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A Flood Of New Development Supercharged The Slowdown, With Prices In Freefall

A report from the Star Phoenix in Canada. “Regina’s residential construction industry is experiencing a heavy downturn, with this year’s housing starts on track to be the lowest in 11 years. Jeff Marchigiano, the sales manager for Gilroy Homes, said the company cut half its construction staff in 2018. ‘When I sell a house, now I get 20 or 30 guys coming in and saying thank you, because I’m providing them with work cause these guys are so starving,’ said Marchigiano.”

From Bloomberg on the UK. “The sale prices of top-end homes in the British capital have been falling for nearly four years, weighed down by a cocktail of tax hikes, a crackdown on money laundering and a glut of new properties.”

“Evidence of the downturn’s impact is mounting. The developer behind London’s Centre Point tower stopped using external sales agents because the offers it was receiving for the luxury apartments were too low, Estates Gazette reported. The number of unsold homes under construction in the capital hit a record in March.”

“Sales of homes in London’s priciest districts fell to their lowest level in six years in the first three months of this year as buyers braced for Britain’s withdrawal from the European Union. ‘I’ve always said that what we could not cope with economically in this country is a long, prolonged period of uncertainty,’ said Mark Preston, chief executive of the Grosvenor Group, the property company that owns large swaths of the upscale Belgravia and Mayfair districts on behalf of the billionaire Duke of Westminster. ‘And that’s now what we have got.'”

From Mansion Global on Dubai. “Dubai home prices plummeted 13.2% in April to an average of AED2.45 million (US$667,012), as an abundance of new construction continues to overwhelm the housing market there, according to Property Monitor. It’s the third consecutive month home prices across the city declined by more than 10%.”

“A flood of new development deliveries in 2018 appear to have supercharged the slowdown, with both the average apartment and villa prices in freefall since the middle of last year. The average apartment cost AED1.7 million in April, while the average villa sold for AED4.5 million—both down roughly 20% from 2015.”

From Bloomberg on Thailand. “A glut of condominiums as Thailand’s economy wavers and stricter mortgage-lending rules kick in is creating a buyer’s market in Bangkok. Some 65,000 new apartments were added to the city last year, an 11% increase over 2017 and the most since 2009.”

“Demand, however, is tepid with developers reporting take-up rates of just 55% and average asking prices decreasing 6% year-on-year, a Knight Frank report shows. Chinese investors have historically made up the bulk of foreign property buyers in Thailand but their presence has waned as China’s economy slows and capital controls limit outflows.”

“And it isn’t just Bangkok that’s hurting. A total of 454,814 residential units across the country were left unsold last year, with a value of $41 billion, according to Sopon Pornchokchai, president of the Agency for Real Estate Affairs Co.”

“Still, Knight Frank at least believes the glut and falling prices may be short lived. ‘Ask anyone who’s been in property how many times they’ve heard the bubble will burst?,’ the firm’s Bangkok-based head of residential, Frank Khan, said. ‘I’ve heard this more than 10 times, but in my last 15 years, it’s never burst.'”

The Australian Financial Review. “Sydney developer Mark Bainey has pooled $50 million from wealthy investors to bulk buy newly-completed apartments at up to 30 per cent discounts as oversupply fears and high funding costs start to bite projects amid the weaker market conditions.”

“‘We have been fielding approaches from concerned developers who have been unable to sell due to oversupply concerns in suburbs such as Epping, Parramatta, Mascot, Macquarie Park and Waterloo,’ he said.”

“With the attractive pricing on offer, Mr Bainey said his fund would be able to generate net returns of about 5.5 per cent compared with the typical yield on new apartments of less then 3 per cent. Mr Bainey said a lot of the discounted stock being offered as bulk deals, was because developers were being pressured from their financiers.”

“‘We’re now seeing the discounted offers coming to market – the cost of capital for developers has been ridiculous. The last unsold apartments in a development are often where developers make most of their profits,’ he said.”

“Alongside apartment fires sales, developers are also coming under pressure to sell whole projects by their non-bank lenders.”

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This Post Has 34 Comments

  1. ‘Mr Bainey said his fund would be able to generate net returns of about 5.5 per cent compared with the typical yield on new apartments of less then 3 per cent’

    What a freaking idiot knife catcher.

  3. ‘Ask anyone who’s been in property how many times they’ve heard the bubble will burst?,’ the firm’s Bangkok-based head of residential, Frank Khan, said. ‘I’ve heard this more than 10 times, but in my last 15 years, it’s never burst.’

    All right Frank, so are you saying last decade Bangkok didn’t have brown stuff running down its legs? Cuz I can pretty easily go find some whining and a screaming and brown stuff.

    Plus, here’s a tip Frank: your bubble burst over a year ago.

  4. ‘The average apartment cost AED1.7 million in April, while the average villa sold for AED4.5 million—both down roughly 20% from 2015’ Four years of crater. Why use the average Knight Frank?

    ‘Regina’s residential construction industry is experiencing a heavy downturn, with this year’s housing starts on track to be the lowest in 11 years. Jeff Marchigiano, the sales manager for Gilroy Homes, said the company cut half its construction staff in 2018. ‘When I sell a house, now I get 20 or 30 guys coming in and saying thank you, because I’m providing them with work cause these guys are so starving,’’

    Four years of crater Jeff. I’ve heard the media say there’s a construction worker shortage. Maybe that’s bull sheeet!

  5. When I sell a house, now I get 20 or 30 guys coming in and saying thank you, because I’m providing them with work cause these guys are so starving,’ said Marchigiano.”

    None of those starving construction workers are going to be buying $500K starter homes.

  6. The developer behind London’s Centre Point tower stopped using external sales agents because the offers it was receiving for the luxury apartments were too low, Estates Gazette reported.

    Sorry, developers, but those “too low” offers are the new comps. And the cratering only gets worse from here.

    1. Yes. Price is set at the margins. Gee, it worked great on the way up. So what’s the problem now? I guess “too high” was OK, but “too low” is not OK, or something. “Don’t do the crime if you can’t do the time.”

  8. ‘buy newly-completed apartments at up to 30 per cent discounts…both down roughly 20%’

    Whata you gotta have to say a bubble? The previous buyers are fooked!

    ‘The number of unsold homes under construction in the capital hit a record in March…And it isn’t just Bangkok that’s hurting. A total of 454,814 residential units across the country were left unsold last year, with a value of $41 billion…’

    1. IMO, it wasn’t housing that cratered the economy. The Chinese pull out of the natural resources tanked the economy. The housing bubble just kept it afloat for a year or two.

      1. housing …natural resources

        It’s rarely just one big thing gone wrong causing a catastrophe. Usually there are three big things gone wrong.

      2. The Aussies should have enjoyed their prosperity and not leverage themselves. Now it’s, “bottoms up, mate!”

  11. Observation. It’s kind of surreal to me that the obvious global real estate bubble is in the process of collapse, but it’s called by every name except “bubble”.

    It’s: “a heavy downturn“, “The sale prices of top-end homes in the British capital have been falling for nearly four years“, “Evidence of the downturn’s impact is mounting.“, “The number of unsold homes under construction in the capital hit a record in March.”, “home prices plummeted“, “A glut of condominiums“, “average asking prices decreasing“, “unable to sell due to oversupply concerns”, “Alongside apartment fire sales,”

    I think I’m detecting a pattern here, but only one mention of the “b” word, but this guy’s still in denial, the 1st stage of grief. Just bad luck I guess. Glad to see that the global media are accurately reporting on this.

    Executive summary: Global central banks blew massive asset bubbles, including global real estate with ultra-low rates and easy credit. Basically flooded the world with liquidity. Now the financial tide is going out and nobody seems to know what’s going on, but they’ve seemed to catch on pretty quick that prices are falling.

    “How did you go bankrupt?”
    Two ways. Gradually, then suddenly.” – Ernest Hemingway, The Sun Also Rises

    “Money, again, has often been a cause of the delusion of the multitudes. Sober nations have all at once become desperate gamblers, and risked almost their existence upon the turn of a piece of paper.” – Charles Mackay

    Alan Parsons Project
    The Turn of a Friendly Card

    The Turn of a Friendly Card (Part 2)

    There are unsmiling faces in fetters and chains
    On a wheel in perpetual motion
    Who belong to all races and answer all names
    With no show of an outward emotion

    And they think it will make their lives easier
    But the doorway before them is barred

    And the game never ends when your whole world depends
    On the turn of a friendly card
    No the game never ends when your whole world depends
    On the turn of a friendly card

    1. Global central banks blew massive asset bubbles, including global real estate with ultra-low rates and easy credit. Basically flooded the world with liquidity.

      New Silicon Valley Stock Exchange Is A Warning Sign For The Startup Bubble:

      “The LTSE is a bid to build a stock exchange in the country’s tech capital that appeals to hot startups, particularly those that are money-losing and want the luxury of focusing on long-term innovation even while trading in the glare of the public markets.”

      “Trillions of dollars worth of central bank-created liquidity has been sloshing around the globe looking for a home and a portion of it found its way into unicorn companies that are worth billions of dollars each.”

      “It will be interesting to see if the Long-Term Stock Exchange will be able to go live before the unicorn bubble bursts.”

    2. Maybe this bubble and pop is being underreported because — on the surface — it appears to be limited to the rich and the bankers.

      I know Ben has posted a ton of articles, but at least to me, all this cratering seems to be happening to investors, developers, realtors, faceless landlords, foreigners, latecomer amateur flippers, and the odd celebrity. This makes sense because, after the 2009 bubble, who bought up the housing stock? It was these business people, not the general public.

      At the kitchen table level, people are having trouble selling, but they aren’t fooked yet, not en masse like they were in 2009. No children thrown onto the sidewalks, no house payments doubling, no housing advocates barricading themselves outside a great-granny’s house, no “feisty nurses” and “SMONOZIAK, LYNNs” being turned down for a refi by the evil bank, no blood in the streets, no bailout talk, no immigrants leaving the country because they can’t find work, no accompanying recession, etc. Nothing to get the clicks and eyeballs for the MSM.

      Besides, it’s all so inconsistent. How can you say house prices are cratering when the stories are all about poopioid homeless and underemployed people living in cars, campers, and tents because housing is too expensive? How can you admit there’s a bubble pop when NYC is falling but Missoula and Boise are booming with cranes? I’m not surprised that this isn’t getting much coverage.

      1. but they aren’t fooked yet, not en masse like they were in 2009…it’s all so inconsistent.

        There have been more than a few case studies presented here of people who are already ruined financially because prices stopped going up or started coming down. It is just the beginning.

      2. Analysts who mention the word bubble have long since been banned from financial news. Peter Schiff, Harry Dent etc are only interviewed on fringe YouTube channels now. This is the bubble that never was and never will be. It will come and go without the MSM ever acknowledging it existed.

  12. “The sale prices of top-end homes in the British capital have been falling for nearly four years, weighed down by a cocktail of tax hikes, a crackdown on money laundering and a glut of new properties.”

    4 years!!! Now he tells us!

  14. Good morning boys and girls! Today’s word of the day: “apogee.” That’s the point in a rocket’s flight where the booster and sustainer burn out, and the rocket is at the peak of its arch. Then a little something called gravity kicks in, and the spent rocket plunges back to earth.

    Kinda like the Canadian housing market is fixing to do, now that it’s hit peak apogee.

    https://business.financialpost.com/real-estate/canada-home-prices-go-eight-straight-months-without-a-rise-teranet

    2. a little something called gravity

      Tomorrow, we will discuss the word “acceleration”.

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