A report from Bloomberg on New York. “Manhattan’s priciest apartment contracts last week had one thing in common: The sellers lost money. Owners who bought at the peak of Manhattan’s luxury condo frenzy just a few years ago are seeing their asset values erode amid a glut of unsold units. Overseas investors, once a reliable source of purchases, have all but disappeared. ‘These particular sellers didn’t want to wait the market out,’ said Donna Olshan, president of the brokerage that bears her name. ‘They have no interest in keeping their money parked in New York if they’re not using the asset or if the asset isn’t giving a return.’”
The Sports Rush. “LeBron James has listed his Brentwood mansion in westside Los Angeles for sale at a listed price of $20 million, having bought it for $23 million. He had gotten the previous estate remodeled. Anthony Davis recently sold a mansion he’d bought a few years earlier for a loss of over $1 million. It’s just the nature of the luxury housing segment.”
The Bay Area Newsgroup in California. “A loan default has rattled a San Jose project proposed by bankrupt developer Sanjeev Acharya and his company Silicon Sage Builders, creating more financial challenges for Acharya, who is the focus of securities fraud allegations. A lender has filed a notice that a delinquent loan could trigger a foreclosure of Silicon Sage Builder properties at 2149 Alum Rock Ave. in east San Jose, according to documents filed with Santa Clara County officials.”
“Acharya and Silicon Sage Builders have fashioned a Bay Area real estate empire that appears to have crumbled beneath the pressure of multiple problems. The property facing foreclosure proceedings is part of a site where Silicon Sage Builders had proposed the development of 796 homes and 30,000 square feet of retail and restaurant space in a big mixed-use development. An estimated 250 people who paid about $119 million to invest in projects launched by Acharya and Silicon Sage Builders face the prospect that they were defrauded through a financial web woven by the real estate developer, according to the SEC’s complaint.”
“Acharya said he should have been more transparent with investors, the SEC’s fraud complaint stated. ‘I should have done it,’ Acharya said at an investment meeting. ‘Back then, maybe my thinking was that everybody’s returns will come. So … I really didn’t bother to get into details, but what I was not thinking, what my mistake was that I wasn’t thinking a downside scenario.’”
“Silicon Sage and Acharya painted an overly rosy picture of the outlook, prospects, and financial strength of the company’s array of projects, according to the SEC’s allegations. ‘Since at least August 24, 2016, Silicon Sage Builders and all but one of its real estate development projects have not been profitable,’ the SEC complaint alleges.”
The Jersey Newsgroup in New Jersey. “Two weeks ago, Leslie Boamah came to a Guttenberg apartment building he once owned to find the locks changed and his belongings ― tools used for making building repairs — in the trash. If he were a tenant, such action would be illegal under the state’s eviction moratorium. But small landlords like Boamah, whose buildings were transferred to the possession of a rent receiver pending foreclosure, have few options for relief — even as rental income has dried up.”
“‘If we don’t get help right now, what is coming is very serious,’ Boamah, 43, said. ‘Because there’s many of my friends who are in the same boat that I am in. Their property is being taken away from them. They didn’t do nothing wrong.’”
“He has managed to keep two other small rental buildings in Guttenberg, he said, because tenants continue to pay rent. But the loss of revenue has hit hard. ‘This is my only source of income,’ he said. ‘It got to a point that I didn’t have any money even to buy gas.’”
“‘What happens if you’re the smaller guy, and 10 people move out? And another five don’t pay the rent? And now 15 out of your 40 units don’t have any revenue?’ said Ron Simoncini, the executive director of the Hudson County Property Rights Coalition. ‘You’re totally underwater. And there’s no program for you.’”
From Bisnow. “Two Dallas-area shopping centers exchanged hands last week in separate deals even though the state of brick-and-mortar retail remains in flux. Retail Plazas Inc. pointed to a steep discount and the 1031 exchange process, which requires buyers to quickly engage in a new transaction to enjoy tax benefits. ‘I’m assuming the sales price had something to do with it,’ Retail Plazas Vice President of Acquisitions and Development Trey Hodge said. ‘We sold it at a price less than what it would cost to build it, and the investor had a 1031 exchange that they needed to close.’”
The Calgary Herald in Canada. “The latest data from the Canada Mortgage and Housing Corp. found the vacancy rate for the secondary market in Calgary almost doubled in 2020 over 2019. ‘With the secondary rental market … people can pull their condo off the market, and even sell it,’ says CMHC market analyst Michael Mak. ‘With the primary rental market, those units are stuck essentially being rentals because it’s very rare for corporations to turn them into non-rental housing.’”
“Contributing to the high vacancy rate has been the addition of new purpose-built apartment units to the market during 2020. Condominiums have seen the greatest decline in resale prices since 2016 — down about 15 per cent, according to Calgary Real Estate Board data. Investors face significant competition from the new rental side. Mak notes supply grew by 3.2 per cent last year, driven by the addition of new units. Many projects coming to the market today were planned two or three years ago when developers foresaw an economic recovery in 2020.”
“‘If you look back to 2018, the general consensus was that there would be a recovery in the economy post-oil bust, and there would be more demand for rental in the city,’ he says.”
The Leicester Mercury in the UK. “City centre rooftop apartment living just got a whole lot cheaper. A flat which commands views across the Leicester city skyline has just dropped in price by a massive 24 per cent. In the heart of the city’s Cultural Quarter, the property is cheek by jowl with the dramatic Curve theatre and gazes out over the urban landscape and beyond. This two-bedroom top floor flat in Alexander House – a Grade II listed building – can be yours for an offer in the region of £224,000.”
From Yahoo Finance Australia. “Despite the nation-wide property boom, a handful of localised housing markets across the country are experiencing significant price declines, new data has revealed. Suburbs that have been hamstrung by lockdowns, have weaker rental markets, have an oversupply of units or are more reliant on tourism are most likely to have a weakened property market, according to realestate.com au chief economist Nerida Conisbee.”
“Property prices in Cairns North in Queensland and Western Sydney suburb Auburn have slid by 12 per cent in the last 12 months. Inner Sydney suburb Redfern has also seen double-digit falls, with dwelling values in this area falling 10 per cent. Meanwhile, property prices in Queensland’s Burpengary East, and ritzy Melbourne suburb Toorak have declined by 9 per cent. Six of the 10 suburbs suffering the biggest price drops have been concentrated in the unit market, the economist noted.”
“‘This is being driven by low levels of investor activity over the past year, which is starting to turn around, as well as poor performance of rental markets,’ Conisbee said.”
From NHK on China. “New housing construction aimed at the high end of the market has been gathering pace near Changchun in the northeastern province of Jilin. Some 650 condominiums and houses are being built. The price tags on the houses range between $920,000 and $1.8 million. Even the lower figure is over 180 times the average annual disposable income of urban residents of the province, which is around $5,000.”
“‘I bought it with my own money, without a loan, after looking at the house just once,’ says Sun Decai, the owner of a local construction-related business. He snapped up a three-story house, complete with two basement floors, its own elevator, a bar counter, wine storage and even a maid’s room. ‘It wasn’t a tough purchase,’ he says.”
“However, it’s not a nationwide picture of unfettered demand — an oversupply of residential units is raising concerns in some places. Construction of large condominiums is booming in central Harbin in northeastern Heilongjiang Province. But local real-estate firms told NHK it’s happening alongside falling prices and excess inventories. The situation prompted the local government to step in last November in an attempt to encourage condo sales. It called for price reductions in consideration of market conditions. Tax revenues from real-estate sales are important to local governments, so such a notice is unusual.”
“The same oversupply of residential units is thought to be occurring in other regional cities too. A survey by private think tank Shanghai E-House Real Estate Research Institute shows the number of unsold new housing units in the city has reached its highest level since fall 2016.”