A report from Morningstar. “Real Estate sales in Canada are booming and as a result, prices are being pushed higher. For those who can’t afford to buy investment properties though, at these prices, does it even make sense to invest in Canadian real estate? With me to discuss this is John Pasalis, President of Realosophy. Saldanha: Some people say that prices in Canada will never fall. And even if they do, they’ll quickly recover. Does this make sense at all?”
“Pasalis: I mean, I think, it can, and it cannot make sense. I mean, it really depends on what’s happening. In the context of some of the bigger cities like Toronto, is that we did have a rapid acceleration in 2017, prices ended up falling and have quickly recovered. You know, we hit this soft landing. But the question is, if there is a decline tomorrow, what drives it and is it going to be a soft landing again? And of course, that we don’t know. I mean, two years ago, it was really a suburban detached home speculative bubble that we saw. And if we see something similar, but in downtown Toronto condos, we might be a little bit harder hit.”
“Saldanha: Speaking of preconstruction condos, earlier, you could get these at a discount, but now the future value is being baked in and preconstruction condos are much more expensive. At these prices, does it even make sense for buyers to consider them?”
“Pasalis: The premium that preconstruction condo investors are paying today is significantly higher than it has been in the past and also anywhere from 30% to 40%. And certainly, it kind of does not really make much sense because you’re basically paying a significant premium over resale. And again, the rationale with a lot of these investors is that, you know, they’re just going to park their money, prices will keep going up, they don’t have to worry about stress test, they don’t have to worry about tenants, they don’t have to worry about all of that stuff. They just put down the $100,000 deposit and they’ll double their money in five years. And that’s really what’s driving preconstruction sales. And of course, the risk is, what if resale prices don’t catch up to the prices that investors are paying? And then, the one risk, of course, is that all these investors actually are going to close on their units when resale prices end up being a lot lower than what they actually pay for their units.”
The Globe and Mail in Canada. “The listing agent says that Vancouver Specials like this home are sought-after because ‘you can do anything you want with them.’ Listing agent Ian Watt received five offers, all conditional. The house sold five days after listing, but because it was an estate sale and had to clear probate, the deal didn’t close until much later. The buyers are a young family.”
“‘Local money is on fire right now,’ Mr. Watt says. ‘Definitely the under $1.2-million market is really busy. People want to buy because they’ve noticed that we’ve hit the bottom. Buyers know they’ve already dropped 10 per cent and they won’t go down anymore.’”
From Vice Magazine on the UK. “An estate agent walks up to the window of a luxury apartment, looking down over east London‘s Hoxton Street Market. The flat is available for £2.2 million. The owner describes how he came to set the place up. ‘When I first got here, I drove away,’ he says. ‘It was a shit-hole, but it was an affordable shithole.’ A former City trader shows us round a large warehouse that used to be a studio for artists. Some of their work has been kept on the walls to add character to what is now a collection of properties. ‘This is now just an investment,’ he says.”
From ENCA in South Africa. “Gauteng’s housing market is in the doldrums. Home owners looking to sell their properties in the country’s economic heartland are being forced to slash their prices. ‘It’s a cross-section of the market. Whether they paid R1-million or R10-million three or four years ago, we are selling at between 20% and 30% less,’ says Denes Zaslansky, Firtz Realty.”
The New Zealand Herald. “Fifteen suburbs have tumbled out of Auckland’s ‘magic million-dollar club’ after a year of sliding house prices in the country’s biggest city. Homes in inner city Ellerslie now typically sold for $60,000 less than a year ago after the suburb’s median sales price fell from $1.015m to $955,000, according to the data. Browns Bay homes in the North Shore were now also going for $60,000 less after its sales price fell to $995,000.”
“James Wilson, from Valocity, said the falls were because of more first-home buyers buying and fewer established homeowners – also known as movers – looking to sell and buy better properties. ‘People wanting to sell and upgrade to larger homes are now often finding mainly first-home buyers in the market, meaning they may have to soften their sale price a wee bit to meet that demand,’ he said. ‘By no means are all homes crashing in value. This data is just showing what kinds of stock is selling.’”
From Smart Property in Australia. “The number of residential properties advertised for sale this spring has been lower than last year across every capital city despite stronger selling conditions, according to CoreLogic. The lower numbers in Sydney and Melbourne are surprising. CoreLogic head of research Tim Lawless attributed this to overall lower consumer confidence in the economy and future household finances.”
“‘It was only five months ago that housing values were still broadly falling. Preparing a property for sale involves a number of processes that take some time, including making the decision to sell, finding an agent, preparing the home for sale and commencing a marketing campaign,’ Mr Lawless said.”
The Sydney Morning Herald in Australia. “The Reserve Bank is under renewed pressure over its interest rate settings after the biggest surge in Australian dwelling values in 16 years, while retailers struggle to entice shoppers through their doors amid more signs the jobs market is slipping. The bank has defended its three rate cuts since June, arguing it wants to drive down the unemployment rate to at least 4.5 per cent in a bid to put upward pressure on wages growth.”
“But ANZ’s closely watched measure of job advertisements, released on Monday, showed a 1.7 per cent drop in November to be 12.6 per cent down over the past year. Ads are now down to where they were at the end of 2016 and point to a modest lift in unemployment. Separate figures from the Australian Bureau of Statistics also point to general softness in the economy.”
“Dwelling approvals across the country dropped by 8.1 per cent in October, with house approvals alone down by 7 per cent. Private sector house approvals in Sydney recorded their worst monthly performance since late 2013 while in Melbourne they dropped to a five year low. The bureau also reported manufacturing sales dropped by 0.3 per cent in the September quarter while wholesale trade levels fell by 0.5 per cent. The retail sector reported its worst quarterly performance since 2006.”
“There is clear evidence of interest rates aiding the property market, with CoreLogic’s house values index showing a 1.7 per cent lift in dwelling values through November. It was the largest national increase since 2003. MP Capital chief economist Shane Oliver said the strong lift in the Sydney and Melbourne property markets would pose a problem for the Reserve Bank as it considered future rate cuts and unconventional monetary policies.”
“‘It may have to return to tighter regulatory controls again if housing credit growth starts to get out of hand again,’ Oliver said.”
From Bloomberg on Singapore. “Singapore’s developers have expressed alarm over the high supply of private apartments amid slowing demand, with the glut threatening to suppress property prices. President of the Real Estate Developers’ Association of Singapore, Chia Ngiang Hong, said home builders are concerned about the fat pipeline and subdued demand.”
From Bloomberg on India. “Brookfield Asset Management Inc., the Canadian money manager, is holding more cash and sees distressed debt as ‘highly attractive’ as it girds for the next recession, said Chief Executive Officer Bruce Flatt. The firm is looking to make more investments in places like India, which is facing financial stress much like the U.S. in 2008-2009.”
“‘India, for example, has a financial crisis situation going on which is similar to what happened in the United States in 2009, probably not quite as bad, but the banks are not in great shape and non-bank financials are in trouble,’ he said. ‘And what that means is that entrepreneurs don’t have access to capital and therefore they’re selling assets.’”
The Bay Area Newsgroup in California. “The empty new home at 1500 Cowper St. in Old Palo Alto fills all the right boxes — and then some. But listed at $27.8 million, how long will it take to sell? Bay Area luxury home sales are turning sluggish. Purchases in the top five percent of the market — above roughly $2.8 million in Santa Clara County and $3.6 million in San Mateo County — have slowed this year in the core Silicon Valley counties, according to an analysis by Realtor.com.”
“‘It’s a natural re-balancing of the market,’ said Realtor.com senior economist George Ratiu. ‘Luxury home buyers in the Bay Area seem to be taking a wait-and-see approach.’”
“The broad Bay Area housing market has leveled off after nearly eight years of rising prices across the nine-county region. The median sale price for a home in the nine-county region was $810,000 in September, down 4.7 percent from the previous year, according to CoreLogic and DQNews.”