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We Should Never Have Let The Property Bubble Get This Big

A report from the Globe and Mail in Canada. “February sales for various housing types in the Vancouver area have tumbled to a 10-year low, with the market for detached houses getting hit the hardest. The price for detached properties sold in the region averaged $1,442,863 last month, down 16.9 per cent from February, 2018, the Real Estate Board of Greater Vancouver said. Total residential sales last month declined to 1,484 transactions, down 32.8 per cent when compared with a year earlier.”

“In Vancouver’s sliding housing market, some industry observers add a quirky factor, arguing that the once-vaunted power of the number eight has lost its lustre. Eight is deemed lucky in Chinese culture, notably for recent arrivals from China, and the number has been a frequent sight in Vancouver real estate for list prices. But Chinese buyers are backing away, and the number eight is becoming less common.”

“At 4555 Magnolia St., on the city’s pricey west side, a couple listed their home for $3,680,000 in November and sold for $3,050,000 in February. Over the past year, the benchmark price for detached houses has dropped 9.7 per cent regionally to $1,443,100, and fallen 13.5 per cent on Vancouver’s west side to $3,029,200.”

From the Irish Independent. “‘The growth we experienced over the past three years was simply not sustainable,’ says Richard Cleary of Property Partners Cleary. ‘We have noticed a considerable slowdown in Tullamore house price growth, but more notable is a surge in price-readjusting on properties currently for sale. We feel that in the past three to six months there has been a lot of price readjusting with an average of 5pc to 7.5pc downwards. Prices were simply too high and agents need to take responsibility for this ‘”

From GDN Online on Oman. “Muscat property rental prices may further be affected due to the falling number of expatriates in the Sultanate of Oman, according to Oman Observer. ‘There has already been a glut in the market with construction of a large number of apartment blocks and villas in various parts of the city. The supply has surpassed the demand,’ said Nasser Al Wahaibi, managing director of a contracting company.”

From the Asia Times on China. “The top two real estate giants in China saw sharp declines in home sales over the first two months of 2019, as the housing market offers no signs of recovery, The Paper reported. Evergrande Group’s home sales reached 64.7 billion yuan in January and February, a year-on-year decline of 42.5%. The total area sold was 5.901 million square meters, a decrease of 46.8%.”

“Though housing policies in about 20 cities have been relaxed, the market has not shown any recovering signs. It is hoped that the government will carry out policies that are relatively favourable to the real estate sector this year, as the economy has not bottomed out yet, the report said.”

From The Korea Herald. “So far this year, the nation’s property market has remained in the doldrums, especially for apartments in Seoul. Market conditions now stand in sharp contrast to those a year ago, when apartment prices in the city were skyrocketing.”

“One apartment complex in Yangcheon saw its unit prices plunge by an average of 50 million won ($44,000) in a week. A researcher at KB Kookmin Bank focused on the recent price drop in the Gangnam, Seocho and Songpa wards. He said the number of apartments advertised ‘for urgent sale’ in the three districts had grown at an unprecedented pace between the first quarter of 2016 and the third quarter of 2018.”

“Meanwhile, data from overseas showed that major cities such as Sydney, Hong Kong, Beijing, New York and London also saw housing prices decline after having posted rapid increases for about five years beginning in 2013.”

From Newshub on New Zealand. “Barfoot & Thompson announced its February sale numbers were the lowest for a month since December 2008 at the high point of the global financial crisis. There were 474 sales for the company in February, which Barfoot & Thompson manager director Peter Thompson said showed the market was failing to gain momentum.”

“The change in median price to $801,000, being down $26,500 or 3.2 percent from January. The median is also down $19,000 or 2.3 percent from February last year. ‘The market is progressively hardening into a buyers’ market with a number of vendors preferring to take their property off the market when they cannot achieve their asking price,’ he said.”

“But former ANZ chief economist Cameron Bagrie told The AM Show that it isn’t time to call it a buyers’ market just yet. ‘Buyers’ market I think is a little bit of a stretch. If you are a buyer out there and you are still trying to buy your first home, and the first home is trading about nine times income, it is kinda hard to characterise it as a buyers’ market,’ he said.”

From News.com.au on Australia. ” An Australian CEO has warned we could soon find ourselves in ‘a world of hurt’ as the troubles plaguing the global economy worsen, according to tech entrepreneur Matt Barrie. ‘The global economy is troubled. It’s low growth everywhere. It’s questionable if we ever exited the GFC,’ Mr Barrie told the Australian Financial Review.”

“‘In Australia every indicator is blinking red. It’s a house of cards. We’re highly dependent on China (we’re on par with the Congo for how reliant we are) and they are in a trade war. We have the housing market falling off a cliff, and this is happening from Vancouver to Auckland too,’ he said.”

“‘The royal commission will be a catalyst for the collapse of the Australian housing market, with the other catalyst being China coming off the boil and regulations to stop the flow of capital out of China. We should never have let the property bubble get this big. People can’t afford the homes and wages haven’t kept up,’ Barrie added.”

“Unfortunately, Mr Barrie’s grim view is not an isolated one. Former Coalition adviser John Adams told news.com.au we were starting to see more signs that Australia was heading towards an “economic Armageddon” — a scenario Mr Adams has warned about since 2016.”

“‘Across the world, evidence is mounting that the world is drenched in debt and that more and more people, companies and governments are struggling to service these debts given slowing economic growth,’ he said. ‘The economy will no doubt continue to worsen in 2019 and 2020. Many Australians will see their so-called wealth evaporate and many will suffer significant financial losses. The day of reckoning resulting from the biggest debt bubble in Australian history is fast approaching.'”

This Post Has 55 Comments
  1. ‘Meanwhile, data from overseas showed that major cities such as Sydney, Hong Kong, Beijing, New York and London also saw housing prices decline after having posted rapid increases for about five years beginning in 2013’

    The article mentions that Korea put the clamp down on lending. Just like Sydney, Hong Kong, Beijing,and London did. You could argue that lending is tighter in New York too, for commercial real estate.

    What did I say to the supply and demanders all these years? Forget about building your way out of the bubble. Just cut the loan gravy and it’ll all fall down. Of course, the sooner that happens the better. But all the years we went on about building delayed that, didn’t it? Now we pay the price.

  2. “‘In Australia every indicator is blinking red. It’s a house of cards.

    Heckova job, central bankers.

  3. ‘down 16.9 per cent from February, 2018, the Real Estate Board of Greater Vancouver said. Total residential sales last month declined to 1,484 transactions, down 32.8 per cent when compared with a year earlier’

    You rarely see Canadian press talk about the peak in Vancouver. Because detached shack prices have been sinking like turd in a well since 2016.

    ‘Eight is deemed lucky in Chinese culture, notably for recent arrivals from China, and the number has been a frequent sight in Vancouver real estate for list prices. But Chinese buyers are backing away, and the number eight is becoming less common’

    I said this Chinese thing would become a curse. Hello curse. And just how stupid is numerology with finances? On top of being the dumbest investors in history, they are superstitious.

    1. ‘Evergrande Group’s home sales reached 64.7 billion yuan in January and February, a year-on-year decline of 42.5%. The total area sold was 5.901 million square meters, a decrease of 46.8%…It is hoped that the government will carry out policies that are relatively favourable to the real estate sector this year, as the economy has not bottomed out yet’

      40% declines are crashes. So when your pleas to the commies don’t work, do STAMP YOUR LITTLE FEET!

    2. Top 3 skills to become a successful UHS:

      1. Know your victims weakness, shack listings should be priced with as many 8s as possible ie $788,888 but not to many because they might catch on.

      2. Master the art of the “lie”. It’s not a lie if you believe it’s true, believe those lies! “RE only goes up”, “we have multiple offers (all below asking), you’ll want to offer more to get into this hidden (everyone knows about it) gem”

      3. Make sure to slander competing UHS, it’s a cut throat business, you’ll need an edge. “That other used shack seller just posted bail for methamphetamine sales at there last open house, you may want to consider me I have my GED and a piece of paper I printed that validates my vast knowledge in real estate”.

      3.

      1. On episode of Flip or Flop did exactly that. Tarek was uneasy about selling the house, so he created a list price with lots of 8s in it. They eventually got a slightly lower all-cash offer, and made a profit.

  4. ‘Djugun, WA home listed for mortgagee sale at $240,000 price reduction’

    ‘A Djugun, WA house situated in the Roebuck Estate has been listed at a $240,000 price reduction on the last purchase price. Lana Ziverts of First National Broome holds the mortgagee listing.’

    ‘Set on 742 square metres at 121 Jigal Drive, Djugun, it is a four bedroom two bathroom property. Built in 2007, it was purchased by Roebuck Estate Development for $145,500 in 2006.’

    ‘The developers successfully garnered a permit for a $328,500 house which most recently traded for $785,000 in 2012. It is currently listed at $589,000, a $240,000 reduction on it’s 2012 sale price.’

    https://www.propertyobserver.com.au/finding/location/wa/96036-djugun-wa-home-listed-for-mortgagee-sale-at-240-000-price-reduction.html

    Djugun. Never heard of it.

    1. Per Wikipedia, it’s in the far northwest of the country, commonly referred to as the Kimberley region and often characterized by stupefying heat. Photos show some remote and undeveloped beach nearby, although in Australia, that often means box jellyfish and occasional saltwater crocodiles.

      I wrote a number of years ago, long before Mr. Adams deduced this, that Australia was headed for the worst recession in its history.

  5. ‘Buyers’ market I think is a little bit of a stretch. If you are a buyer out there and you are still trying to buy your first home, and the first home is trading about nine times income, it is kinda hard to characterise it as a buyers’ market’

    https://www.gulf-times.com/story/619435/From-sizzle-to-fizzle-HK-s-red-hot-property-market

    ‘after a decade of near continual growth Hong Kong is about to join a global downturn that is buffeting markets including London, Vancouver, Sydney and Shanghai.’

    ‘And the good news for first-time buyers like Leung, who works in sales and lives with his parents, most analysts believe the trend will continue into 2019 as the China-US trade dispute rumbles on and the Chinese economy stutters. ‘Now the price range is OK for me,’ Leung, 30, tells AFP, a sentiment not often heard in a city where many young people save for years under their parents’ roofs in cramped flats well into their thirties. I am not waiting for the market to drop even more, but waiting for a wider selection to show up. Once I find an ideal place, I’ll spring into action.’

    ‘Leung, who plans to marry later this year, might do well to wait some more on the property hunt. RICS senior economist Sean Ellison said the current drop looks more long term as the trade war bites. “This time feels different because there’s multiple catalysts,” he told AFP.’

    ‘UBS ranked Hong Kong at the top of its league table for being the most overpriced and most at risk of a bubble. The September report said a “skilled worker” needed 22 years of income to afford a 60 square metre (645 square feet) flat, up from 12 years a decade ago, with salaries staying largely the same since 2008.’

    And Bloomberg has a writer saying Hong Kong is ’bout to go to the moon! Read this again:

    ’22 years of income to afford a 60 square metre (645 square feet) flat, up from 12 years a decade ago, with salaries staying largely the same since 2008′

    1. ‘where many young people save for years under their parents’ roofs in cramped flats well into their thirties. I am not waiting for the market to drop even more, but waiting for a wider selection to show up. Once I find an ideal place, I’ll spring into action’

      Not thinking with his big head.

      1. Not thinking with his big head.

        If the Asian women were smart they’d say “put the money in a joint account and forget the house”. But IIRC when they marry all her money becomes his…so maybe that’s why the house is so important.

    2. ‘Buyers’ market I think is a little bit of a stretch. If you are a buyer out there and you are still trying to buy your first home, and the first home is trading about nine times income, it is kinda hard to characterise it as a buyers’ market’

      Truer words were never spoken. The same can be said for any market in the US, regardless if it’s started to experience price declines. It’s not a buyer’s market, it’s a sucker’s market. Prices are still extraordinarily high and anybody buying now and for the next several years will live to regret it. The sad part is, you need those sales to get back to affordability.

      1. you need those sales to get back to affordability.

        Death, divorce and financial ruin will always bring some to market.

  6. ‘The day of reckoning resulting from the biggest debt bubble in Australian history is fast approaching’

    This is the second article in Australian MSM I’ve read in the past 24 hours that mentions the B word.

    1. just getting started

      “I heard a joke that 2019 may be the worst in the past 10 years, but it may be the best in the next 10 years.”

        1. Ironically, “it” may not be what you are hoping. That’s my take on the article anyway. Safe to still assume nothing you say is private, despite the constitution.

        2. How would we know if it is actually shut down?

          I’m certain that if it’s shut down that means a better one is already in place.

  7. Toronto Real Estate Board joins calls for Ottawa to modify mortgage stress test amid falling home sales

    ‘The Toronto Real Estate Board (TREB) said home sales fell by 2.4 per cent in the Greater Toronto Area in February compared with the same month last year. The drop is especially notable because sales were tumbling last February after the introduction of a new mortgage stress test rule on Jan. 1, 2018.’

    ‘The weakness last month came on the heels of almost flat sales in January, and raises questions about whether Toronto’s market will have the sales rebound that some had anticipated for 2019. TREB predicted last month that the volume of GTA home sales will grow by 7.3 per cent in 2019 after falling 16.1 per cent in 2018 and 18.3 per cent in 2017.’

    https://www.theglobeandmail.com/business/article-toronto-real-estate-board-joins-calls-for-ottawa-to-modify-mortgage/

    The Toronto UHS have been saying it’s to the moon Alice! So why are they begging for guberment gravy?

    ‘Many groups working in the mortgage sector have urged the federal government to give first-time homebuyers the option to repay their mortgages over 30 years instead of 25 years to lower their monthly payments and make it easier to get into the market.’

  8. UH OH…………“Everything’s been flipped on its head,” said Milford Mayor Ben Blake, noting that until last summer, Bridgeport-area communities were receiving about $20 a ton for recyclables. But now, the cost is $75 a ton for about 5,000 tons of glass, paper and plastic. It’s actually costing his city more to recycle waste than collect trash for the mass-burn plant in Bridgeport.

    https://www.newstimes.com/politics/article/CT-s-recycling-market-collapse-13661573.php

  9. Oh look, Diana is going full shill this morning.

    We still have a shortage, and prices are going to keep climbing.

  10. Hey Dumminj,
    Love the extension, but for some reason, it’s not marking posts as read. I’m using Firefox, newest version for Android. Any advice HBB readers?

    1. Econ_teacher,
      Please see my response to your expanded explanation in the March 1st thread. I appreciate your honesty and insight.

      1. Saw it and will reply in more detail this evening. And if anyone here wants assistance navigating public school for their child, please dont hesitate to ask, keeping in mind that my bias is not in favor of the public school cartel.

      2. If you are very, very lucky, you may have access to a school with very caring and dedicated Special Ed Teachers who have experience and training specific to working with students on the high-functioning side of the autism scale.

        I currently have a wonderful student who has enormous support from his parents and is the bane of the existence of his Special Ed department because his parents are loud, lawyered-up advocates who are fighting to get the best for him. Their insistence on a high-quality education for their child creates a lot of work for the people who work the most closely with him. They are not entitled primadonnas though; they push/support their child to achieve to his highest potential. I am very proud of his hard work and determination to improve, especially having seen his struggle to control his behavior when he is bored and/or frustrated.

        The other students who lack the legal resources that family commands generally quietly fail in the back of class. They are not disruptive. They are usually bored. They tend to do most of their work in their IEP support class which, to be frank, means they cheat on it, often with the tacit assistance of their teachers, who have been “helping” students with the same assignments from the same teachers year after year. They are even allowed to test in that separate location. (At my old school site, it was common knowledge that the teachers “helped” students on their tests in ways other than the legal accommodations prescribed by their IEP, i.e., Individual Education Plans, a legal requirement for special ed students for all of you reading this who don’t know the lingo.)

        In general, the students I know with IEPs are no less competent than many of my other students, but because they are held to a much lower standard, their learning is retarded if not outright sabotaged by the system.

        The Special Ed teacher’s incentive is to comply with the law to keep the parents out of their hair. The Gen Ed teacher’s incentive is to give them every allowance so that the student can pass the class and graduate, regardless of the level of scholarship achieved by the student. The administration’s incentive is to ensure that there are no lawsuits. So, in general, special education students get quietly passed along through the utilization of lowered standards, grade inflation, and academic dishonesty (whether or not teachers are involved). There is no incentive to ensure that they really learn anything as long as their grades come up as passing.

        High functioning students on the spectrum and students with ADHD are the touchstones of just how bad the system is. These are kids with massive untapped ability to learn, and in general, they are bored out of their minds. They understandably act out, which often results in further lowering the bar for them so that they create fewer “problems” for the teachers and administration.

        Caring about the development of their communication, thinking, and quantitative skills is so low on the list of school priorities that we should all be ashamed, especially considering the vast number of taxpayer dollars delivered to the special education department.

        If you choose to home school your child, it will be a difficult road. However, I think the outcome will be superior to your traditional public school and vastly more rewarding. If you have the resources to put a kid in a school specially adapted for the needs of children like yours, then by all means, look into it. If not, know that there are many, many resources out there. In a quick search, I found this, and it jibes with my experience. It offers links to a few additional resources.
        This site gives a list of books to help parents homeschooling learners with autism, Aspergers, etc.

        I hope this helps, and I apologize if my analysis seems overly jaundiced, but my criticism of the system is fueled by the vast amount of wasted potential I see in all of my students. We have taken four of what could have been the most productive years of their lives and too many of them have precious little to show for it.

        1. So, in general, special education students get quietly passed along through the utilization of lowered standards, grade inflation, and academic dishonesty (whether or not teachers are involved). There is no incentive to ensure that they really learn anything as long as their grades come up as passing.

          I’m already beginning to see this. I flipped out when I saw his second grade math and performance assessments, which were much too language-based for a child on the spectrum. It was the first time the thought passed through my mind that he would be ushered along without any attention or care to the substance of his education. I will definitely be looking into other alternatives. Thank you for your time.

  11. ‘Let’s look at what’s been driving our economy. Not oil and gas — that’s shrinking. On purpose — Notley and Trudeau and Butts all want to phase it out.’

    ‘Scratch the auto industry, too. So what’s left? The overpriced housing market in Vancouver and Toronto? Sure, it’s great for those who already own their home and paid it off. But that’s sort of the opposite of growth, isn’t it?’

    ‘And according to police, it’s not people in Vancouver saying, “I’d like to pay 2 million dollars for a starter home”. What’s happening is that mainland Chinese are getting their money out of China, using the city’s real estate inventory to stash money away from the Communist Party. That, and massive criminal money-laundering, too. Lots of Russians doing the same in Toronto for the same reason.’

    ‘My point is: what’s left? Public sector growth? Those are the takers, not the makers.’

    https://www.therebel.media/canada-economy-recession-trudeau-liberals-government-news-rebel-media-ezra-levant-show-march-04-2019

    1. The banks are left in Toronto. The issue is that there is severe margin pressure on the products that they offer. When layoffs happen at the HQ and IT functions (all downtown Toronto) – watch the price of condos

      1. They can just start opening up new accounts with fees for existing customers without their knowledge or permission, like Wells Fargo.

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