planner Jules Gardner and fellow contractor Mark Saunders are on contracts that can be cancelled with little notice. Gardner reckons he has a 75 per cent chance of keeping his job this year while Saunders, says he’s closer to 60 per cent. Both have had their pay rates cut.’
‘The two started commuting to Aberdeen every week from outside London in 2012. Six months ago, Gardner was making 78 pounds an hour, the equivalent of about 180,000 pounds a year. His pay is now down about 30 per cent, he said, drawing a contrast with the days when he received two pay increases and enjoyed spreading his cash around Aberdeen’s restaurants, curry houses and pubs.’
“It was a party town, a boom,” Gardner said. “I’d eat out three nights out of four. But I don’t do that anymore.”
‘Back on Union Street, diamond-seller Ozdaslar is trying to remain optimistic. “The oil price will go up,” he said. “It cannot stay like that. It must go up.”
‘Back on Union Street, diamond-seller Ozdaslar is trying to remain optimistic. “The oil price will go up,” he said. “It cannot stay like that. It must go up.”
The last words of a degenerate gambler. Just like a degenerate gambler.
And in another bubble country:
‘When Joergen Langaunet started as a project planner at offshore engineer Aker Solutions ASA in 2012, he worked a lot of overtime. Norway’s oil industry, so rich it spawned the world’s largest sovereign wealth fund, was booming.’
‘Then last year, he realized he was spending most of his time in the lunch room: His services weren’t needed. In September, Langaunet lost his job. Today he’s a regional manager for Tine SA, Norway’s biggest dairy producer.’
“Our office went through two rounds of downsizing, so you start to see the picture when people have to leave and no matter how many people leave, there’s still less and less work to do,” the 29-year-old said by phone from Trondheim, Norway.’
‘The industry’s struggles are rippling through the Nordic country’s economy, where petroleum accounts for more than one fifth of gross domestic product. In December, the central bank, which had been keeping rates up to guard against a housing bubble, eased its benchmark for the first time in more than two years and said there was a 50-50 chance for another reduction as soon as March.’
‘At Bergen University College, engineering students who used to interview with eager oil-company recruiters during breaks between classes, are being forced to change their plans. “I was promised gold and riches,” said Safina de Klerk, a 21-year-old in her third year of engineering studies in Norway’s second-biggest city. “We were caught off guard, but we should actually have seen this coming. The investments in the oil industry have been ridiculous.”
It seems like everywhere a boom is called a “wave” and collapse is called “ripples”.
I’m thinking 60’s by summer- look at car sales- suv’s p/u trucks weeeeeeeeeeeeeeeeeeeeeeee
Oil dependent, check. Real estate bubble, check.
‘Nigeria’s naira fell to a record after the West African nation’s decision to postpone elections increased risks the continent’s worst-performing currency will be devalued. The currency is depreciating for a seventh day to the weakest level since Bloomberg started compiling the data in January 1999, extending losses this year to 7.8 percent, the most among 24 currencies tracked by Bloomberg.’
‘Yields on Nigeria’s $500 million of Eurobonds due July 2023 climbed seven basis points to 7.45 percent, the highest since Feb. 2. The 195-member Nigerian Stock Exchange All Share Index fell 0.3 percent, declining a fourth day. The gauge is down 16 percent this year, the most among 93 primary equity indexes tracked by Bloomberg.’
60 what? $/barrel? 60% of current prices? Housing. No clarity in your comment…….
$48 and falling Jingle_Fraud.
“Vancouver’s real estate market might be in trouble”
With prices sinking on the US side, it already is.
Vancouver, WA List Prices Sink 6% In 2014 As Sellers Slash
http://www.zillow.com/vancouver-wa-98661/home-values/
Don’t let a Realtor sweet talk you into becoming a fangnu.
“their negative-gearing portfolio”
Debt donkey wagon in any language.
‘a cousin who, he said, ‘bought two apartments on the border of Beijing and Hebei,’ far from the city center: ‘He can barely pay the mortgage every month and they’re not even living in either apartment now’
So this is double fangnu-ed?
‘a house in the Pilbara mining town of Port Hedland was passed in at auction for $360,000 at the weekend after it was bought for $1.3 million just four years ago’
Now that’s some deep fangnu there.
‘more than 700 customers booked homes and paid 90% of the amount by 2010. ‘It has been four years and not a brick was laid after 2010,’ said Lakshmi Narayanan, one of the investors.’
700 and they didn’t even get an empty sky box. That’s fanged-up.
“So this is double fangnu-ed?”
My family can beat that, as Lil Sis is triple fangu-ed, and wants to sell two of the three into a market pock-marked with foreclosure craters.
“Yes, Looser Credit — And Fraud — Drove The Housing Bubble”
http://ftalphaville.ft.com/2015/02/10/2116771/yes-looser-credit-and-fraud-drove-the-housing-bubble/
And yes….. with current prices inflated 250% higher than long term trend, it’s a huge, massive fraud driven operation.
Breaking news:
“A new report from McKinsey Global Institute is warning that household debt levels are dangerously high in many developed countries, including Canada.”
Apparently this news just sorta snuck up out of nowhere.
“The report calls for more action to reign in both household and government debt and to cool overheated housing markets.”
Which means (the horror) everyone should SPEND LESS!
But … but … but to keep these economies going in these developed countries the experts (choke) say we should SPEND MORE.
“Apparently this news just sorta snuck up out of nowhere.”
Nobody could have seen it coming!
“…the experts (choke) say we should SPEND MORE.”
And given dismal wage growth, the only way for this to happen is if we collectively BORROW MORE.
“‘This normalising …”
“normalizing” …such a word … Bahahahahahahahah …
“… is not good for the Sydney investor who bought a place in the Pilbara sight unseen …”
“sight unseen … bahahahahahaha …
“… because their adviser (Amy?) told them it would be good for their negative-gearing portfolio,’ he said.”
Go here (if you dare!) for a free peek of a mining town that has been “normalized”:
https://www.google.com/search?q=bodie&biw=1813&bih=857&tbm=isch&tbo=u&source=univ&sa=X&ei=PQ3aVKWNNNTcoATZ2YLwAQ&ved=0CDcQsAQ&dpr=0.75
‘Egypt cheapened the pound more than any other Middle East currency this year by abandoning its fixed peg against the dollar. The central bank allowed the pound to slide 6.3 percent in three weeks through Feb. 2, the most among 19 currencies in the Middle East and North Africa tracked by Bloomberg. The exchange rate reached a 22-month low of 7.982 a dollar in the black market, a 4.4 percent discount to the official rate, according to the average of seven dealer quotes obtained by Bloomberg on Feb. 3.’
‘Inflation has been accelerating, with consumer prices rising 9.7 percent a year in January, compared with 4.3 percent in November 2012 when economic activity was slowing following the 2011 revolution.’
‘Higher import costs have a magnified effect on prices overall because more than three-quarters of the $60 billion of foreign purchases are intermediate goods that go into the manufacturing of other products, or raw materials, petroleum products and investment goods, the central bank’s data show.’
‘The weakening pound is likely to benefit real-estate companies by spurring Egyptians to hedge against depreciating cash through buying property, said Simon Kitchen, a Cairo-based strategist at EFG-Hermes Holding SAE.’
‘Finance Minister Bill English has responded to a warning about a “sharp correction” in the housing market, saying that skyrocketing house prices “cannot go on forever”. Mr English was this morning asked about comments made by Reserve Bank Governor Graeme Wheeler, who said last week that rising house prices in Auckland and Christchurch were one of the main risks to the economy.’
‘In a speech, Mr Wheeler said: “The more that house prices get out of line with historic relativities, the greater the risk of a sharp correction, leading to financial instability.” Asked whether a “sharp correction” could mean the bursting of a housing bubble, Mr English said: “Well, you’d need to talk to the Reserve Bank about that. All I know is there’s no asset price can go up at over 10 percent a year forever, so sometime it will stop. And in this case we are really starting to get more supply coming at speed into the market.”
‘Labour’s housing spokesman Phil Twyford said Labour would support any move by the Reserve Bank to tighten lending restrictions for investors who owned multiple properties. But he said this alone would not solve the housing problem, and the Reserve Bank should not be expected to “pick up the tab” for Government’s “failed” housing policies.’
‘Mr Twyford said there was no evidence that the housing market was about to crash, but it was clear that it was “extremely over-heated” and house prices were “wildly inflated”. “I think everyone knows the social and economic consequences of that are terrible for Auckland and terrible for New Zealand,” he said.’
‘In a speech, Mr Wheeler said: “The more that house prices get out of line with historic relativities, the greater the risk of a sharp correction, leading to financial instability.”
I like this guy: He’s a guy who tells it like it is.
“Asked whether a “sharp correction” could mean the bursting of a housing bubble, Mr English said …”
Yes? Yes? And what was his answer?
“Well, you’d need to talk to the Reserve Bank about that.”
Well, so much for telling it like it is.
how many gov agencies do we have “helping” folks acquire RE ?
10-20?
‘In the last ten days two of the most liquid companies in the history of the earth have raised about $20 billion in debt. Microsoft, with about $90 billion on its balance sheet, sold $10.8 billion yesterday. The 10-year portion of that offering yields 2.7%. That’s less than the dividend yield on Microsoft shares.’
‘Apple is pricing Swiss bonds today. Since Swiss franc denominated debt has a negative yield Apple is expected to pay buyers of its corporate bond less than .5 percentage points a year for 10 or 15 year paper. This is astonishingly low.’
‘The real message from Apple and Microsoft is that artificially low rates have perverted the markets in weird ways that will take generations to unlock. Issuing debt to buy back equity doesn’t actually create value.’
‘It’s not stimulative to make it easier for the rich to stock pile cash, but that’s what we’re continuing to do six years into the financial crisis.’
‘Japan’s outstanding national debt is more than 1 quadrillion yen ($8.4 trillion) and more than twice the size of the economy. That’s way more even than Greece, which is fighting with the rest of Europe for some relief over its debt load.’
‘Yet Japan has the world’s fourth-lowest borrowing costs, even as its borrowings continue to rise. Here’s why Japan, home to the world’s largest debt burden, can borrow massive amounts of money at little or no cost.’
Better yet, I am sure they are playing the same “the more we borrow the more money we make” game the US is playing. Of course, such perverse economics can go on indefinitely. There was this from a few days ago:
‘Volatility Bursts Halts Rally as Bond Yields Double: Japan Credit’
What is a “volatility burst”? I’ve never previously seen that term in print.
Is is anything like “dollar spiking”?
‘The real message from Apple and Microsoft is that artificially low rates have perverted the markets in weird ways that will take generations to unlock. Issuing debt to buy back equity doesn’t actually create value.’
Even if you have to pay a less than 0.5 percent interest rate on the debt used to buy back shares on which you would otherwise have paid 2.7 percent dividends?
How does chipping away at a 2.2 percent spread NOT create value?
Issuing debt to buy back equity doesn’t actually create value.’
Stock buybacks mostly only create value for the top shareholders and executives. If that money were spent on wages instead, the economy would be much more balanced - as it was before.
This is why the middle class can’t get ahead
http://www.pbs.org/newshour/making-sense/middle-class-cant-get-ahead/
Billionaire venture capitalist Nick Hanauer:
“….A stock buyback, in case you are wondering, is when a public company buys its own shares. “Why on earth would a company do that?” you ask. To push the stock price higher, of course—which benefits senior managers who are all paid in stock—rather than, say, investing in R&D or in building new factories. Or paying you overtime for all those extra hours you work…
…If this sounds a little bit like a Ponzi scheme, that’s because it is. I buy my shares back from investors and speculators, who then use that money to buy more shares. We get richer riding this merry-go-round, but the money never touches the real economy. Perhaps you’ve wondered how the stock market hit 17,000 while, at the same time, five years after the end of the Great Recession, the real economy that you live in still kind of sucks? Stock buybacks.
So if you’re still thinking that higher wages or fewer hours of overtime for you and your coworkers might bankrupt the public company you work for, I encourage you to do this: Send an email to your CFO and ask him or her how much your company has spent on stock buybacks over the past 10 years in both dollars and in percent of pretax profits? Seriously. Do it right now. And while you’re waiting for a reply from your CFO, let’s have an honest conversation about the way the economy really works.
But Don’t Rich People Create Jobs?
Forget everything you’ve been told about how the rich are job creators—that the more money we have, the more we invest, the more jobs we create, and the better the economy is for everybody. As our epidemic of stock buybacks clearly illustrates, capitalists like me already have more money than we know what to do with. Indeed, smart investors are struggling to cope with what Bain & Co. has termed “capital superabundance,” marked by a tripling of global capital since 1990 despite the ongoing stagnation of the underlying economy. Meanwhile, even as this glut of financial capital continues to grow, new technologies are dramatically reducing demand for capital.”
any positive RE markets in the USA ?
flip shows going to reruns- you can tell it’s always springtime in the outside scenes
California real estate always goes up.
State home sales rise in December
January 16, 2015, 05:00 AM
By Elliot Spagat The Associated
SAN DIEGO — California home sales jumped in December, buoyed by a stronger economy and lower interest rates, a research firm said Thursday. Prices rose modestly.
The median sales price for new and existing single-family houses and condominiums was $388,000, up 1.8 percent from $381,000 in November and up 6.3 percent from $365,000 in December 2013, according to CoreLogic DataQuick.
It was the 34th straight month of annual price increases, but percentage gains have been single-digit since July.
There were 36,468 homes sold, up 23.8 percent from an anemic 29,459 sales in November and up 4.3 percent from 34,949 sales in December 2013. Sales were particularly strong in the San Francisco Bay Area.
The numbers suggest job growth and low borrowing rates are attracting buyers who live in their homes, as opposed to cash-paying investors. Absentee buyers, mostly investors, made up 18.3 percent of San Francisco Bay Area sales last month, down from 22.5 percent a year earlier.
Absentee buyers accounted for 23.4 percent of Southern California sales, down from 26.9 percent a year earlier and the lowest level since October 2010.
“You don’t want to extrapolate too much from one month but the numbers suggest regular buyers are starting to step up,” said CoreLogic DataQuick analyst Andrew LePage.
…
brown & co will tax them into oblivion
Well, I can’t buy a house in mine. Hardly any inventory. Of the three houses I bid on in the last month two received multiple offers (third one wouldn’t budge).
Weston, FL
Sounds like a Lola story.
How many million excess empty houses in FL? And with demand at 20 year lows, we find your fable to be incredulous.
sorry to burst your bubble theory, Housing DB, but its totally true. PS, who is Lola?
‘I can’t buy a house in mine’
It sounds like you didn’t offer enough money.
I’d say your assessment is correct. Point is, there is competition for houses here, a rebound in asking prices, reduced time on market, etc….to answer the original question about positive markets.
Would you say your outcome was ‘positive’?
What he’s talking about is the almost across the board slowing/decline we’ve seen. How many US metros were up double digits a year ago that are in the low single digits now? This is how a market turns. But that so many are turning is very interesting. BTW, the median is a pretty flawed statistic. Price is a lagging indicator.
Not really.
Weston, FL List Prices Plunge 14% In 2014 As Sellers Slash
http://www.zillow.com/weston-fl-33326/home-values/
Why buy a house when sellers are slashing prices?
From the zillow link:
‘10.8% Homes with negative equity (16.9% US Avg) (Sep 30, 2014)
18.7% Delinquent on mortgage (6.4% US Avg) (Sep 30, 2014) ‘
‘$168 Median list price / sq ft $159 Median sale price / sq ft 15.3% Listings with price cut’
http://www.movoto.com/weston-fl/market-trends/#city=&time=1Y&metric=Median%20List%20Price&type=0
‘The median listing price in Weston went down from January to February. There were a total of 26 price increases and 233 price decreases.’
‘Danish consumer prices fell in January for the first time since 1954 after energy prices collapsed, following the eurozone into negative territory while raising hopes it could boost Denmark’s anaemic consumer spending.’
‘The prices of goods and services dipped 0.1 percent in January after rising 0.3 percent the month before, the national statistics office said. “It is worth underscoring that the current situation is good news for the Danish economy,” Nordea economist Jan Stoerup Nielsen wrote in a note to investors. “As long as lower inflation is due to falling energy prices and fees it is helping to support the purchasing power of Danish households,” he said.’
‘Danish consumers have reined in spending since housing prices began a protracted slide in 2007, leaving the country with one of the world’s highest levels of household debt.’
‘Deflation means they have more money to spend at the end of the month, but it could also lead to consumers putting off buying big ticket items if they expect prices to fall further. However, Handelsbanken economist Jes Asmussen said the deflation was unlikely to last.’
“Looking at the trends in the price of services, wages, house prices and consumer expectations for inflation in Denmark, there is nothing to suggest that the Danish economy is about to be caught in a vicious deflationary spiral,” he said according to business daily Boersen.’
got oil ?
Trucks — a category that consists of pickups, vans and SUVs — were 54% of January sales; cars were the remainder, according to sales tracker Autodata.
Oh dear…
‘As demand dwindles, steel prices in China have fallen 12 percent in the first five weeks of this year - almost as much as in all of 2014. The tonnage of China’s imports of rubber, oil, iron ore and other industrial materials also fell sharply in January. And the global market for bulk freighter charters is in free fall, already below levels in the worst days of the global financial crisis in late 2008 and early 2009.’
“In the past two months, it has been more or less a vertical correction, and this is a proxy for China,” said Basil M. Karatzas, a Manhattan ship broker.’
‘Heavy industry in the country, the world’s second-largest economy, is suffering a much sharper downturn than was apparent or expected even several weeks ago. That slowdown seems to be mirrored to a lesser extent in other sectors. But the full scope of China’s economic weakness is obscured by limited data, as the country prepares for a nationwide, weeklong holiday beginning Feb. 18, in observance of the Lunar New Year.’
“It’s too early to be saying we’re moving toward disaster, but there’s nothing in this data to be cheery about,” said Louis Kuijs, the chief China economist at the Royal Bank of Scotland.’
‘China’s National Bureau of Statistics released inflation data on Tuesday morning in Beijing showing that producer prices have been falling faster and faster since last July, partly because of lower commodity prices.’
‘China has many tools to halt a slowdown, although all of them have potentially undesirable side effects…Some restrictions on housing market speculation have been lifted, at the risk of making homes more expensive.’
‘A slowdown in home construction and car sales has contributed to trouble in the steel and iron ore sectors and in the energy sector. The tonnage of iron ore imports is down 9.3 percent in January from a year ago, while the tonnage of imports of refined products like gasoline and diesel was down 37.6 percent.’
‘Some of the slowdown in industrial commodity imports last month may reflect that many Chinese companies built above-average stockpiles in the autumn as prices were falling, and now find themselves with scant room to store more. They also face losses on their earlier purchases, as prices have continued to drop.’
‘With the purchases slowing, ship charters have slowed to a crawl. Large freighters that cost $8,000 to $9,000 a day to operate, plus $20,000 or more a day in interest payments and other ownership costs, are now leasing for about $4,000.’
‘The daily cost to charter a so-called capesize freighter, a large ship particularly used to supply China, has fallen fastest of all, down 75 percent since mid-November.’
“It’s pretty grim at the moment,” said Tim Huxley, the chief executive of Wah Kwong Maritime Transport, a large Hong Kong shipping line. “The bulk carrier market is at the lowest it has been in 30 years.”
‘Large freighters that cost $8,000 to $9,000 a day to operate, plus $20,000 or more a day in interest payments and other ownership costs, are now leasing for about $4,000′
I wonder if there’s a fangnu term for ships?
‘many Chinese companies built above-average stockpiles in the autumn as prices were falling, and now find themselves with scant room to store more. They also face losses on their earlier purchases, as prices have continued to drop’
And this:
‘Data from China over the weekend showing a 20 percent drop in imports in January and weaker exports underlined a deepening economic slowdown in the world’s top consumer of both iron ore and steel.’
‘China’s iron ore imports fell to 78.57 million tonnes last month from a record high of 86.85 million tonnes in December. If iron ore remains in the low $60 price range, Wood Mackenzie’s Emslie warned there will likely be more closures from mid-tier producers and more asset write-downs.’
“There’s only so far that cost cutting can go before difficult decisions need to be taken concerning the long-term viability of a mine in a structurally oversupplied market,” Emslie said.’
China government debt tripled in the last 7 years to $28 Tr. Supposedly half of this is tied into real estate development.
“the tonnage of imports of refined products like gasoline and diesel was down 37.6 percent”
When a massive credit expansion runs out of steam, there’s a lot of whiplash handed out.
The anecdote that I heard this weekend (and you may have posted an article about it) was related to land sales by Chinese cities. Apparently demand from developers is waning, so in order to prop up the land prices, the cities are providing the debt to developers so that the developers can buy the land!
Oh yeah, that won’t end badly at all…talk about malinvestment.
“it has been more or less a vertical correction,”
http://www.dailymotion.com/video/x20me30_the-many-falls-of-wile-e-coyote_shortfilms
I understand it took the NYT a year to investigate the money piling up in super-expensive condos. And while I never had those resources to devote to it, many here have been saying this is simple money laundering:
‘New York City’s elite real estate is being bought up at a staggering rate by anonymous shell companies. Due to the lack of legal imperative to investigate the identities of buyers, large numbers of unscrupulous ultra-rich have come to own a large percentage of New York’s most valuable real estate…
The shell company Columbus Skyline, which bought three condos for a total of $25.6 million, was traced to NYU Board of Trustees member Wang Wenliang. In 2010, Wang donated $25 million to the university and founded the NYU Center on U.S.-China Relations. Wang’s company, China Rilin Construction Group, was fined thousands of dollars for housing workers in overcrowded, unsanitary conditions in New Jersey. A second, similar case was dismissed. According to the NYU Board of Trustees page, trustee members are “keepers of the mission of NYU” who “must pay particularly close attention to the mission of obligations to society that are unique to the academic enterprise.” Wang’s questionable transactions show that he has failed to meet these standards.’
‘It is clear that further regulation is needed for these shell companies that all too easily buy up real estate with untraceable funds. New York City’s expanding skyline may already be a symbol of wealth inequality, but it is still worsened by this influx of suspicious foreign funds. This is not just a matter of political integrity, but a real concern for the stability of the already skyrocketing real estate market. Seemingly boundless money flowing into the U.S. economy and universities seems nice, but it cannot be an excuse to ignore global political realities.’
‘A wave of billions of dollars in foreign money, some of it fleeing tax authorities, unfriendly political regimes and anti-corruption investigations at home, has flowed into US real estate in recent years, leaving the country dotted with high-end homes owned by often-absentee landlords.’
‘New York magazine dubbed the city’s real estate “the new Swiss bank account” last year, after an ICIJ investigation found “corrupt politicians, tax dodgers and money launderers around the globe” were buying properties.’
‘In Miami, Russian and Chinese buyers are fueling another boom in luxury condo construction, just six years after the industry’s historic crash there.’
‘When eyeing other liquid, high-ticket assets in the US, like bonds or public shares, foreign purchasers come under a lot more scrutiny from regulators and market makers, but investing in the property market allows them to be nearly anonymous.’
‘Foreign buyers bought $92 billion in US residential real estate in the 12 months ended April 1, 2014, the National Association of Realtors reports, much of it probably completely legal. But regular checks on buyers that used to surround real estate transactions in the United States, when property was typically purchased with a mortgage, have completely fallen by the wayside in recent years.’
‘Instead, as many as 70% of properties bought by international buyers are now paid for in cash, the realtor group reports, up from 33% in 2007. The buyer may come with a check or another cash equivalent that a seller puts into a bank as legitimate proceeds of a home sale. While banks are required to file a Suspicious Activity Report, or SAR, with the US Treasury if they suspect a client is depositing or transferring corrupt money, real estate agents and the lawyers who work on these deals have no such requirements. The real estate commission model means agents are paid to sell, and often get higher percentages of subsequent sales the more properties they move, so there’s no incentive to flag suspicious deals.’
‘US authorities taxed with keeping the proceeds of corruption and graft out of the US say SAR reports are a “huge help” to law enforcement, and “requiring a broader range of players,” like real estate agents, to file them would keep more corrupt money out of the US, as one assistant US attorney told the Nation.’
‘In 2012, the NAR issued a list of guidelines for when realtors should voluntarily file an SAR to alert the government to a potential money-laundering transaction. For example, they flag transactions that have a large geographic distance between the buyer and the property, involve a shell corporation in the deal, “use large amounts of cash,” or involve a buyer who “brings actual cash to the closing.” All of these red flags are present in many recent New York City real estate transactions, recent reports suggest, but realtors rarely file SARs.’
“realtors rarely file SARs.’”
Thieves profiting from the theft of thieves.
Don’t bite the hand that feeds you!
‘According to reports, 36 of China’s 67 listed property developers forecast worse results in 2014 than the previous year. Furthermore, 13 companies said they may suffer losses for the year 2014 for the first time.’
‘Many local governments and housing investors seem more optimistic though. In some places, authorities are trying to keep the market afloat with supportive policies, while some speculators are waiting for the right moment to start snapping up homes. But if developers have lost confidence, what does this say about those hunting for bargains or silver linings?’
‘With layoffs, financial losses and market withdrawals on the horizon, developers face dark times ahead. It’s time to face facts: the golden age of Chinese property growth is over.’
Farmland bubble bursting.
http://finance.yahoo.com/news/u-farmers-watch-100-billion-055216044.html
‘The agriculture industry has boomed over the past decade as record land and crop prices boosted sales of seed and farm equipment. Net-cash income touched a record $137.1 billion in 2012. Land values have kept rising, up 8.1 percent last year to an all-time high of $2,950 an acre, while beef and pork prices were the highest ever.
Crop Slump’
‘Record-high crop prices in 2012 helped fuel a surge in global output, creating a surplus that sent futures tumbling. Corn traded at $3.8725 a bushel at 12:22 p.m. on the Chicago Board of Trade, down 54 percent from a record in August 2012, and soybeans were at $9.73 a bushel, down 46 percent from their all-time high.’
In the end, QE creates deflation.
A lot of stuff has been wasted, as in you can’t recover it. And then there’s the bill.
The deflation ahead cannot possibly just settle things back to “normal”. There’s the hangover to deal with first.
“A new report from McKinsey Global Institute is warning that household debt levels are dangerously high in many developed countries, including Canada. The report calls for more action to reign in both household and government debt and to cool overheated housing markets.”
See, even international markets watchers agree….DEBT IS DUMB!!!