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An Oversupply Of Houses Is One Of The Factors Behind Prices Being Slashed

A report from Bloomberg on Iceland. “The spacious entrance to Hildigunnur Haraldsdottir’s building in downtown Reykjavik is paved with marble from Prague and decorated with stained glass artwork by a famous local artist. The flat is one of 38 that she designed for her company. Only 20 of them have been sold since they hit the market more than a year ago. ‘We have lowered our prices and can’t lower them further, since the price is now lower than the cost of building,’ Haraldsdottir said in an interview.”

“Asgeir Jonsson, an economist at the University of Iceland, says people like Haraldsdottir should be worried. ‘The contractors have been catering to the luxury market, which now seems to be more or less saturated,’ he said. ‘I would not be surprised if the price’ of high-end apartments were to fall further, he said.”

The Westmoreland Gazette in the UK. “A former hotel in Grange-over-Sands is to be turned into 32 new homes – despite a ‘glut’ of houses up for sale in the town, a meeting heard. Resident Valerie Kennedy spoke on behalf of a group of objectors and told the committee: ‘Grange-over-Sands has a glut of houses on the market. There were over 180 properties being advertised on the internet in this area. A significant number have been on the market for more than a year and some have been on the market for up to three years.'”

From Albawaba on Oman. “Speaking exclusively to Times of Oman, Hassan Al Ruqeishi, Head of the Real Estate Development Committee, said: ‘There has been a significant drop in rental prices in Muscat and outside Muscat because of the high supply and low demand. The drop is as high as 60 per cent in places such as Al Maabela and Al Amerat and 40 per cent in Mawelah,’ Ruqeishi added.”

“Khalil Al Zadjali, Head of Oman at Cavendish Maxwell, said that developers need to understand the market demand before coming up with new projects to avoid losses. ‘Developers need to understand what’s going on in the neighbouring property before they start a new project. They need to see if the buildings are empty, and if they are, they have to question themselves over why the building is empty. What we have seen from our evaluation is that previously, the occupancy rate was around 80-90 per cent, but now it is half empty. This will continue if the awareness is not understood by developers.'”

The Sunday Times on Sri Lanka. “Some time back it was stated by leading business leaders and property gurus that real estate is a good investment with better returns. Having said that, times have changed, and are changing fast. There is uncertainty in the property market in Sri Lanka since the beginning of this year, noted Ravi Abeysuriya, Group Director of Candor Group of Companies.”

“‘The property market looks really bad in Sri Lanka since the beginning of this year. Property developers are finding it difficult to pay back loans and most of the construction projects are on hold. Enough and more property developers have gone bankrupt,’ said Mr. Abeysuriya.”

“Mr. Abeysuriya said the real estate market in Sri Lanka that used to have 100 per cent return is gradually decreasing. ‘In today’s context you cannot make money; neither the apartment developer nor the buyer. People who buy apartments to sell cannot sell them at huge gains due to cost excursion. Rental income is also coming down, drastically,’ he added.”

From Bloomberg on India. “Mumbai: Five months. That’s how long it takes Country Garden Holdings Co. to start selling apartments after acquiring land. A spate of fatal accidents forced the Chinese builder to slow things down a notch last year, but the pace of construction may pick up again when robots start plastering the walls.”

“The pressure to finish comes from the markets: Of the $14.6 billion (Dh53.63 billion) the builder has to pay creditors between now and 2021, as much as 86 per cent is return of principal. It has to give back that money (plus interest) and borrow afresh. Keeping up this live-wire act is how Country Garden acquired the scale to tackle 2,200 projects in 2018, a 13-fold jump in five years.”

“Compare this with the somnolent life of India’s developers. A six-year loan while they build at leisure? No problem. Don’t want to repay principal for the first four years? Even better. Maybe a six-month moratorium on interest as well? Shadow lenders can’t stop lining up at their doors. After all, the financiers earn a fee for every concession they make, and that juices up their returns.”

“Until there’s no juice left to go around. The funding squeeze faced by Indian nonbank finance companies after the collapse of IL & FS Group in September has seen embattled firms such as Dewan Housing Finance Corp. sell down some of their builder loans, offering a glimpse of the generous terms they’ve been offering.”

“The time for masking such equity-type investments as loans has passed. Real estate in India is facing a glut, with $110 billion worth of unsold homes across the top eight markets, including Mumbai. Predicting the bursting of China’s credit bubble is a global cottage industry. But the risks of disorderly deleveraging in India should no longer be ignored.”

The Global Times on China. “Chinese counties are at the forefront of the nation’s drive to urbanize its vast rural areas. But as China’s economic growth slows to its lowest level in more than 25 years, local economies are also feeling the pinch.”

“Wang, who only gave his surname, especially lamented the spending cut on firecrackers, which are regarded as a ritual for the business community in the province, which is heavily reliant on tradition. ‘For the first time in 2018, workers at Dad’s firm are taking two-day weekends. Dad also cut the payroll by 40 percent. Family spending on Lunar New Year firecrackers fell from 4,000 yuan before to just over 1,000 yuan this year,’ Wang, whose family owns a small business in construction in Longkou, East China’s Shandong Province, told the Global Times.”

“Ma Xiaoteng, a native of Julu, a county in North China’s Hebei Province, said much the same thing. ‘Housing prices soared to about 6,000 yuan per square meter while the local monthly salary averaged about 2,000 yuan,’ Ma said. ‘We all felt in 2018 is that it take more work to earn money.'”

From Ten Daily in Australia. “Almost 100 suburbs around Australia have dropped off the million-dollar list in the last year, with price drops seeing losses in property value of over 30 percent in some areas. ‘The decline in million dollar suburbs over the year occurred across houses and units. 602 suburbs nationally have a median house value of at least $1 million currently which is down from 669 suburbs a year ago,’ Core Logic’s Cameron Kusher said.”

“An oversupply of houses is one of the factors behind the prices being slashed, according to Raine&Horne real estate agent, Raza Khan. ‘Buyers are sort of spoiled for choice and Box Hill is the sort of area where it established itself as a residential area in the height of the boom that we had,’ Khan told 10 daily. ‘The main catalyst is banks have tightened lending; buyers don’t have that luxury or don’t have that funding to go and buy.'”

“Another problem is, quite simply, there are too many houses at this point compared to other areas which are better supplied.”

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This Post Has 32 Comments

  1. From the last link:

    Of the remaining top 10 biggest price falls, three are in Victoria and one each are in Queensland and WA.

    Top 10 Biggest Drops In Price

    Box Hill (NSW): 41.30 percent
    Agnes Banks (NSW): 39.40 percent
    Red Hill (VIC): 32.50 percent
    Barragup (WA): 31.10 percent
    Liberty Grove (NSW): 25.70 percent
    Gumdale (QLD): 24.50 percent
    Mulgoa (NSW): 23.20 percent
    North Ryde (NSW): 21.70 percent
    Blackburn South (VIC): 20.10 percent
    Clayton (VIC): 19.20 percent

    (The price drop in North Ryde is for units while all other figures are for houses).

    Still no bubble Australia?

  2. ‘Housing prices soared to about 6,000 yuan per square meter while the local monthly salary averaged about 2,000 yuan…We all felt in 2018 is that it take more work to earn money’

    Click!

  3. ‘Developers need to understand what’s going on in the neighbouring property before they start a new project. They need to see if the buildings are empty, and if they are, they have to question themselves over why the building is empty. What we have seen from our evaluation is that previously, the occupancy rate was around 80-90 per cent, but now it is half empty. This will continue if the awareness is not understood by developers’

    Stop complaining, in China they build one empty city after another. Then they move on to India and keep going. Shortage!

  4. “Shadow lenders can’t stop lining up at their doors. After all, the financiers earn a fee for every concession they make, and that juices up their returns.”

    Shadow lenders …

    “The big challenge of shadow banking in India”
    https://www.livemint.com/Industry/XbampFSLLmxi1kmE51OlhJ/ILFS-default-NBFCs-NPAs-shadow-banking-in-India.html

    (snip)

    “A 2017 report by the RBI said that 99.7% of shadow banking in India involves making long-term loans against short-term funding …”

    Long-term loans against short-term funding = An excellent way to lose money when short-term interest rates rise.

    Stay tuned. And maybe pop up a batch of popcorn.

  5. ‘The contractors have been catering to the luxury market, which now seems to be more or less saturated,’

    Yellen bux took their search for toe tag luxury homes all the way to Iceland!?

  6. ‘We have lowered our prices and can’t lower them further, since the price is now lower than the cost of building,’ Haraldsdottir said in an interview.”

    Here’s the thing, Ms. Haraldsdottir: Mr. Market doesn’t give a rat’s ass if you’re selling at a loss. Wanna sell the remaining 18 flats? Then lower the price until you find a buyer.

  7. People who buy apartments to sell cannot sell them at huge gains due to cost excursion. Rental income is also coming down, drastically,’ he added.”

    What a tragedy. Breaks your heart, doesn’t it?

    1. So after central banks pumped $16 trillion in fake-money “stimulus” into the “global economy” (read: gifted it to their investment banker and mega-speculator pals), here we are ten years later on the cusp of a new global financial crisis. Only this time, because of the tripling of household, corporate, and public debt since 2009, thanks to QE and ultra-easy credit, the crisis will be far worse than if we would’ve allowed the speculative excesses to be flushed from the system in 2008.

      So remind me again why we let these central bank fraudsters control our currency issuance and monetary policies.

      1. “Only this time, because of the tripling of household, corporate, and public debt since 2009 …”

        Ah, yes, such an orgasmic observation …

        “… thanks to QE and ultra-easy credit …”

        I feel in need of a cigarette …

        “… the crisis will be far worse than if we would’ve allowed the speculative excesses to be flushed from the system in 2008.”

        Read: “The OPPORTUNITIES will be far BETTER than if we would’ve allowed the speculative excesses to be flushed from the system in 2008.”

        There. More better.

        😁

      1. ‘Sales of homes in Turkey dropped an annual 25 percent in January, reflecting a continuing slump in the housing market. Purchases of homes secured via mortgage lending slid 77 percent to 6,537 units, representing nine percent of total transactions. Turkey’s housing market is in a severe decline after a surge in inflation and interest rates since a currency crisis last year decimated the mortgage market, which had helped spur sales under the government of President Recep Tayyip Erdoğan. Consumer price inflation in the country stands at 20.4 percent.’

        ‘Mortgage sales in Istanbul dropped 78 percent to 1,215 units, and fell 80 percent to 621 units in Ankara.’

        ‘The slump in mortgage transactions comes despite efforts by the government to use state-run banks to help constructors sell excess housing stock.’

        https://ahvalnews.com/turkey-construction/turkish-home-sales-slide-25-percent-january

  10. $166 billion in student loan debt is now officially delinquent. More than seven million deadbeats, er, victims of predatory lending, are also delinquent on their subprime auto loans. So my theory is, all the F**ked Borrowers who signed on Mr. Banker’s dotted line for shacks they couldn’t afford are stiffing their student and auto loan creditors so they can stay current on their mortgage payments, right, Mr. Banker?

    https://www.zerohedge.com/news/2019-02-17/166-billion-student-debt-now-officially-delinquent

    1. (snip)

      “Mortgage balances, shown on consumer credit reports on December 31 stood at $9.1 trillion, essentially unchanged from the third quarter of 2018.”

      “Unchanged”. What a bummer.

      “Balances on home equity lines of credit (HELOC), continued their declining trend from 2009 with a drop of $10 billion in the fourth quarter and are now at $412 billion, the lowest level seen in 14 years.”

      “Declining trend”. A super bummer.

      “Non-housing balances increased by $58 billion in the fourth quarter, with auto loans increasing by $9 billion …”

      (grins)

      “… credit card balances going up by $26 billion …”

      (more grins)

      “… and student loan balances by $15 billion.”

      (the widest grin of them all)

      😁

    2. With student loan debt piling up to great heights and auto loans heading into the crapper, not to mention a recent plentitude of whatever subprime mortgage lending is going to be relabeled this time around, it sure does seem like calls for the next round of credit bailouts are just around the corner. Will the likes of Alexandra Occasio-Cortez and Elizabeth Warren lead the charge to finance the great 21st Century debt jubilee?

  12. Berkshire’s Charlie Munger has a very blunt response to those ‘driving rich people away’ as Amazon scraps HQ2
    By Mark DeCambre
    Published: Feb 17, 2019 7:39 p.m. ET

    ‘I think it’s really stupid for a state to drive the rich people out,’ Munger tells CNBC

    That is the famously plain-spoken Charlie Munger, speaking to CNBC’s Becky Quick in an interview on the network that aired on Friday.

    “They’re old. They keep your hospitals busy. They don’t burden your schools, the police department, your prisons. They give a lot. Who wouldn’t want rich people?”

    The nonagenarian’s comments come as Amazon.com Inc. (AMZN, -0.91%) announced on Thursday that it was canceling plans to build its New York City headquarters in Long Island City, and wouldn’t be seeking a replacement venue.

    The company, run by Jeff Bezos, ultimately opted to declare a number of winning cities rather than one. Although the Long Island City plan has been abandoned, projects in Crystal City neighborhood of Arlington, Va., an operations facility in Nashville, Tenn., are expected to proceed.

    The hoped-for HQ2 was expected to bring an estimated 25,000 jobs to the New York area in exchange for $3 billion in state and local tax breaks, which many politicians, notably freshmen Congresswoman Alexandria Ocasio-Cortez, have opposed adamantly.

    “There are a number of places that have shot themselves in the foot; Connecticut, California, New York City,” Munger told CNBC. The 95-year-old Munger, who is vice chairman of Warren Buffett’s Berkshire Hathaway, is known for his methodical, straight-talking, and unequivocating responses.
    …

    1. “NSW has also started downgrading its projections for stamp duty revenues. At its recent Budget update it wiped a billion dollars out and projected that stamp duty revenues will not return to their lofty 2017-18 levels in the foreseeable future.“

      Gubbernmemt gonna get burned too. No wonder why they want to keep the market inflated. Massive revenue stream for there pocket books and at the expense of the population they are sworn to “protect”.

      1. Like the Korea report I just posted, the government popped the bubble. Same with the UK, Canada, Hong Kong, New Zealand, etc.

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