thehousingbubble@gmail.com
Blog

Investing For Capital Gains Is More Like Speculating

A report from the Star Weekly on Australia. “House prices in Sunbury and Macedon Ranges are feeling the effects of a wide-ranging downturn in the Victorian real estate market. Real estate agent Greg Czapnik said he had noted property prices in Sunbury had dropped more than $40,000 in the past five months. ‘Median house prices in October last year were at the $540,000 mark,’ he said. ‘Today, they’re sitting on $496,000, so they’ve dropped off by 8.1 per cent roughly.'”

“‘There are less buyers and the buyers are being more cautious, said Chess Property Consultants owner Liz Dormontt. ‘Melbourne buyers are struggling to sell their houses – they are not getting their prices.'”

From Stuff New Zealand. “Property investors who are worried about the prospect of a capital gains tax are being told they may have only themselves to blame. In Auckland, it’s common for property investors to get yields of 3 per cent on money invested in housing. That’s before expenses are deducted.”

“For 116,000 investors around the country, the cost of owning property is more than the income earnt. Many are left relying on capital gains to make the investment pay – and so the prospect of paying 33 per cent in tax on profits is hard for some to swallow.”

“One investor, Graeme Fowler, agreed.  He said he would guess at least 70 per cent of investors were chasing capital gains and relied on prices going up to get ahead. ‘Investing for capital gains is more like speculating. The investor buys a rental property with the hope that it will increase in value. If that does happen, they will often refinance the property and buy another one with the exact same intention.'”

“He said most of the investors following this style ended up selling earlier than they should and regretting it later. ‘Already I’m hearing of investors wanting to sell now, especially in the likes of Auckland and Queenstown.'”

From Mingtiandi on Hong Kong. “A luxury house on Hong Kong’s Victoria Peak has reportedly sold at a 26.5 percent discount from the seller’s original asking price, after going unpurchased for the past seven months, according to local media accounts.”

“House No 5 at 28 Barker Road, a billionaire’s retreat overlooking the city’s Hong Kong harbour, is said to have sold for between HK$610 million ($77.7 million) to HK$620 million according to brokers working in the neighbourhood.”

From Globes on Israel. “Israel’s luxury housing market is showing more signs of distress. A survey published by Levy Yitzhak, a leading Israeli real estate appraiser, indicates that owners of luxury properties realized in the past year that they would have to compromise on price in order to close deals.”

“For example, in comparing deals in February 2019 to deals in February 2018 for five-room apartments in Tel Aviv, the average price for a five-room apartment fell from NIS 4.68 million in February 2018 to NIS 4.1 million in February 2019, a 12% drop.”

“‘The price of apartments with five or more rooms are falling steeply. Prices of special apartments, duplexes, and penthouses are in freefall, with falls of 15% and even more,’ Yitzhak said.”

“The price decreases in Herzliya were even greater. Prices of three-room apartments in the city dropped 12% to NIS 1.65 million, while prices of four-room apartments slid 10% to NIS 2.15 million. The survey states, ‘The absence of foreign investors and residents greatly affects Herzliya. Both the number of deals and apartment prices declined very steeply. Move-up buyers are making deals, but are finding it difficult to bridge the difference between the apartments being sold and the new apartments being offered for sale.'”

From CTV News in Canada. “In Vancouver, where sky-high real estate prices have made ownership impossible for many, it’s suddenly not too difficult to live like a king. Author and housing advocate Kishone Roy found approximately 800 Vancouver-area mansions for rent on Craigslist for prices well below what they would normally command.”

“Many of the mansions have ocean views and offer luxury amenities such as swimming pools, in-home cinemas, built-in saunas and wine cellars. In several cases, the homes are fully furnished.”

“The city of Vancouver is facing a crisis in housing affordability, with one bedroom units averaging about $1,730 per month. But these rentals offer a single room in a multi-bedroom house for anywhere between $700 and $1,500, with more than 5,000 empty bedrooms available across the city.”

“‘Maybe the cheapest real estate right now is mansion rentals,’ Roy said.”

“It’s a situation that might not seem to make sense, but realtor Kevin Wang says the answer is a simple one. ‘The speculator tax is really the big one,’ Wang said. ‘It hit the market.'”

“While many owners seem to be asking a monthly rent almost exactly the monthly tax cost, some seem to be open to taking much less. ‘I thought I was imagining things until I called a mansion broker today and offered to rent one for $1 for the year,’ Roy wrote. ‘She quickly took my number, and even asked if there was a specific mansion I had in mind.'”

Related Posts
This Post Has 36 Comments

  1. ‘buyers are making deals, but are finding it difficult to bridge the difference between the apartments being sold and the new apartments being offered for sale’

    Like Salt Lake City. When the new stuff is cheaper, look out below. Cuz they can keep building.

  2. ‘I thought I was imagining things until I called a mansion broker today and offered to rent one for $1 for the year,’ Roy wrote. ‘She quickly took my number, and even asked if there was a specific mansion I had in mind.’

    Anyone up for a year or two in Vancouver?

    1. Maybe the idea that the same shack will sell for at least 50% less in the near future is a little demoralizing?

    2. Why would they want something that requires constant maintenance… Renting will continue to be the better option for most. I would think buying an airbox with an HOA that covers maintenance would be more attractive to these types but guessing with all the student debt and high cost of living / little savings, it’s not easy to get into unless we backtrack to the previous lending practices… oh wait they are!

      https://www.housingwire.com/articles/48403-is-fannie-freddies-role-in-the-housing-market-beginning-to-shrink

    1. As a true believer that real estate only goes up, I confirm no bubble, no crash, and no speculation are happening or going to happen EVER! To the moon with crypto too!

  7. It’s just another Meatless Monday (oh,oh)
    I wish it were Sunday (oh, oh)
    ‘Cause that’s my fun day (oh, oh)
    My burger on a bun day (oh)
    It’s just another Meatless Monday

    ‘Meatless Mondays’ more important to NYC’s de Blasio than city’s looming financial crisis

    By Colin Reed | Fox News
    Published 5 hours ago

    De Blasio has no problem lecturing kids at New York’s public schools about “cutting back on meat” to save the environment. But he’s shown less interest giving up the fleet of SUVs that bring him to and from the gym. Or reducing the pork in his stewardship of the taxpayers’ finances. According to the New York Post, city spending has increased 32 percent in the de Blasio years, with an estimated $3 billion more expected in Hizzoner’s latest budget.

    https://www.foxnews.com/opinion/meatless-mondays-more-important-to-nycs-de-blasio-than-citys-looming-financial-crisis

  8. “The investor buys a rental property with the hope that it will increase in value. If that does happen, they will often refinance the property and buy another one with the exact same intention.’”

    IIRC, cascading collapses of leveraged asset purchases were a key factor underlying the Great Depression.

    1. The trade talks have been hanging like a cloud over Wall Street for many months.

      Sep 5, 2018, 3:43 pm
      Disaster Is Inevitable When America’s Stock Market Bubble Bursts
      Jesse Colombo, Contributor
      Markets
      Traders work on the floor of the New York Stock Exchange (NYSE) in New York, U.S., on Friday, Aug. 31, 2018. Technology shares advanced as the S&P 500 Index headed to a fifth monthly gain while investors awaited developments on trade talks.
      Photographer: Michael Nagle/Bloomberg

      Despite the volatility and brief correction earlier this year, the U.S. stock market is back to making record highs in the past couple weeks. To many observers, this market now seems downright bulletproof as it keeps going higher and higher as it has for nearly a decade in direct defiance of the naysayers’ warnings. Unfortunately, this unusual market strength is not evidence of a strong, organic economy, but of an extremely unhealthy, artificial bubble economy that will end in a crisis that will be even worse than we experienced in 2008. In this report, I will show a wide variety of charts that prove how unsustainable the current bull market is.
      …

      1. Here’s the part of the bubble popping story I don’t get: If the Fed knows that taking away the punchbowl will spark a financial crisis, why would they ever do this? Why not just keep rates low, and let the good times roll on forever?

        If they have decided to play it that way, what development beyond their control could force a course correction?

        How The Stock Market Bubble Will Pop

        To keep it simple, the current U.S. stock market bubble will pop due to the ending of the conditions that created it in the first place: cheap credit/loose monetary conditions. The Federal Reserve inflated the stock market bubble via its record low Fed Funds Rate and quantitative easing programs, and the central bank is now raising interest rates and reversing its QE programs by shrinking its balance sheet. What the Fed giveth, the Fed taketh away.

          1. Seems like China debt exhaustion creates even more incentives for ongoing hair-of-the-dog hangover cures (QE, ultralow rates, fiscal stimulus, etc.), rather than impetus to stop.

            If things play out as in the 70s, then a decade of rising inflation will eventually take hold, followed by draconian measures to contain out-of-control inflation.

          2. as in the 70s

            Consider that we are not in a different cycle than the 70s and 80s, but in the very same one. We already had the rising debt and big inflation. What comes later in the cycle is not the same thing.

  9. Judging by the futures markets, the Plunge Protection Team is doing a good job holding off further stock market losses so far.

  10. Investing for capital gains is more like speculating. The investor buys a rental property with the hope that it will increase in value.

    It isn’t “like” speculating, Graeme. It IS speculating, and it has made housing unaffordable to the prudent and responsible. So the sooner and more vigorously policymakers and communities discourage speculation, the better.

  12. Real estate agent Greg Czapnik said he had noted property prices in Sunbury had dropped more than $40,000 in the past five months.

    $40K would cover many months of rent, especially with rents falling in tandem with plunging shack prices.

  13. “It’s a situation that might not seem to make sense, but realtor Kevin Wang says the answer is a simple one. ‘The speculator tax is really the big one,’ Wang said. ‘It hit the market.’”

    This needs to happen in every “superheated” housing market. Vacant speculator-owned houses should be hit with taxes punitive enough to persuade them to repent the error of their ways.

    1. The speculator tax

      Merely a catalyst. There ain’t no incentive like massive gambling losses, and the PTSD will last a lifetime. Notice we’re not talking about Japanese speculators this time around.

    3. You need to download Dissenter by Gab for firefox. It gives every article a comment section independent of the hosting website. Grabs purported goal is to protect free speech; this is a huge step in the right direction and a giant middle finger to the legacy media.

  18. Kinda off topic but pertains to speculating:

    Recently had a conversation with a friend who is about to sell his home here in the bay area. Friend: “I am going to list my house after the IPOs are public. There will be 1000’s of new millionaires looking to buy houses like mine so I’ll have no problem selling. I witnessed the housing market boom after Facebook and a few others went public so I know by waiting my home will sell for more”.

    I didn’t want to rain on his parade nor do I have any insight into the possible future. My thought here is that these soon to be new millionaires technically have had access to the funds (through speculative bank loans) prior to this soon IPO release. I don’t feel to confident these IPOs will revive the previous RE insanity but mabye they will?

    1. My thought here is that these soon to be new millionaires technically have had access to the funds (through speculative bank loans) prior to this soon IPO release.

      IIRC, equity compensation is already considered in some mortgage originations. Or was that the last bubble?

Comments are closed.