July 2, 2015

There’s Going To Be A Lot More Tears

A report from Agence France-Presse. “Leading global producer Australia on Tuesday lowered its forecast for iron ore prices as Chinese steel production eases, but said export volumes were expected to grow as suppliers ramp up output. ‘China’s steel production is forecast to contract in 2015 and 2016 as the seaborne supply of iron ore increases,’ the report said. ‘These factors are forecast to drive the price of iron ore down 38 percent in 2015… and a further 4.2 percent in 2016. Housing construction in China remains a key area of uncertainty.’”

The Australian Financial Review. “There is only one type of house sale in the iron ore export hub of Port Hedland – a distressed one. ‘In a word the market is ‘dead’, John Briggs, of Port Hedland Real Estate, said. ‘The last one out of Port Hedland please turn the lights out.’”

“Median home prices in Port Hedland are down 12.5 per cent from already depleted prices 12 months ago, the Real Estate Institute of Western Australia (REIWA) says. One Port Hedland house on a 928-square-metre block in Trembath Street – a mortgage repossession – has been put on the market for $330,000. It last sold for $605,000 in 2008 and one agent believes it was worth as much as $1 million in 2010-11. Mortgagee repossessions were abundant now, Mr Briggs said. ‘There’s going to be a lot more tears in Port Hedland,’ he said.”

The Globe and Mail in Canada. “CIBC World Markets says people frequently ask about Canada’s housing market in client meetings. Economists Benjamin Tal and Andrew Grantham put some meat on those bones in a report this week, noting that much has to do with ‘truths, lies and averages.’ For example, Calgary’s market had been surging, but in the wake of the oil shock ‘prices have now started to move downwards, prompting concerns of a hard landing for that market,’ Mr. Tal and Mr. Grantham noted.”

The Calgary Herald in Canada. “CBRE data indicate vacancy in Calgary’s central business district jumped to 13 per cent in the second quarter, from 10 per cent a year earlier, due largely to the amount of office space coming back to the market. Greg Kwong, executive vice-president of CBRE’s Calgary office, said the downturn in the oilpatch has not affected the industrial sector as severely as the office market. ‘There was a lag of five or six months,’ he said. ‘The drop in oil in November of last year almost had an immediate effect on downtown office leasing … Things started to slow down.’”

“The average net rent in the second quarter was $7.80, down from $8.25 a year ago. ‘If the low oil price environment continues on, we expect to see a further slowdown in Q3,’ said Kwong.”

The Houston Chronicle in Texas. “This city is leading the way when it comes to rising home price listings. Even despite plunging oil prices. While the real estate bubble is still expected to bust, research site FindTheHome reports that the median list prices of homes in the Houston metro area are increasing more quickly than any other place in the state. In Houston, median list prices have increased 19.91 percent since last year. In Texas they’ve shot up by 6.47 percent, and in the nation that number is 12.70 percent.”

“The local median list price is currently $266,927, according to FindTheHome, much higher than Texas’ $232,455 medial list price. Compare that to the nation’s $231,543. The researchers at that site resolve this discrepancy by explaining that higher-priced homes are moving faster than lower priced homes. ‘Although more homes on the market typically means waning demand, Houston remains a seller’s market,’ FindTheHome states. ‘Home inventories across the state remained flat with no change over the last year, yet the number of homes for sale in the Houston metro area increased by seven percent even as list prices pushed higher.’”

The Midland Reporter Telegram in Texas. “As in the 1980s, falling oil prices have undercut the Lone Star State’s economic growth. But unlike the 1980s, the state’s economy is much more resilient, said Mine Yucel, senior vice president and director of research for the Federal Reserve Bank of Dallas. She acknowledged that the 60 percent drop in oil prices has taken a bite out of the Texas economy. Evidence of the contraction in the state’s energy industry is evident in employment statistics.”

“The state is forecast to lose 60,000 to 100,000 jobs this year, she said. That contraction has spread throughout the state economy, Yucel said. The state has lost 20,000 jobs in the energy sector in the first five months of this year, followed by 19,000 in manufacturing and 5,000 jobs in construction, three sectors with high-paying jobs. Construction activity has also been affected, with declines in multi-family and single-family housing starts declining.”

“‘We’re all aware China’s growth is slowing. And it’s not just China. It’s Korea, it’s southeast Asia. That gap between demand and supply will remain open longer than we’d hoped. Instead of 18 months to bring supply and demand back into balance, it may be two or three years,’ said Steve Pruett, chief executive officer of Elevation Resources.”

“Bobby Burns, president of the Midland Chamber of Commerce, said Texas has handled the downturn ‘very well,’ as has Midland. ‘We’re still stable, we’re still strong. Although the foot is off the gas pedal, we’re still moving forward.’ He pointed to Midland’s continued strong housing prices and said that ‘hotel rates are still amazingly strong.’”

Business Day on Dubai. “It is another round of knocks for investors in the Dubai housing market as the market has slumped again. The reality now is that demand is low, prices are down and the market is festered with high vacancy rate. The Guide, a research house dedicated to residential property, covering market trends in 101 countries, in its Q1 2015 global property report noted that the Dubai housing market started to recover in Q2 2012 with double-digit house price increases.”

“‘Demand is now plunging. During the year to April 2015, property transactions, both in number and value, plunged by 51.8 percent and 37.1 percent respectively,’ the report revealed, quoting real estate consultant, Jones Lang LaSalle, and the ratings agency, Standard & Poor’s, as expecting that average house prices in the emirate could fall by between 10 percent and 20 percent this year.”

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Comment by Ben Jones
2015-07-02 03:30:37

‘Greg Kwong, executive vice-president of CBRE’s Calgary office, said the downturn in the oilpatch has not affected the industrial sector as severely as the office market. ‘There was a lag of five or six months,’ he said. ‘The drop in oil in November of last year almost had an immediate effect on downtown office leasing’

‘We’re all aware China’s growth is slowing. And it’s not just China. It’s Korea, it’s southeast Asia. That gap between demand and supply will remain open longer than we’d hoped. Instead of 18 months to bring supply and demand back into balance, it may be two or three years’

Yeah, and it might fall for 2 or 3 years and stay that way for 7. These commodity things turn very slowly and you guys have had a nice little boom for some time. Come to think of it, you’ve had a once-in-history “China gets globalization handed to them and blows it” event.

Remember those tales of how much concrete they poured? Not going to happen again. These reports of office use falling, etc, is like a bad dream from the 80’s. This means business is falling, lower hiring, and down it goes. “Oh, our house prices haven’t fallen (much) yet.” That comes later dim-switch, after you’ve lost your job and car.

Comment by Senior Housing Analyst
2015-07-02 05:25:19

“‘We’re all aware China’s growth is slowing. And it’s not just China. It’s Korea, it’s southeast Asia.”

Its global. It’s 20 years in the making and the reckoning will be hellacious. In particular for those who borrowed and holding non-cash assets.

Comment by Dman
2015-07-02 05:27:56

““Oh, our house prices haven’t fallen (much) yet.” That comes later dim-switch, after you’ve lost your job and car.”

The same with all these Texas articles. They act as if the layoffs have already happened. Wait until the mortgage payments are missed, and the foreclosures start, then tell us how great things are. Realtor cheerleading is all it is.

Comment by Mr. Banker
2015-07-02 05:35:38

“Realtor cheerleading is all it is.”

You use what you’ve got. If cheerleading is all you’ve got then that’s what you use.

From my point of view these cheerleaders need to work harder, maybe extend their lies, do whatever it takes to bring me some marks.

Comment by Ben Jones
2015-07-02 04:07:16

‘It’s quite the reversal of fortune.’

‘Colombia’s peso has gone from Latin America’s best currency to one of its worst in the past 12 months after the drop in oil prices left it with a widening budget deficit. Its growing current account gap — the broadest measure of trade — is forecast to exceed the average for India, South Africa, Indonesia, Turkey and Brazil in 2013, when Morgan Stanley coined the phrase “fragile five” to describe the nations that would suffer the most when the U.S. raised interest rates.’

‘The peso’s volatility is now at its highest relative to emerging markets since 2008 as traders wager that U.S. Federal Reserve tightening will begin this year. After a decade in which Colombia benefited from rising oil revenue as improved security opened swaths of land to energy exploration and fueled foreign investment, analysts are now cutting forecasts for growth and turning more bearish on the peso. Standard Chartered Plc predicts the currency will drop 8 percent by September.’

“You can fall out of love as easily as you can fall in love,” Mike Moran, the head of research for the Americas at Standard Chartered, said from New York. “The economy is so reliant on revenue from commodities that it is left exposed when external conditions become more averse.”

Comment by snake charmer
2015-07-02 11:38:59

I wrote here last month that the peso has devalued by more than 40% since I last was in Colombia in 2012. It makes me wonder what imported goods — always a luxury item — are costing now.

Comment by Ben Jones
2015-07-02 04:25:04

‘The history of housing bubbles’

‘Housing bubbles have a tendency to burst—look no further than the experiences of Ireland, Spain and the United States in recent years—and the aftermath can be serious; the US collapse plunged the world into economic crisis. So is there a house price bubble in Australia’s capital cities? Stan Correy takes a look at the lessons from history.’

Comment by Senior Housing Analyst
2015-07-02 04:46:13

Carrollton, TX(Dallas/FTW) Housing Inventory Skyrockets 137%; Prices Fall 8%


Comment by Senior Housing Analyst
2015-07-02 04:50:48

“The National Association of Realtors Keep You In The Dark And Feed You Manure”


Comment by taxpers
2015-07-02 04:52:49

Tx losing 100,000 jobs
Time to buy a house!
?how till the last oil bust reached dallas ?

Comment by Senior Housing Analyst
2015-07-02 05:16:16

Kirkland, WA Housing Prices Fall 19%


Comment by redmondjp
2015-07-02 08:49:04

Using one of the hottest RE markets in the entire nation to disprove your point again, I see.

Comment by Mafia Blocks
2015-07-02 09:01:34

Refute the data my friend.

Comment by Prime_Is_Contained
2015-07-02 15:41:30

Wow, even PPSF is down 4% in Kirkland. Neat!

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Comment by Prime_Is_Contained
2015-07-02 15:42:30

p.s. Thank you for not picking one tiny little zip-code in this case.

Comment by redmondjp
2015-07-02 21:52:23
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Comment by Mafia Blocks
2015-07-03 06:04:08

CS is an index, not boots-on-the-ground data. Besides, it excludes foreclosed and defaulted property.

Seattle, WA Housing Prices Fall 11%


Comment by Ben Jones
2015-07-02 05:40:20

‘Rio Tinto has put up for sale its South Jordan regional headquarters, a state-of-the-art distribution center and large swaths of industrial land northwest of its Daybreak housing development.’

‘The parent company to Kennecott Utah Copper confirmed Tuesday it listed the properties in hopes of taking advantage of strong commercial real-estate markets and generating cash for other aspects of its businesses.’

‘While the nearly 150 acres of industrial land had an official asking price of $32.67 million, Rio Tinto sought undisclosed private bids for the two buildings.’

‘The world’s second largest mining company owns and operates Kennecott’s Bingham Canyon mine and holds nearly 96,000 acres in Utah, centered around the Oquirrh Mountains along the western edge of Salt Lake County.’

Comment by taxpayers
2015-07-02 07:45:59

strong commercial? we’re at 20 vaca in DC area
where no one ever loses their job

Comment by Ben Jones
2015-07-02 05:42:58

‘A massive pipeline of housing construction is expected to help slow soaring home prices in the coming year. A record $57.6 billion of new homes were approved in the past 12 months, which means more than 200,000 dwellings are expected to be constructed across Australia this year.’

‘Commonwealth Bank senior economist Michael Workman said the yearly increase was “quite extraordinary” considering housing construction was already strong.’

“Maybe that’s one way to solve that affordability issue,” Mr Workman said. “Purely from a supply perspective you’d expect to see this enormous addition in housing dampen price rises through this year and into the next.”

Comment by Ben Jones
2015-07-02 05:49:46

‘You might think that a brush with a bust, like the one affecting world oil prices, which have dropped by half from recent peaks, would undo some of the boom-time effects and bring housing prices back to affordable levels.’

‘But so far, Newfoundland’s Pollett hasn’t seen it happening there. Vacancies in St. John’s may be up a bit, he said, “but it’s all a moot point because they’re still unaffordable.”

‘Meanwhile in Fort MacMurray, mass layoffs and project delays have created anxiety and uncertainty. “It’s very volatile,” Lutes said. “In most markets, it’s little waves as it goes along. Here, this is like a roller-coaster tied to oil prices, up and down. We’ve gotten used to very fast-paced growth here.”

‘A century ago, central Newfoundland’s Tilt Cove was a thriving town of 1,400 working local gold and copper deposits. Then its mines shut in 1920. By 1956 only 57 people lived there. The next year however, the mines restarted and Tilt Cove came back to life, only to close again after a decade. As of 2011, it was down to five residents. (Though renewed plans to reopen the mine may deliver a third resurrection to the town.)’

“All these people come into the province. These places are absolutely bursting at the seams. People can’t afford the crazy market prices,” Ciufo said. “But when the bottom falls out, when the mine leaves, the housing is worth nothing. It’s a horrible cycle.”

‘Sheldon Pollett, executive director of St. John’s social services provider Choices for Youth, views booms as mixed blessings. “I would never sit here and say, ‘Prosperity is a bad thing.’ It’s created opportunities for young people, right?” Pollett said. “It’s just that there’s a lot of unintended consequences that come from that. Prosperity has created all this pressure around housing affordability.”

‘As lower oil prices ease some of the housing pressure on the Athabasca region, and reduce demand for long-distance commuters, their effects ripple through those communities too. Many of those are in Newfoundland and Labrador. But the province has learned a few things from its own volatile economic history.’

“It’s boom-and-bust there as well,” said Jody Ciufo, executive director of the Canadian Housing Renewal Association. “They have huge housing needs with the oil production, but now oil revenues have dropped they’re seeing real swings too.”

Comment by Mr. Banker
2015-07-02 06:00:19

The joke of the day:

“But the province has learned a few things from its own volatile economic history.”

Yeah, right.


Comment by Ben Jones
2015-07-02 06:06:44

‘The last one out of Port Hedland please turn the lights out’

I can remember bumper stickers like this in the 80’s.

Comment by redmondjp
2015-07-02 08:53:24

And on billboards in Seattle, in the early 1970s, as well.

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Comment by Ben Jones
2015-07-02 09:30:33

And to think that was before central banks created many trillions in a short period of time.

Comment by oxide
2015-07-02 10:18:44

You can’t create trillions in a short amount of time by handwriting in paper ledger books. It was Bill Gates (among others) who helped create the banking monster… in Seattle.

Comment by redmondjp
2015-07-02 16:40:22

Wait, what? I knew Gates (and his dad) got the H1B floodgates unleashed, but what is this about Seattle banking that he had to do with?

Comment by oxide
2015-07-02 18:21:35

I’m referring to something more basic: the invention and commercialization of the computer. Much easier to pint money when all you have to do is shake a few electrons.

Comment by redmondjp
2015-07-02 21:56:23

Oh, got it, but Gates had zero to do with that.

They were doing that for a couple decades before Gates came along, using larger, more expensive mainframe computers.

And before that, they kept track on paper. They still created $ out of thin air, regardless of the accounting method.

Comment by Ben Jones
2015-07-02 06:17:30

‘The insurance protecting shale drillers against plummeting prices has become so crucial that for one company, SandRidge Energy Inc., payments from the hedges accounted for a stunning 64 percent of first-quarter revenue. Now the safety net is going away.’

‘The insurance that producers bought before the collapse in oil — much of which guaranteed minimum prices of $90 a barrel or more — is expiring. As they do, investors are left to wonder how these companies will make up the $3.7 billion the hedges earned them in the first quarter after crude sunk below $60 from a peak of $107 in mid-2014.’

“A year ago, you could hedge at $85 to $90, and now it’s in the low $60s,” said Chris Lang, a senior vice president with Asset Risk Management, a hedging adviser for more than 100 exploration and production companies. “Next year it’s really going to come to a head.”

‘The hedges staved off an acute shortage of cash for shale companies and helped keep lenders from cutting credit lines, many of which are up for renewal in October. With drillers burdened by interest payments on $235 billion of debt, $89 billion of it high-yield, a U.S. regulator has warned banks to beware of the “emerging risk” of lending to energy companies.’

‘For SandRidge and other drillers, the hedges, required by some lenders, gave them enough time to cut spending. Costs in shale fields have fallen by 20 to 30 percent and productivity has increased as producers moved rigs to the most prolific regions. Producers were able to raise about $44 billion in equity and debt in the first quarter, according to UBS AG.’

“That postponed the day of reckoning,” said Carl Tricoli, co-founder of private-equity firm Denham Capital Management.’

‘With oil prices down 45 percent in the past year, the industry is facing scrutiny from lenders and their regulator. Banks typically evaluate credit lines to oil and gas companies twice a year. The next time is October, and by then many of the drillers’ hedging contracts will have run out. The U.S. Office of the Comptroller of the Currency has expressed concern that the banks it supervises be more careful about lending to energy firms.’

“Some companies are not nearly as well-hedged for 2016 as they were for this year,” said Omar Samji, a partner in law firm Jones Day’s energy practice. “They’re going to have a real cash-flow crunch.”

Comment by Ben Jones
2015-07-02 07:15:03

From the bits bucket:

‘Of course it’s ridiculous to think a single guy’s anecdotes mean anything, especially in a country of a billion plus people. And 4-6 percent guess on growth seems close enough to around 7 percent.’

‘Many seem to be more interested in piling on Dan than testing their own confirmation bias.’

I’m working on 11 years of studying this thing online. Thousands of reports read and scrutinized. Let’s go over this one more time:

Suppose I built a strip mall and some houses in the middle of nowhere Arizona. People may come up to me and ask, “what were you thinking?”Ah, I say, this is a new way of building here in this part of the world. I build it and the people come later. “But there’s no jobs?” No matter. We are growing so fast that will take care of itself.

“But if there is so much growth, what about the opportunity costs? Surely there is something that needed to be built or improved right away? And the carrying costs; how much have you wasted?”

Then let’s suppose you find out I get bonuses based on building unused projects like this? That my bosses let me borrow huge amounts without regard to feasibility, and that I am spreading around the loot. Even more, that I am taking vast sums of cash out of the country illegally and laundering it.

So I ask, confirmation bias? Is this not the most obvious bunch of horse-s*** ever hoisted on the internet?

Comment by Dudgeon Bludgeon
2015-07-02 07:53:07

ADan is Pan Faan.

Like a Youtube cat video. ;-)

Comment by Ben Jones
2015-07-02 08:59:20

‘The percent of homes purchased by all-cash buyers share in May was close to its long-term average going back to January 2000 of 24.8%, and well below its recent peak of 42.2% in February 2011, according to data released Thursday by RealtyTrac. It’s one sign that the housing market is on the road back to a normal, “how do we find a place to live?” market, and away from the “how do I make a quick buck?” market.’


And here:

‘The share of institutional investors — entities purchasing at least 10 properties in a calendar year — dropped to 2.4 percent of single family home sales in May, a record low going back to January 2000, the earliest month with data available.’


Comment by Rental Watch
2015-07-02 10:28:00

What’s your read on this Ben?

The lack of cash and institutional buyers seems like both 1) there aren’t buyers who think there are screaming deals and/or 2) there aren’t unrealistic expectations about price appreciation and/or 3) the only way people are willing to buy at today’s prices is because of cheap finance (which is consistent with #1 and #2).

Comment by Mafia Blocks
2015-07-02 11:05:09

Before 1998, ‘institutional buyers’ didn’t exist. This factoid should help you better understand just why housing prices have been inflated 250% higher than long term trend for the last 15+ years.

No Dingbat stories. Just the cold hard truth.

Comment by Rental Watch
2015-07-02 13:27:44

“The share of institutional investors — entities purchasing at least 10 properties in a calendar year”

These groups come out of the woodwork during every foreclosure cycle.

Wall Street funds joining the fray are new. Entities purchasing more than 10 homes in a year are not.

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Comment by Mafia Blocks
2015-07-02 19:15:22

That’s a DingBatism.

They didn’t exist and there is no cycle when a full fledged bubble is in effect like there is currently.

Comment by Ben Jones
2015-07-02 12:47:02

July 24, 2014

“Alexander Philips joined the rush to buy foreclosed U.S. homes four years ago, spending $40 million on houses in California and Nevada to operate as rentals. Now his firm is getting ready to sell. ‘We didn’t want to be the last one standing when the music stopped,’ Philips said. ‘We view this as a trade, not as a business.’”

“Corporate owners with limited capital or deadlines to repay investors are now selling houses in bulk, or one by one, after a 26 percent surge in prices from a March 2012 low. ‘That consolidation phase will be bigger than the original buy phase,’ Tom Barrack, whose Colony American Homes is the third-largest single-family landlord, said at Bloomberg’s Los Angeles bureau. ‘Now we’ll sweep up everybody over the next two years who got stuck, who says I have home price appreciation, which they do. They bought right, but now they are stuck.’”


Comment by Rental Watch
2015-07-02 13:54:47

So, you posted something from a year ago…what are you trying to say? Do you think that we’re in a consolidation phase with investors who are “stuck” in a trade? Do you think that Alex Philips is “stuck” in a trade with his company’s couple hundred homes?

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Comment by Mafia Blocks
2015-07-02 14:00:22

25 million excess empty and defaulted houses 4.4 million of which are in California. Yeah….. someone is stuck

Comment by Sean
2015-07-02 12:22:31

I love reading the Yahoo comments section. It’s my own slice of low brow entertainment. Anyways, the recurring theme in there is “The smart money is leaving.” Who says people who speculate on houses are “smart”?

I’ve been arguing for years that the smart money has always been sitting on the sidelines just watching.

Comment by taxpayers
2015-07-02 10:12:52

I’ll admit to being amazed

He pointed to Midland’s continued strong housing prices and said that ‘hotel rates are still amazingly strong.’”

Comment by Mafia Blocks
2015-07-02 10:14:20

And vacancy rates?


Comment by rj chicago
2015-07-02 13:31:20

Where’s Media / Rally today?

Comment by Ben Jones
2015-07-02 14:35:10

‘Zacks upgraded shares of PulteGroup from a hold rating to a buy rating in a report. According to Zacks, “…though Pulte’s order trends have remained light over the past two years, the positive increase seen in the past two quarters raises hope that volumes might improve in 2015 with the housing market growing at a slow and steady pace. That being said, broader housing market headwinds — increasingly competitive environment and cost inflation amid moderating home price — and the mild slowdown in sales trends in Texas/Houston are the concerns.”


Comment by Ben Jones
2015-07-02 14:40:35

‘What is common between anaemic growth in India and the current slowdown in Indonesia? Markets cite the political impasse, a lack of reform, corruption crackdowns, the commodity slowdown and several such factors. In my view, the crux of this slowdown remains rooted in the massive credit expansion we witnessed in Asia generally during the 2000s. We borrowed aggressively, and we borrowed and consumed from the future. We are now normalising that growth rate.

I’ve referred in the past, while focusing on India, as to how credit growth needs to slow and is indeed slowing. This is unhelpful for GDP growth, but, I believe, a good time for investing in well-managed businesses to own for the long term. Indonesia, I feel, is heading in a very similar direction as India did from 2012 till 2014.’

‘During the boom years of 2003 till 2013, credit growth in Indonesia was almost tracking at twice nominal GDP. As you can see in the chart below, this growth was punctured for a short while in 2005/6 (in September 2006, subsidised fuel prices were doubled and the Indonesian central bank raised rates aggressively). After that, the global financial crisis in 2008/9 led to a slowdown again, but that too was short-lived. However, as you can observe from late 2013 onwards, as the Fed spoke about normalising policy, loan growth in Indonesia has started to slow quite sharply.’

‘In our recent meeting with Bank Central Asia (BCA), the largest bank in Indonesia, management commented that they will not meet their budgeted 10-12% loan growth in 2015. Across the board, corporate Indonesia’s earnings growth is starting to slow.’

‘Indonesia also faces the effects of the hangover from high commodity prices, especially coal and palm oil. I am in the camp that believes commodity prices will stay lower for longer. When prices were high, entrepreneurs expanded production and hired workers to meet increased demand. Over the past three years, minimum wages in Indonesia increased by an average of 20% per annum. However, with commodity prices languishing, we hear of several small mines and plantations facing tough times, which have resulted in a cut back in employees.’

‘A trend we have observed over the past 5-7 years has been the expansion of companies beyond Java into the commodity-rich provinces of Sumatra and Kalimantan…Unfortunately, that demand was ephemeral and started to moderate in 2014 and 2015, coinciding with falling commodity prices and slower wage growth.’

‘The other sector that is starting to show signs of exhaustion is housing. Much like in India, savers in Indonesia bought land and property as they feared for the preservation of their savings in real terms. A rising current account deficit and credit expansion raised vulnerabilities on the currency and real savings rates. Worried about rising property prices, the government has imposed restrictions, the latest being talks about a luxury tax in an apparent bid to increase tax collections. Most people we spoke to in Jakarta confirmed that property was no longer the topic of discussion at dinner tables. The impact of the slowdown in housing demand can be seen in cement sales.’

‘In summary, our view is that Indonesia is facing an extended slowdown, not yet reflected in equity markets. Capital flows have held up as foreigners have bought the country’s sovereign bonds, but the vulnerability on the currency makes this a weak foundation. In our meetings we get a sense that only now are companies in Indonesia waking up to the fact that this slowdown could be quite prolonged compared to the two prior episodes. Either the currency has to give or markets have to fall to reflect this possibility. We remain very cautious but vigilant for opportunities. Similar to India, we find Indonesia is facing a cycle of rising costs of capital, which will punish those who are over-extended.’


Comment by Ben Jones
2015-07-02 14:55:15

‘Sales across Kuwait’s three main real estate sectors totalled KD256 million ($845 million) in May, down 28 per cent from a year earlier, a report said. This shows softening of the real estate market for a second month in a row, after a slight recovery in March, added the latest Economic Update from the National Bank of Kuwait (NBK).’

‘Sales in the residential sector were down 30 per cent year-on-year (y/y) to KD119 million in May. The sector registered a 28 per cent y/y decrease in the number of transactions. The average transaction size in May slid slightly to KD358,000, down 2.7 per cent y/y but remains seven per cent higher than 2014 average transaction size of KD334,000.’

‘Ahmadi governorate came in second, accounting for 24 per cent of transactions, possibly signalling a cooling down of plot sales in Sabah Al Ahmed Sea City.’

‘The investment sector also underperformed in May (again compared to a strong May 2014). Total sales in May reached KD115.2 million, a 21 per cent y/y drop.’

‘Sales in the skittish commercial sector dropped in May but continue to show resilience compared to last year. Sales of commercial properties reached KD22.5 million in May, down 44 per cent y/y as it registered only five transactions.’


Comment by Ben Jones
2015-07-02 14:58:11

‘The falling price of oil is starting to take a toll on the economy, the housing market is showing some strain, and job growth has slowed, but unemployment is still below the national average.’

‘Texas’ largest private employer is the H-E-B supermarket chain, and the state’s largest industry is mining, including oil and gas drilling.’


Comment by Ben Jones
2015-07-02 15:01:17

‘A tightening in the labor market, the dropping price of oil or the increasing cost of housing could be affecting confidence of Colorado business leaders, according to a report.’

‘The report shows that business leaders did express some hesitation, Wobbekind said. “It indicates some headwinds that the economy is facing,” he said. “Clearly the largest one is lower oil prices which have impacted the oil industry directly and perhaps indirectly to other sectors like professional and business services.”

‘Another area he is studying closely, he said, is the cost of housing. “Year over year in the most recent Federal Housing Finance Authority numbers, we have the highest appreciation year over year in the country, in the state of Colorado,” he said. “We hear many stories of rapidly rising rental rates, not just home costs but the cost of shelter for people who are living here, whether they are renting or trying buy.”


Comment by Ben Jones
2015-07-02 15:04:57

‘The world’s biggest consumer of commodities is no longer just an insatiable buyer of everything from coal to gold. A richer, slower-growing and choosier China is becoming an exporter as well as importer. It is also using its clout to change the way commodities are traded, bringing markets closer to home and drawing up rules that suit its needs instead of those of producers and Western financiers.’

‘As its economy slows and investment gives way to consumption as the mainstay of growth, the country’s needs are changing. Demand for primary products used mainly in housing and infrastructure—coal, iron ore, steel and aluminium—is slowing. China has already hit “peak coal” (consumption is falling, amid worries about air pollution); peak steel is not far off, with growth of only 1-3% likely after a dip last year. Even copper is fading a bit. Consumption used to grow faster than GDP, notes Colin Hamilton of Macquarie, a bank; now it lags.’

‘A related headache is that China, once a sponge for raw materials, is becoming an exporter of things like stainless steel and aluminium, thanks to cheap and abundant power, growing technological nous and a glut of smelting capacity.’


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