Does Prosperity Come With Less Affordability?
A report from the Irish Independent. “The iconic show of the Noughties was, of course, Location, Location, Location. People buying houses, just like us. It’s still particularly popular with Irish people. We’ll watch anything that proves our neighbours are a bit on the thick side. The proof here being that university-educated Brits seem unable to ring an estate agent and place an offer on a house. Instead, they go to a hipster bar with a Kirstie and Phil to discuss strategy.”
“Location, Location, Location is proof positive that Britain is a nation of goldfish. They must be on their fourth housing bubble since 1990. And still there is no shortage of yuppie couples willing to pay 750 grand for a one-bed flat in London because it’s only three tube stops from an artisan-bread shop.”
“We’re watching over here, the wounds still open after our own crash, shouting, ‘Don’t do it, you crazy yuppie couple, you’ll be stuck there for life.’ They never listen.”
The Malaysia Chronicle. “Property buyers should hold off on purchases until at least next year to enjoy lower prices as cooling measures implemented by Bank Negara Malaysia set in. Prices have stayed stagnant and the property market slowed somewhat in the last year, indicating that tighter lending rules and related measures are achieving their desired impact. National House Buyers Association secretary-general Chang Kim Loong said property buyers should wait as the cooling measures were working well. Prices have gone down and are expected to reduce further.”
“‘Do not buy new property this year. There is still the secondary market and auction properties that can be considered at cheaper prices,’ he said after speaking at the forum, themed ‘Does Greater Prosperity Come With Less Housing Affordability?’ yesterday.”
“Before the central bank’s cooling measures, property prices were on a steep climb, particularly in key markets, believed to be spurred by excessive speculation. Chang said the investors club were now rushing to sell their properties at lower prices as there were no takers, and predicted ‘many foreclosure cases soon due to this.’”
Sky News in Australia. “The Australian share market has plunged 3.8 per cent, pulled down mainly by a big sell-off of resources stocks, especially global miner BHP Billiton. The sell-off stripped almost $60 billion in value from the market. OptionsXpress market analyst Ben Le Brun said the local bourse was an absolute bloodbath on Tuesday, with selling across all sectors. ‘Resources have led the way down on renewed concerns about China,’ Mr Le Brun said.”
“The Australian share market has taken its worst beating in four years over the September quarter, mainly because of weakness in economic powerhouse China. The market has fallen by just over nine per cent in the past three months, wiping about $160 billion from its value. ‘What’s going on right now is that there is a test of the market’s belief of the commodity story and China going forward,’ IG market strategist Evan Lucas said.”
The Australian Financial Review. “The supply of new apartments and a retreating, resource-based economy is starting to weigh on the market, with more units selling at a loss in the June quarter than the previous three months. The proportion of apartments selling for less than the purchase price rose in Melbourne, Brisbane, Canberra, Perth and Darwin in the second quarter, bringing the capital city average to 8.4 per cent from 8.1 per cent in June, CoreLogic RP Data’s latest Pain & Gain report shows. Nationally, loss-making apartment sales ticked up to 12.6 per cent from 12.5 per cent.”
“The greatest effect of new supply on prices was seen in the Melbourne central business district CBD, where as many as 20 per cent of all sales – where the product is overwhelmingly apartments – were sold at a loss, for a median figure of $28,125 per transaction. The pain was greatest in the resource-dependent capitals of Perth and Darwin. Loss-making apartment sales in Perth jumped to 18.7 per cent of all transactions from 11.9 per cent in March, while in Darwin the figure jumped to 25.3 per cent – meaning more than a quarter of all apartments and units are selling for less than their purchase price – from 17.3 per cent.”
The New Zealand Herald. “Chinese property investors are rapidly disappearing from the auction room, says the boss of Auckland’s biggest real estate agency. Peter Thompson, of Barfoot & Thompson, blames financial instability in China for the dip in those bidding - partly fuelling the market slowdown. ‘There are a lot less Chinese in the auction room at the moment and at the open homes,’ he said. ‘The market has changed and some of that is the Chinese buyers. There are more requirements in getting money out of China now and that is having an impact.’”
“This week, the Herald on Sunday paid a visit to the Barfoot and Thompson city auctions for central Auckland suburbs. Despite a full room it was clear the frenzied bidding on any and all properties had slowed. A number of houses were passed in with few or no bids.”
“A three bedroom bungalow in Ellerslie sold for more than $1.5 million - almost double it’s CV and evidence character homes in desirable suburbs are still hot property. Dawn Buxton, Barfoot and Thompson agent for the Ballin Rd house, said interest was high and she expected the sale price to be about $1.2m. The reserve price of $1.25m was passed easily with the owners pocketing $311,000 more than they would have accepted. ‘We really didn’t expect it to go as high as it did, the vendors were extremely happy,’ Buxton said.”
Bloomberg on Hong Kong. “Cosmetics retailer Colourmix will move to Hong Kong’s Russell Street, once the world’s most expensive shopping strip, and pay about 40 percent less than the former tenant as China’s economic slowdown rattles the city. Hong Kong’s retail property market has slumped with China facing its slowest growth in a quarter-century. ‘Landlords have to face the reality, no matter how reluctant they are,’ Lawrence Wong, a director at property agent Sheraton Valuers Ltd., said in a telephone interview Saturday. ‘It’s still better than leaving their property empty.’”
“Hong Kong’s residential market is also experiencing weaker sentiment. ‘Housing market outlook will likely become more cautious amid increased volatility in the global and Hong Kong’s financial markets,’ the Hong Kong Monetary Authority said in a report. ‘The risk of downward adjustment has picked up steadily.’”
The Associated Press. “Several local officials in eastern China have been detained after a man died in a fire at his home while defending it from a demolition gang, state media reported, underscoring continuing violence in the country’s frequent land disputes. Those suspected of culpability in the death of homeowner Zhang Jimin had been directly responsible for an urban renewal project in Difang township in the Shandong province city of Linyi, the Xinhua News Agency and state broadcaster CCTV said.”
“Zhang was burned to death and his house gutted in Monday’s incident, which followed a prolonged disagreement over terms of compensation for the demolished home. Cellphone footage of the incident circulating widely on the Internet shows what appears to be a group of men throwing stones and gasoline-filled containers into the house, which quickly begins billowing smoke while flames shoot from windows.”
“The use of thugs and strong-arm tactics in housing demolitions is relatively common in China, where local governments are heavily reliant on land sales to top up their coffers. Corrupt officials can pocket generous kickbacks through collusion with real estate developers, giving them even more incentive to force out incalcitrant homeowners.”
“Among those detained were Difang’s Communist Party secretary Wei Yunbo and Guan Yansheng, party secretary of the township’s Donggu community, Xinhua said. The total number of people detained was not immediately clear. An investigation at the city government level was ordered after the video footage and eyewitness reports raised questions about official claims that Zhang had set the fire himself. In a post on its official microblog, the government of Pingyi county, which directly oversees Difang township, had said that Zhang had purchased gasoline and that his death was a matter of ‘his own behavior.’”
‘The use of thugs and strong-arm tactics in housing demolitions is relatively common in China, where local governments are heavily reliant on land sales to top up their coffers. Corrupt officials can pocket generous kickbacks through collusion with real estate developers, giving them even more incentive to force out incalcitrant homeowners’
And one of these fine real estate entrepreneurs could be buying a house in your neighborhood!
‘Little-known private investment firms have been popping up all over China, luring pensioners’ savings by promising annual returns of more than 10 percent, and sometimes as high 60 percent, to fund cash-thirsty projects unable to get bank loans.’
‘Distributing fliers outside supermarkets and drawing on word-of-mouth, the private firms — part of China’s unregulated network of shadow financing– typically lure retirees with the offer of free lunch. A recent feast of radish soup, spare ribs, red-cooked pork, fried vegetables and a yogurt cup at a downtown Beijing restaurant drew about 100 mostly elderly people to hear a passionate lecture on the importance of investing. Attendees were treated to a magic show in which a magician chopped off the hand of his assistant in a bloody flourish, a bamboo flute concert, a whirling acrobat, and lucky drawings — as well as the promise of 12 percent annual returns to lend their money to a real estate project in Chengdu.’
“The project sounds not bad, just the return is a bit low,” said Fan, a blasé 62-year-old attendee who only gave her surname. She does this all the time and normally expects higher rates, no less than 15 percent on average, she said.’
‘That’s low compared with other investments being touted to Beijing’s elderly. A typical supermarket flier will list several offers with returns in the low double-digits. When potential investors phone up, they’re offered higher rates for even riskier products. A recent one, to fund the acquisition of a small oil pipe company in Jilin province, promised 5 percent a month, or 60 percent annually.’
‘The risk that some will turn out to be Ponzi schemes and never pay back the principal propels the wisest of the elderly investors to be wary. They advise each other to attend only investment pitches with lower returns, eat the free lunch on offer and take their money out relatively quickly before any signs of repayment difficulties emerge.’
‘Another lunch attendee who only gave her surname as Wang said her self-imposed cutoff for investments is a 20 percent annual return, and that she makes site trips to see projects herself whenever possible. She knows two people who put money into a product offering more than 30 percent last year, only to see their investments sour after receiving just two monthly payments, she said.’
“My experience is, don’t stick with any company for too long,” Wang said, as the emcee loudly read out names of people who he proclaimed had just collectively pledged more than 2 million yuan (about $313,800) to fund the Chengdu project.’
‘While it’s possible for experienced investors to make money from investments that turn out to be Ponzi schemes, the risk is like “pulling chestnuts out of the fire,” said Liao Qiang, a Beijing-based analyst for Standard & Poor’s.’
“……..The use of thugs and strong-arm tactics in housing demolitions is relatively common in China………”
The Chinese need a second amendment. The right to keep and bear arms!
“Wang said her self-imposed cutoff for investments is…”
I’m not sure she appreciates the irony of the bloody hand cutting off magic trick part of the entertainment.
That is funny. “I don’t go for the 30% returns, that’s crazy talk. My limit is 20%.” I’m sure the ponzi operators have picked up on this. “You’re promising 60%? The marks will know that can’t be true! Just say 15% and they will line up around the building.”
+14.99
How does anyone not become insane living there? On a day-to-day basis, the level of cognitive dissonance has to be crippling. From reading these reports, much of the country has become an fraud and crony-driven investment scam, with a witless, aging population addicted to gambling. Probably not what Mao had in mind.
Every policy mistake is amplified in China. Somehow, the combination of Eastern culture and Western economics results in a grotesque hybrid featuring the most troubling aspects of both systems.
There are some alternative writers who focus on Strauss and Howe’s theory of the “fourth turning,” i.e., fundamental social and political change occurring every fourth generation. The People’s Republic of China has existed since 1949, so the clock is ticking. I’ve never been there, so my judgments are uninformed by firsthand knowledge, but I can’t imagine the country surviving 50 or even 20 more years in its current form.
This is one reason lots of them are coming over to the USA and Canada, though I suspect they have close ties to the Communist Party of China.
I love how the companies solociting money in China do so by distributing flyers outside of supermarkets. Must be some crazy scene. Here we only get bombarded with girl scouts and school fundraisers. I once bought a $10 bag of popcorn from a boy scout and felt like a total sucker. How would I feel if I bought some “investment” and lost all my money?
“Honey I know you only wanted me to pick up milk, but I’ve got some bad news…”
Again, my opinion is based solely on these articles, but that culture does not seem to have developed the concept of caveat emptor, maybe because it doesn’t have as much experience with con artists as we do, and even we screw up royally from time to time. Is there a Chinese counterpart to P.T. Barnum? I’m guessing no.
Remember…. ‘Location’ is just another marketing strategy to get you to pay far more than the property is worth.
BUT then the Realtor makes more cashish!
And the seller makes more cashish!
Only the buyer takes in the poot!
2 out of 3 are winners!
This is a recipe for permanently growing economic prosperity stretching forward for generations to come!
Why buy it when you can rent it for half the monthly cost?
Frisco, TX Housing Prices Plunge 14% YoY; Inventory Balloons 85%
http://www.movoto.com/frisco-tx/market-trends/
tr taxes will zoom in FX since they have little else to tax
in IL they tax everything and they’ll still zoom
?got public sector unions?
crushing.housing.losses.
“Before the central bank’s cooling measures, property prices were on a steep climb, particularly in key markets, believed to be spurred by excessive speculation.”
Before the cooling measures money was being made easily available to push up prices and the pushing up of prices is what created demand.
“Chang said the investors club were now rushing to sell their properties at lower prices as there were no takers, and predicted ‘many foreclosure cases soon due to this.’”
Now that prices are no longer being pushed up demand suddenly vanished and hence a crash is now at hand.
There a lesson here somewhere an it goes something like this:
In a price-equals-value market a price increase will create demand because a price increase is seen as an increase in value. If money is made available to finance these price increases then “wealth” is seen to be created because, since price equals value, an increase in price is seen as an increase in value, and an increase in value is seen as an increase in wealth.
But if the money that fueled these price increases is yanked away then prices will no longer be increasing which means values will no longer be increasing and since demand was driven by increases in value this demand will suddenly evaporate.
Suddenly evaporating demand will not slow a price rise; Suddenly evaporating demand will instead cause prices to crash. And this, IMHO, is why speculative price-equals-value markets cannot be slowly “cooled off”.
A speculative price-equals-value market is either “hot” or “it is not”; There is no middle ground.
In other words; Boom is followed by Bust.
“We’re watching over here, the wounds still open after our own crash, shouting, ‘Don’t do it, you crazy yuppie couple, you’ll be stuck there for life.’ They never listen.”
Can’t say I didn’t warn these fools.
And to make it worse, the artisan bread shop that is “only three tube stops away” will probably close and they’ll have to go 20 stops to the nearest Lidl store.
‘A Chinese maker of solar components is threatening to become the nation’s next company to default on bonds, highlighting industry challenges. Baoding Tianwei Yingli New Energy Resources Co., whose majority holder was until last year the world’s biggest panel company by shipments, said there’s uncertainty if it can repay 1.057 billion yuan ($166 million) of bond principal and interest due Oct. 13 after suffering losses. The firm, based in the northern province of Hebei, is still trying to raise money, according to a statement.’
‘Concerns are mounting that China National Erzhong Group Co. has become the second state firm to default on onshore debt after a Sept. 28 deadline for an interest payment passed without word whether it was made. “It’s very likely Tianwei Yingli will default,” said Zhang Li, a bond analyst at Guotai Junan Securities Co. in Beijing. “Many Chinese companies have such a problem this year as the economy slows.”
It wasn’t that long ago that a Chinese default would be tracked minute by minute in the media, until the government or somebody bailed it out:
‘a Sept. 28 deadline for an interest payment passed without word whether it was made’
“It wasn’t that long ago…”
There is never enough cash around to support a failing credit pyramid. The first few holes can be plugged but eventually reality takes over.
‘The trial of two Uber executives kicked off in France on Wednesday, the latest front in the fierce battle between the popular ride hailing service and the taxi industry there. Uber France chief Thibaud Simphal and Pierre-Dimitri Gore-Coty, general manager for Western Europe, could be sent to prison for up to two years and fined as much as 300,000 euros if found guilty of deceptive commercial practices and other charges.’
‘Uber has been banned in Belgium, Spain and some parts of India among other regions. Valued at $60 billion by its venture capital investors, Uber’s services match drivers and riders in hundreds of cities worldwide via mobile phone apps. But taxi owners say Uber, which isn’t subject to the same regulations in many cities, poses unfair competition.’
‘French taxi drivers took to the streets this summer, smashing cars and setting tires on fire, as part of widespread protests against Uber. They also lobbied for a 2014 law which outlawed non-professional drivers from carrying passengers for profit — the exact business model of Uber’s lowest cost Uber Pop service in France. The country’s highest court upheld the law last week.’
I hear some poofing out there:
‘Valued at $60 billion by its venture capital investors’
‘Valued at $60 billion by its venture capital investors’
Somehow I doubt that the aggregate value of all Taxi Companies in the world is that much, and they, unlike Uber, own assets (the taxi cabs).
Are Taxi Medallions based on the driver or the cab? If the driver, there were 42,000 taxi cab drivers in nyc in 2012 and recent sale of medallion was $740,000 (Down a huge chunk.) That means the medallions are worth $31,080,000,000 if google did the math right.
‘Chang said the investors club were now rushing to sell their properties at lower prices as there were no takers’
When you ad it all up, China, Malaysia, Indonesia, the Philippines, India, Brazil, etc, you get into some big population numbers wrapped up in this bubble.
‘Asian equities rose with US index futures, while Malaysia’s ringgit trimmed its biggest three-month loss since 1997, as investors took stock after a quarter of volatile trading that wiped almost US$11 trillion (RM48.931 trillion) off the value of global shares.’
‘The MSCI Asia Pacific Index pared set for a fifth straight monthly decline, the longest streak since the 2008 global financial crisis…as the Bloomberg JP Morgan Asia Dollar Index heads for its biggest quarterly drop in almost 17 years.’
“The stabilization in risk sentiment looks relatively tentative to us,” Raiko Shareef, a markets strategist in Wellington at Bank of New Zealand Ltd., said. “We’d be wary of another deterioration in Asia today as funding costs spike in China ahead of a week-long holiday.”
‘The Shanghai Composite Index’s 29 per cent drop since June 30 is the worst performance of any major index globally this quarter. Hong Kong’s Hang Seng China Enterprises Index has the second-biggest drop.’
‘The Asia Dollar Index, which tracks the region’s 10 most- active currencies outside of Japan, has dropped 4.4 per cent this quarter, in its worst performance since 1997. Malaysia’s ringgit led the rout with a 15 per cent slide as oil prices retreated and Prime Minister Datuk Seri Najib Razak was caught up in a corruption investigation.’
Is this a lot?
‘trading that wiped almost US$11 trillion (RM48.931 trillion) off the value of global shares’
10,049 properties found San Diego County, CA Homes for Sale & Real Estate
http://www.realtor.com/realestateandhomes-search/San-Diego-County_CA
3,374 properties found San Diego County, CA Price Reduced Homes for Sale
http://www.realtor.com/realestateandhomes-search/San-Diego-County_CA/show-price-reduced
34% of sellers have reduced prices at least once
‘With the bursting of the Chinese stock market bubble in July and the slight but unexpected depreciation of the renminbi, by about 4 percent in August, the world markets have panicked and doomsayers are coming out in droves to predict the imminent collapse of the Chinese economy. But the Chinese economy should be able to make a smooth transition to a “new normal”, with an average annual growth rate of about 7 percent over the next few years, based once again on China’s domestic demand.’
‘Despite everything, it is unlikely that the Chinese economy will suffer a “hard landing”, because the large and widespread excess production capacities in China’s manufacturing industries will ensure aggregate supply so long as there is aggregate demand. Thus, the Chinese economy is not supply-constrained.’
‘Given the excess manufacturing capacities in many industries and the excess supply of residential units in almost all except the very first-tier cities, private-sector fixed assets investment is not likely to be a robust source of increase for aggregate demand as it once used to be. Lowering the rate of interest alone is not going to induce additional private-sector fixed investment in either manufacturing or residential housing. Nor is export likely to be a source of increase of aggregate demand, given the relatively slow recovery of the U.S. and European economies, the continuing rise in wages in China and the significant appreciation of the renminbi since 2005 (about 25 percent). The 4 percent depreciation of the renminbi in August was too small to have any significant impact.’
‘Moreover, it is really not in the best interests of China to devalue the renminbi enough to go back to labor-intensive light manufacturing such as toy-making, with the low standard of living that such activities imply.’
‘For household consumption to become a major driver of aggregate demand, real household disposable income must increase significantly faster than real GDP. Even then, it will take a while before household disposable income exceeds 50 percent of GDP.’
‘Thus, in the short and medium terms, any significant growth in aggregate demand must come from investment in public infrastructure and commodity consumption. The government is expected to take the lead in both. Increasing investment in public infrastructure and commodity consumption to boost aggregate demand at this juncture has two additional advantages.’
‘First, given the idle manufacturing capacities, the marginal social cost of investment in public infrastructure and commodity consumption is low. Second, the provision of public goods amounts to a redistribution of real income in kind, since, for example, both the rich and the poor breathe the same air and drink the same water. So, the move can reduce the degree of income disparity in China.’
“growth in aggregate demand must come from investment in public infrastructure and commodity consumption…”
Credit expansion and malinvestment. We just watched how that works. Now something else follows.
Realtor Charged In $200k Swindle
http://www.tbo.com/news/crime/scam-fleeced-anna-maria-vacationers-out-of-200k-20150912/
8,334 nearby properties found Seattle, WA Real Estate and Homes for Sale
http://www.realtor.com/realestateandhomes-search/Seattle_WA?ml=4
2,958 nearby properties found Seattle, WA Price Reduced Homes for Sale
http://www.realtor.com/realestateandhomes-search/Seattle_WA/show-price-reduced?ml=4
Ramping Recovery: Rochester, NY Gasoline Prices Fall Below $2
http://www.democratandchronicle.com/story/money/business/2015/09/29/henrietta-gas-prices-2-dollars-gallon-rochester/73061098/
National House Buyers Association secretary-general Chang Kim Loong said property buyers should wait as the cooling measures were working well. Prices have gone down and are expected to reduce further.”
Why don’t we have a National House Buyers Association? Perhaps they could influence legislation and policies on national and state levels to offset all the power of the National Association of Realtors and other interests which have ill affected the economic lives of most of us.
The NAR has no power over those who will not buy what they cannot afford.
Ben Jones:
When can we expect a video / commentary on your excursion to Denver and environs?
I am working on the last bit of editing right now; should be this afternoon. I’m pushing to expand what I can do with each video. I thought I’d finish last night but got tired.