The Housing Bubble

The National Post reports from Canada. “Vancouver’s real estate market has been very good to Amanda. She’s not a licensed realtor, but buying and selling property is her full-time job. She started about eight years ago as an unlicensed ‘wholesaler’ in Vancouver. She would approach homeowners and make unsolicited offers for private cash deals. Amanda estimates hundreds of wholesalers are scouring Metro Vancouver’s never-hotter speculative market — not including the realtors who are secretly wholesaling for themselves. ‘A lot of money is leaving China, so now every second day people are asking if I can go out and find places for them. They have tons of money,’ Amanda said. ‘They are basically brokering business deals specifically for Chinese investors.’”

“Vancouver realtors confirmed that money laundering is a big concern in assignment-flipping deals, whether organized by an unlicensed wholesaler or a realtor. ‘When you are a non-realtor broker you no longer have to play by any rules,’ one Vancouver realtor said. ‘There is a role for assignments, but nobody is asking where the money came from. We are creating vehicles for money laundering. No person in their right mind wants to buy your house once, and sell it three more times in a small window of opportunity, unless they have a whole pool of people lined up trying to get their money out of the country. The higher the prices go, these vehicles to get money out of the country get bigger and bigger.’”

CNBC on China. “In 2009, expecting Beijing’s home prices to keep climbing, Peter Zeng bought a two-bedroom apartment in Beijing’s Shuangjing neighborhood for 1.8 million yuan ($280,000). He sold the two-bedder for 4.05 million yuan ($620,000) last year and was able to buy the school-district apartment in cash. ‘With this property, I can now borrow 3 million yuan [$460,000] from the bank with an interest rate as low as 4.9 percent,’ he said. ‘It’s like free money!’”

“Zeng said the current housing boom reminded him of 2009. ‘The housing market is as crazy as back then,’ he recalled. ‘There is no chance for buyers to bargain. If you don’t take the apartment immediately, it’s gone the next day’”

“Shen Yan, a 24-year-old Shenyang resident who graduated in 2014, told CNBC that he would take advantage of the zero down-payment policy if it ever took effect, but said he saw very little current demand for property. ‘People around me already have had at least two apartments,’ said Yan. ‘There is no demand from local residents, and the city’s north side is almost like a ghost town.’”

The Malaysia Chronicle. “The Selangor government has frozen the approval of new property projects involving serviced apartments, small office home offices and small office versatile offices for six months amid the gloomy outlook plaguing the sector. Property experts lauded the Selangor government’s move to halt such developments in view of the current challenging times in the property sector. Malaysian Institute of Estate Agents immediate past president Siva Shanker even opined that the state government should have done this two years ago.”

“‘In the last few years, there have been a lot of apartments and condominiums being built and sold. That sector of the market is clearly oversupplied and the market started to feel the pinch last year. All those units will come into the market about the same time and it is going to create a glut, especially during a market downturn, the glut will be a double whammy,’ he said.”

The Thanh Nien News in Vietnam. “Amid concerns of a possible credit crisis, the State Bank of Vietnam has said its plan to tighten lending to the real estate sector will actually benefit everyone in the long run by eliminating bubble risks, local media reported. The central bank was quoted as saying that its newly proposed credit rules are meant to require banks to be more cautious with real estate loans. That means only speculators and financially weak developers, both often responsible for creating housing bubbles, should feel worried about the changes, it said.”

“The central bank said the draft revisions are its ‘policy of caution’ about recent rises in real estate loans. Outstanding loans to the sector grew nearly 26 percent year on year to VND393 trillion (US$17.42 billion) at the end of last year, according to its latest figures. Vietnam’s banking sector learned ‘a costly lesson’ about boosting lending to real estate in 2006-10 when a property bubble had caused heavy losses to local banks, the bank said.”

The Sunday Times in Australia. “Developers have pulled the plug on Perth apartment projects worth hundreds of millions of dollars after they failed to get enough pre-sales to start construction. At least four big developments representing 500 apartments and a completion value of more than $300 million have collapsed in recent months, The Sunday Times can reveal. It comes as developers have become so desperate to secure sales that incentives on offer include $1000 deposits, ‘living deals’ where buyers get their Wi-Fi, strata fees, water, electricity and council bills paid for two years and ‘guaranteed rent’ bonuses for investors.”

“Tenth & Beaufort was marketed on behalf of Westbridge Property Group and was meant to start construction last year, but Limnios managing director Irene Limnios described the market as a ’shocker.’ ‘When they design off-the-plan, they design for the market that is there currently and sometimes it takes years to bring it to the market, and once that’s happened the markets shifted – and that’s what’s happened,’ Ms Limnios said.”

Get West London in the UK. “A community fighting to save the homes they live in say they are angry after developers revealed they are struggling to find buyers for the houses that will replace them. Earl’s Court developers Capital and Counties Properties Ltd (Capco) has said it is struggling to shift the flats in Phase 2 of its Lillie Square development, blaming ‘regulatory intervention’ and a supply glut housing.”

“The first release of Phase 2 of Lillie Square which comprises 70 units, was launched in September 2015. Capco says 40% of this first release has been reserved or exchanged, but that demand had slowed due to ‘challenging conditions towards the end of 2015 as a result of increasing supply, particularly in emerging locations, and regulatory intervention.’”

“Matt Bain, a first time homeowner on the Gibbs Green estates who teaches music at a nearby school, said: ‘It is an insult to be’ told that there is a ‘supply glut’ of the type of housing that I or nobody I know could ever possibly afford. I have been fighting alongside my neighbours now for five years to save my home. These are decent, genuinely affordable places to live, with a strong sense of community. If the next Mayor of London allows demolition to take place, this strong and genuinely socially mixed community will be destroyed as private renters, leaseholders and council tenants are forced out, leaving only the ghost of a Fulham that used to be.’”