February 23, 2016

It Was Too High, It Was Crazy

The Herald Sun reports from Australia. “Unit prices in Richmond have plummeted more than $80,000 in 12 months according to latest data, while house prices continue to skyrocket. Jellis Craig partner Elliot Gill said the price slump was the result of oversupply, with units needing a ‘point of difference’ to stop them languishing on the market. He said many modern complexes were built with more than 80 per cent of apartments identical to one another. ‘If you want to sell, there can be three or four identical properties on the market,’ he said. ‘For houses, there are many buyers for every property, and for apartments there are many properties for every buyer.’”

Bloomberg on Hong Kong. “Hong Kong’s developers are offering enticements from iPhones to wine coupons to counter the slowest home sales in at least 25 years, to no avail. Their options are now narrowing down to the one they’ve desperately sought to avoid: price cuts. The next step may be the outright price cuts that developers have long resisted because of fears that they’ll fuel expectations of steeper declines.”

“‘Obviously buyers, whether as end users or investors, are taking their time and aware that prices might go down further,’ Antonio Wu, deputy managing director at Colliers International Hong Kong, said in a phone interview. ‘There will be a lot more discounts than today. If they really want to sell, they really have to cut the price and start sales.’”

Korea Joongang Daily. “The values of about 4 percent, or 270,000, of apartments sold in the first month of the year have dropped, according to a study by the real estate information provider Budongsan 114. ‘As the government tightened the regulations on loans, housing demands have shrunk and recently the oversupply of apartments and shrinking transactions have resulted in lowering apartment values,’ said Kim Eun-jin, head of the Budongsan 114 research team. ‘The price adjustment in Daegu and North Gyeongsang was inevitable as these regions have enjoyed a continuous rise of apartment values over the years.’”

Bloomberg on Brazil. “Some of the luxury apartments built in anticipation of the 2016 summer Olympic Games are at risk of being left unsold as the housing market deteriorates in Rio de Janeiro, Mayor Eduardo Paes said in an interview. ‘The real-estate market has really cooled down,’ Paes said from his office in City Hall. ‘Ilha Pura is the bigger risk. The guys did 31 buildings all at once, and they’re going to have difficulty.’”

“In the nine years since Brazil bid for the games, the nation and the city of Rio have gone from economic boom to bust, reversing the seemingly unstoppable rise of the real-estate market. Prices in Rio are poised to fall a ‘a little bit further,’ Paes said. ‘It was too high, it was crazy.’”

The National on Dubai. “Dubai property developers are offering increasingly generous terms to clinch sales in a softening market. ‘These offers are indeed a sign that the market is getting more competitive, but we believe that it doesn’t have any particular effect on the stock,’ said Sanyalak Manibhandu, head of research at NBAD Securities. ‘These sort of deals are the sort that only the big developers are able to afford to do. Effectively, what they are doing is pricing smaller Dubai developers out of the market. We don’t expect them to offer these sort of deals on all projects, and if they find that they aren’t working then they will probably not continue with them.’”

The Copenhagen Post in Denmark. “For the first time since 2001, Copenhagen is actually losing people, according to figures from the national statistics keeper Danmarks Statistik. ‘A deciding factor behind these figures are that families with small children – who want to leave the city but are hesitant to sell their apartment and purchase a house during a recession – are now beginning to move out,’ Hans Skifter Andersen, a professor of housing and welfare at Aalborg University, told Politiken newspaper.”

The Deccan Chronicle in the UK. “A spectre is haunting London, or at least central and property-valuable parts of the city today. Central London today, its housing stock, the flats in the new luxury tower blocks, the Victorian terraces of the whole of central London are being or have been, bought up with crooked, or what is known in India as ‘black,’ money by Russians, Arabs, Indians, Pakistanis and some Chinese and Africans.”

“Here’s a fairly typical story: An Egyptian individual called Ahmed Ezz, a steel magnate of sorts was arrested soon after the ‘Arab Spring’ in that country, fined £2 billion for stealing from the state and sent to jail. Nevertheless investigative journalists from Private Eye, a Brit fortnightly, now allege that Mr Ezz’s laundered money was used through two companies registered in the non-tax-paying black money-laundering British Virgin Islands to buy one of his three wives a flat in Knightsbridge worth ‘tens of millions of pounds’ and another in an Edwardian apartment block worth £3.5 million.”

“If New York is known as the Big Apple, London should be rechristened the Big Launderette. This great laundromat has had a disastrous effect on the social fabric of Britain. House and flat prices in the whole of London have rocketed and young working people can’t afford to buy into the London housing market even at the humblest one-room or studio-flat level many tube stations away from Oxford Circus. And Central London has nothing resembling a ‘community.’ I still know people who are proud of living in Chelsea or Knights-bridge and in my crueller moments remind them that they are living in ghost towns.”

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Comment by Mugsy
2016-02-23 04:06:42

And Central London has nothing resembling a ‘community.’ I still know people who are proud of living in Chelsea or Knights-bridge and in my crueller moments remind them that they are living in ghost towns.”

There was a song by the Fun Boy Three back in 1981 called “Ghost Town” but it was about the lack of employment and opportunities in post 1970’s Britain and had nothing to do with the housing bubble. Maybe they need to do a re-make.

This town,
is coming like a ghost town…

Comment by Jingle Male
2016-02-24 01:48:03

Every vacant property is a hole in the community fabric. There needs to be a vacancy tax which escalates every few months a property is vacant.

Comment by Mugsy
2016-02-23 04:17:03

“Dubai property developers are offering increasingly generous terms to clinch sales in a softening market.”

I wonder if the suckers, I mean “purchasers”, of these properties will abandon their cars at the airport when the properties go deep underwater ala 2008? Nostalgia is so much fun!

Comment by snake charmer
2016-02-23 15:43:01

The suckers are in even deeper than they think. The Towering Inferno-style fire that the Dubai skyscraper had over New Year’s revealed the extent to which that structure, and others, made use of unusually flammable building materials. Think terrorists didn’t see that?

“On the evening of December 31, 2015, thousands of revelers had gathered in Downtown Dubai to ring in the New Year. The vast development built by Emaar Properties, the owner of The Address Hotel, has become the home of new year’s festivities ever since the world’s tallest tower was opened there in 2010.

But soon the crowds were watching in shock as the 63-storey building was engulfed in a fire that took just minutes to leap 40 storeys up its exterior walls.

But a spate of such cladding-related fires in recent years in the UAE and elsewhere is increasingly focusing the spotlight on them and their causes.

Emaar Properties, the developer of The Address, and designer Atkins declined to answer specific questions relating to the fire tests conducted on the exterior cladding panels of the building or whether those panels contained flammable polyethylene material.”


Comment by Blue Skye
2016-02-23 05:40:07

“Prices in Rio are poised to fall a ‘a little bit further,’ Paes said.”

Oh? Or maybe Brazil is bleeding like a stuck pig.

“They now expect that Brazil’s GDP last year contracted by an enormous 4%; worse (far worse) the OECD now predicts 2016 GDP will contract by slightly more (and we have almost a whole year remaining of potentially further downgrades) and that with 2017 GDP anticipated at now 0.0% the OECD is essentially admitting that they don’t really know when Brazil will get out of this depression.”

“A recession is something that comes along to temporarily knock any economy from its long-run path or potential. The Great Recession was a severe deviation (for reference, CY 2009 GDP was only -0.24% in Brazil) for every economy on earth but this is something altogether different and terrifying. Not only is it expected (by orthodox models, no less) that Brazil will be the “dollar” recipient of back-to-back 4% contractions, there is no discernable time table for recovery, therefore suggesting a massive dislocation lasting years.”


Comment by scdave
2016-02-23 07:27:49

I agree Blue….There is no telling how bad it could get…Those are brutal numbers that are just going to get worse…

Comment by Ben Jones
2016-02-23 07:46:09

Check this out:

‘Norwegians’ faith in the economy has plummeted’

‘A new consumer survey from Finance Norway shows that confidence in the Norwegian economy is at an all-time low. Despite the numbers, Finance Norway CEO Idar Kreutzer said it’s important not to exaggerate the fear of a downturn in the Norwegian economy and concerns about rising unemployment.’

“Most people have a secure job and won’t be affected by the problems faced by parts of the Norwegian industry. If falling confidence and increased unemployment make individual households overreact by increasing their savings and tightening consumption it can affect sectors of the Norwegian industry,” Kreutzer said.’

“We now see that the low confidence in the country’s economy is influencing people’s confidence in their own situation. We can see that more people are preparing for hard times by postponing major purchases and spending less on vehicles and travel,” Kreutzer said.’

From this article I went back to their business page and it was one big layoff report after another.

Comment by scdave
2016-02-23 08:02:23

Check this out: ??

They rely heavily on oil also don’t they Ben ??

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Comment by Ben Jones
2016-02-23 08:24:30

Yes and they are seriously contracting.

Comment by Ben Jones
2016-02-23 08:50:23

‘JP Morgan will set aside an additional half a billion dollars to cover potential bad loans to oil and gas companies in the first quarter, underlining the sharp deterioration in the U.S. energy sector.’

‘Thousands of jobs have been cut in the U.S. energy sector and roughly a third of oil producers, or 175 companies, are at high risk of slipping into bankruptcy this year, according to a study by Deloitte, increasing the risk that bank loans will not be repaid.’

‘JP Morgan expects to set aside an additional $500 million for oil and gas loans in the first quarter, on top of the $815 million it had at the end of 2015, according to slides released ahead of its annual investor day on Tuesday.’

‘JPMorgan also expects to increase reserves for metals and mining loan exposure by $100 million to $350 million.’

‘Banks globally are a facing a hostile environment with interest rates remaining stubbornly low - hurting their ability to profit from lending - continuing regulatory pressure and tough markets with a slowdown in China and a worldwide energy rout hurting companies.’

Comment by Ben Jones
2016-02-23 09:07:17

‘The U.S. Energy Information Administration’s ( http://www.eia.gov ) new “Today in Energy” brief looks at how gasoline consumption is expected to increase this year, but still be less than the peak demand seen in 2007 even though highway travel will be much higher.’

“Based on estimates in the most recent Short-Term Energy Outlook (STEO), vehicle travel in the United States in 2015 was almost 4% above its 2007 level, but motor gasoline consumption has not exceeded its previous peak in 2007. Improvements in light-duty vehicle fuel economy are largely responsible for this outcome. STEO forecasts motor gasoline consumption to average 9.23 million barrels per day (b/d) in both 2016 and 2017, about 0.6% below its 2007 level. In contrast, vehicle travel is expected to grow to levels 5% and 7% above the 2007 level in 2016 and 2017, respectively.”

Yesterday I read Jim Rogers saying China was the victim of slowing global demand, not the cause. It’s a bit like why did the chicken cross the road.

Comment by scdave
2016-02-23 09:07:17

Swiss negative rates just hit a record low….

Comment by Mafia Blocks
2016-02-23 09:18:38

Remember….. “Central planning always results in failure. Central Planning(central banking) is foundational to socialism and communism.

Comment by Blue Skye
2016-02-23 10:58:46

Consider how much oil it takes to build a ghost city or a steel mill, and to mine, mill and deliver everything involved. China is shutting these things down left and right. It matters little in comparison if I take a longer vacation this year.

Comment by Mugsy
2016-02-23 21:32:04

More likely that Norwegians faith in free money and giant housing bubble courtesy of the high oil prices has waned.

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Comment by snake charmer
2016-02-23 15:59:25

More on Brazil. The Olympics made this 91-year-old very rich. But with comments like these, he’ll have to spend it all on personal security. Why does everyone dream of recreating Manhattan? And a “noble” Latin American elite, LOL. Rio, are you around to comment on this?

With land holdings of at least 6m square metres – equivalent to about 8,000 football pitches – in and around the main Olympic site at Barra da Tijuca, Carvalho has seen his wealth surge since Rio was chosen as the host city in 2009, thanks to what he describes as the “billion-dollar jump” of Games-related, publicly funded development.

This has already propelled him into the higher echelons of the global rich, but he has still more at stake with a near-$1bn (£640m) investment in the athletes’ village and the Olympic Park, parts of which will be sold off after the Games as luxury housing. He also recently built a 3,000-room, five-star hotel on a nearby plot of his land, which is slated for theatres, universities and 100-metre wide boulevards that, he says, “will be the envy of New York”.

His vision – sketched out in an interview with the Guardian – is for Barra (this is the place name in all International Olympic Committee documents, though the location is actually in the neighbouring district of Jacarepaguá) to become home to a “noble” elite, cleared of poor communities, and ultimately destined as the centre of a “beautiful new Rio de Janeiro”.


Comment by Mr. Banker
2016-02-23 06:15:18

“Some of the luxury apartments Some of the luxury apartments built in anticipation of the 2016 summer Olympic Games are at risk of being left unsold as the housing market deteriorates in Rio de Janeiro, Mayor Eduardo Paes said in an interview.

“… luxury apartments built in anticipation of the 2016 summer Olympic Games.”

Bahahahahahahaha … built in anticipation of the 2016 summer Olympic Games that will end after the summer ends in - what? - three months or so?

But as for the luxury apartments? Bahahahaha … they will still be there and the debt that was incurred in building these luxury apartments will still be there … everything will be there EXCEPT the prices, prices that will temporarily be there only because the summer Olympics Games is scheduled to temporarily be there.

Bahahahahaha … gross total stupidity really and truly appears to be a global issue.

Morons without borders. Bahahahahahahahahahahahahahahaha.

Comment by Mr. Banker
2016-02-23 07:30:27

It is bad enough that a lot of stupid money - a lot of BORROWED stupid money - goes into to financing booms that are not anticipated by most people to turn into busts, but it is really and truly incredible that a lot of really, really stupid borrowed money goes into financing booms that ARE GUARANTEED to turn into busts, and borrowing a lot of money to finance a boom that is scheduled - SCHEDULED! - to last for ONE SUMMER! is one of these instances.

Comment by In Colorado
2016-02-23 07:44:09

It is getting to the point where few dare host the Olympics.

Comment by snake charmer
2016-02-23 15:51:26

There are some great stories and pictures showing Olympic venues once the games are over. Many become derelict almost instantly, including some recognizable venues from the Beijing games in 2008.

Similarly, some of the stadia from the 2014 World Cup in Brazil were constructed at great expense in out-of-the-way cities to give all regions of the country a chance to participate, and now the structures are sitting there practically abandoned only two years later:

“Nearly a year after the 2014 World Cup, many of the 12 stadiums Brazil built and renovated for the event have fallen into disuse.

Brazil spent more than $3 billion on the stadiums, some of which were built in far-flung locations without popular local professional teams to sustain them after the tournament. A year later, some sit empty and others are running at a loss, and even the stadiums that host regular domestic games have been plagued by disputes between the clubs and the stadium operators.

The Estadio Nacional in Brasilia, the most expensive of the stadiums, is being used as a bus parking lot. The stadium cost $550 million to build, NPR reports, but without a top-division team in the capital it has little use after hosting seven World Cup games.”


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Comment by scdave
Comment by Mafia Blocks
2016-02-23 08:42:35

Remember… CS data is months old and excludes foreclosures and defaults.

Comment by Ben Jones
2016-02-23 07:49:24

All you ever wanted to know about Chinese money laundering. Bookmark this one and read it when you have some extra time, cuz it’s long:

‘Is Chinese money laundering “flying” into real estate?’

Comment by scdave
2016-02-23 08:08:21

Linky no worky Ben….

Comment by scdave
2016-02-23 08:10:09

Tried it again and it worked fine…

Comment by Ben Jones
2016-02-23 07:58:17

‘Jeff Kiarie was guarding a Chinese mine back in early 2014 near Arusha, Tanzania when Chinese managers and investors picked up and left, leaving their excavators, tractors, and wheel loaders behind, offering no explanation. “They couldn’t just leave so many machines here,” Kiarie, the lone Tanzanian now guarding thousands of tons of Chinese mining equipment, says he reasoned.’

‘But that’s exactly what seems to have happened; Kiarie’s mine remains abandoned, and other Chinese operations on the African continent seem to be in peril. For years, Western media has covered Chinese trade and investment with the continent somewhat breathlessly; a November 2006 New York Times report declared that Chinese development “looks more like Africa’s future than its past,” and a February 2011 article for the BBC proclaimed that “the Chinese are coming” to Africa.’

‘Since the turn of the 21st century, Chinese state-owned and private enterprises have poured into African countries, seeking natural resources, new markets, and other business opportunities. China’s trade with the continent has skyrocketed; in 2009, China surpassed the United States to become Africa’s largest trading partner, and by 2014 flows exceeded U.S. trade with the continent by more than $120 billion. These trends coincided with an explosion in optimism about Africa’s economic growth prospects.’

‘But now with the slowdown in China’s economic growth — its GDP expanded 6.9 percent in 2015, down from 7.3 percent in 2014 and the lowest growth rate China has seen in 25 years — things are changing. China’s customs office recently reported that African exports to China in 2015 fell 38 percent from 2014. In November 2015, China’s Ministry of Commerce announced a 40 percent year-on-year plunge in investment to the continent, what the state-run English-language China Daily called a “collapse.”

‘As the jumbo jet that is China’s economy slows — or worse, perhaps heads for a hard landing — some analysts believe the outlook for the African continent is bleak. South Africa’s plunging currency, the rand, is one recent manifestation of more pain to come.’

‘As China’s previously insatiable appetite for oil, metals, and minerals wanes, African economies dependent on the export of commodities are hurting. The pain is evident in Tanzania’s once-booming copper mines. Tom Opila, the owner of a variety of mining concessions near the massive inland Lake Tanganyika bordering Tanzania, described how the international price of copper soared in 2010, spurring Chinese arrivals and a frenzy of investor activity.’

‘Opila jumped on the opportunity, jointly launching his first copper mining development project with a Chinese firm. Other Tanzanian business people soon also set up investment projects to attract Chinese finance. But now, after shifts in the international market for copper and a series of fraud and quality issues at Chinese firms, the action has ground to a halt. “Later on they did not come any more, ” Opila muttered.’

‘Gazing out over haphazard stacks of rosewood logs, a commodity used primarily for furniture manufacturing in China that sells for between $1,500 to $15,000 per cubic meter — high-end specimens once sold for as much as $1.5 million per cubic meter — Zhang reminisced. “A few years ago, because of the economic boom, the demand for rosewood was very high,” he said. “And the price was very high.” High enough that it was still worth investing despite an onerous export regulation regime. “In a single month we used to export several containers…” Zhang trailed off, his silence preempting follow-up questions.’

Does anyone remember the rosewood furniture mania in China? It’s been a couple of years but that one always cracked me up.

Anyhoo, well what do you know? China screwed up in Africa! No surprise as they are the biggest idiots of the investing world. Too harsh you say? Show me where they haven’t completely blundered a situation into ruin!

Comment by scdave
2016-02-23 08:05:25

rosewood furniture mania in China ??

Kind of like Tulips…

Comment by Mafia Blocks
2016-02-23 08:10:55

And rapidly depreciating houses.

Comment by azdude
2016-02-23 08:35:49

your calls havent been that good. why should we listen to your constant doom and gloom news?

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Comment by Mafia Blocks
2016-02-23 08:45:32

Az_Donk….. Pick yourself up off the floor and cheer up and remember….. Nothing accelerates the economy, creates jobs and cures poverty like falling prices to dramatically lower and more affordable levels. Nothing.

Davis,CA Housing Market Craters; Prices Plummet 8% YoY As Declines Accelerate Nationally


Comment by In Colorado
2016-02-23 09:07:11

As the jumbo jet that is China’s economy slows — or worse, perhaps heads for a hard landing

I’m envisioning a landing more akin to that of the ill fated Asiana 777 in San Francisco.

Comment by Blue Skye
2016-02-23 11:00:17

Rosewood sure is pretty, but it is deadly to those who mill it.

Comment by Karen
2016-02-23 13:06:45

The fact that the Chinese are the biggest idiots of the investing world ought to tell us what will happen to their “investments” in the US property market. Crater ahead!

Comment by Blue Skye
2016-02-23 13:56:20

Future Chinese proverb:

Never get involved in house speculation in North America.

Comment by Professor Bear
2016-02-23 08:13:54

“If New York is known as the Big Apple, London should be rechristened the Big Launderette. This great laundromat has had a disastrous effect on the social fabric of Britain. House and flat prices in the whole of London have rocketed and young working people can’t afford to buy into the London housing market even at the humblest one-room or studio-flat level many tube stations away from Oxford Circus. And Central London has nothing resembling a ‘community.’ I still know people who are proud of living in Chelsea or Knights-bridge and in my crueller moments remind them that they are living in ghost towns.”

Isn’t this same dynamic driving prices skyward in the Big Apple?

Comment by In Colorado
2016-02-23 09:10:43

I was flabbergasted when I learned that people commute to jobs in London from as far away as Bournemouth.

Comment by Mr. Banker
2016-02-23 10:00:05

“I was flabbergasted when I learned that people commute to jobs in London from as far away as Bournemouth.”

Bahahahahaha … I know guys who worked in El Segundo and bought places in Victorville after doing their looking for place to live on the week ends - the WEEK ENDS.

Bahahahaha … then after the dotted lines were filled in with signatures and they and their families moved into there brand new Victorville dream homes they got to experience the wonders of commuting to work during the week days - the WEEK DAYS.


Comment by Mafia Blocks
2016-02-23 09:25:09

Subprime on steroids. 3% down with no PMI isn’t anything new but it is the definition of subprime. Look out below.

“Freddie Mac, Bank Of America Launch Another 3% Down Mortgage Program”


Comment by Mafia Blocks
2016-02-23 10:48:28

There has never been a better time to default on your mortgage. Ever.

Comment by pricedoutfornow
2016-02-23 11:46:13

This sounds like Vancouver.

“leaving the flats and houses empty for most of the year, claiming “non-domicile” status and paying no taxes here.”

Comment by Senior Housing Analyst
2016-02-23 12:46:07

Corvallis, OR Housing Market Craters; Prices Dive 7% YoY On Collapsing Housing Demand


Comment by Double Flip Triple Gainer
2016-02-23 12:57:54

Should we believe what the NAR is telling us? Does it apply to my area here in Chicago? Well, some lunchtime Redfin research:

Winnetka houses to sell for over $900K from 11/23/2015-2/23/2016: 25 ($384/sq ft)
Winnetka houses to sell for over $900k from 11/23/2014-2/23/2015: 37 ($477/sq ft)

So year over year, trailing 3 month sales are off 32% in Winnetka. Prices are down 19.5% per sq. ft. in Chicago’s nicest suburb.

How about in the western burbs?

Houses to sell for over 600k over last 3 months:
Wheaton - 9 ($191/sq ft)
Glen Ellyn - 20 ($229/sq ft)
La Grange - 3 (no sqft info)
Downers Grove - 15 ($243/sq ft)

Over same 3 months last year
Wheaton - 15 ($218/sq ft)
Glen Ellyn -24 ($247/sq ft)
La Grange -13 (no sqft info)
Downers Grove - 21 ($289/sq ft)

So year over year higher priced Wheaton sales are down 40% and price is down 12.4% per sqft. Year over year higher priced Glen Ellyn sales are down 17% and price is down 7.3% per sqft. Year over year higher priced La Grange sales are down a whopping 77%. And YoY higher priced Downers Grove sales are off 29% and price is down 15.9%.

The weight of excess inventory at the higher end will crush prices of all homes, even the more affordable ones for which there is admittedly salient demand.

Rather than buy into any laughable statistics some self-interested agency spews, do your own research. The truth is right under your nose.

Comment by taxpayers
2016-02-23 14:18:35

maybe they know how much re taxes are going to soar in IL / chighetto

Comment by Mafia Blocks
2016-02-23 15:04:34

Cratering prices from massively inflated levels(still are from the the looks of the unit price) and collapsing demand.

You may want to scrutinize closely as it is redfin afterall.

Comment by Ben Jones
2016-02-23 14:40:21

Falling house prices add to emerging market woes
Financial Times-4 hours ago
“And, of course, changes in house prices may affect the housing construction … Mr Shearing is equally concerned about what he regards as a “bubble” in the ..

Comment by Mafia Blocks
2016-02-23 15:40:41

“Subprime Auto Delinquencies Hit Highest Level Since 2010″


told yas. told yas long ago.

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