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Stock Is Abundant But Purchasers Are In Short Supply

A report from the Wall Street Journal. “For five years, European nations have been trying to jump-start their ailing economies with what was supposed to be a radical, short-term remedy—negative interest rates. Instead, central banks haven’t been able to wean their economies off them. The policy threatens pensions, creates the risk of real-estate bubbles and doesn’t fully quell the specter of deflation.”

“In Switzerland, some individuals are putting cash into real estate, prompting fears of overbuilding. ‘Holding cash,’ said Swiss Bankers Association chief economist Martin Hess, ‘is simply more expensive than building an empty house.'”

The Sierra Leone Times. “The oversupply of real estate in Gulf countries which has seen a collapse in property prices, commensutate with similar falls in rents, has hit across the region, none worse though in Qatar. Like all Gulf countries, Qatar has pushed the envelope, building far more villas, apartments, commercial office towers, hotels and malls than there is demand for.”

“Ratings agency Fitch says rentals in Qatar have fallen 20% over the past 3 years, again similar to Dubai and Abu Dhabi, and echoed around the rest of the region.”

The Business Report on South Africa. “MC du Toit Chief Executive of Property Sales for BidX1 South Africa said, ‘Now acquiring property for sale on auction via an on-line platform is rapidly becoming a convenient and secure way of transacting.'”

“Due to variations in browser and connection speeds, bidders are advised to make a bid with at least 10, 15 or more seconds remaining on the clock. He said, ‘In the current buyers’ market, where stock is abundant but purchasers are in short supply, there is downward pressure on property prices, creating a situation which empowers buyers to negotiate strongly on price.'”

From Newshub on New Zealand. “The Government may have to purchase KiwiBuild homes in Canterbury because they failed to sell after being listed three months ago. It’s a government promise to either purchase them outright from the developer or top up any shortfall should the developer sell them at a discounted price.”

“None of the first seven Canterbury KiwiBuild houses first marketed on February 20 have sold – houses that ranged in price from $459,000 to $480,000. ‘There is little-to-zero demand for houses in this price bracket in Christchurch, despite Mr Twyford’s assertion to the contrary. It shows just how little thought was put into his KiwiBuild policy, which has been a spectacular failure,’ said The National Party’s housing spokesperson Judith Collins.”

The Daily Telegraph in Australia. “A report provided exclusively to The Daily Telegraph revealed inner suburbs in Brisbane and Perth, along with emerging Sydney hubs, had the worst balance of supply to demand in the country, suggesting declines in prices were imminent.”

“‘An oversupply of housing is the main issue in most of these suburbs,’ said Group analyst Jeremy Sheppard. ‘Developers have built too many (dwellings) and in some areas there’s too many of the same type of dwellings such as two-bedroom units … cookie cutter type homes rarely appreciate in value quickly.'”

“Property prices were also being heavily discounted in most of the nominated areas, with Haymarket and Bentley vendors typically slashing about 10 per cent off their original prices before selling. This suggested buyer demand was weak and there was little chance of buyers absorbing the excess housing supply.”

The Globe and Mail in Canada. “Readers are responding to The Globe’s weekend read: Bubble trouble: In Vancouver’s housing market, pain has set in. With falling sales and prices, patient buyers are sitting on the sidelines, waiting for sellers to face reality.”

“‘As a 32-year-old, I am definitely feeling the schadenfreude here. Housing prices are unrealistically high across much of the country, and I would like few things better than to see that market crash so that I can have a shot at buying a decent house myself.'”

“‘We can thank the BC Liberals and the Federal Government for the housing bubble. They both knew it was fuelled by organized crime and cared little and did nothing to protect the hard working families in Greater Vancouver. Hopefully this inquiry will get some of the regulators and gate keepers under oath to see why everyone but them knew what was happening to inflate prices.'”

“‘I have absolutely no sympathy for anyone who allowed themselves to get so caught up in the bubble that they thought even $7 million is a reasonable price on anything. And better that someone who could come up with that kind of financing get left holding the bag than your average Vancouverite, the ones who have been totally left out of the market for the last decade or so.'”

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This Post Has 27 Comments

  1. ‘revealed inner suburbs in Brisbane and Perth, along with emerging Sydney hubs, had the worst balance of supply to demand’

    It was probably over a year ago I noted conditions were worse in Sydney than the mining town disasters. Now look at the role reversal. The hottest shack market on the planet a couple of years ago.

  2. ‘‘We can thank the BC Liberals and the Federal Government for the housing bubble. They both knew it was fuelled by organized crime and cared little and did nothing to protect the hard working families in Greater Vancouver. Hopefully this inquiry will get some of the regulators and gate keepers under oath to see why everyone but them knew what was happening to inflate prices’

    ‘I have absolutely no sympathy for anyone who allowed themselves to get so caught up in the bubble that they thought even $7 million is a reasonable price on anything’

    As usual, the average Joes know and knew a lot more than the self-interested pundits and experts.

  3. ‘The policy threatens pensions, creates the risk of real-estate bubbles and doesn’t fully quell the specter of deflation In Switzerland, some individuals are putting cash into real estate, prompting fears of overbuilding. ‘Holding cash,’ said Swiss Bankers Association chief economist Martin Hess, ‘is simply more expensive than building an empty house’

    QE/funny money is deflationary, which central banks hate. This is why I don’t worry about what they do. Go ahead, burn it all down. We’ll end up with more shacks than we’ll need for 100 years.

    1. ‘We do know this much: Only after Trump was elected did these officials ring major alarm bells about the Russians. It’s as if they are utterly unaware that the election interference they suspected and detected happened while they were in charge.’

      ‘Or maybe they just hope to convince us to look the other way.’

      ‘Instead of looking the other way, we might be well advised to open the books and examine how these officials were running their shops well before 2016. What does either scenario imply about how these operators behaved behind closed doors? How did they use their power and the powerful tools at their disposal? How well did they guard the nation’s interests and our deepest secrets?’

      ‘Whether they were corrupt or inept, whether they knew or whether they didn’t know, the questions seem important to answer.’

  6. Why?

    No other business gets this kind of backing…
    ##
    “The Government may have to purchase KiwiBuild homes in Canterbury because they failed to sell after being listed three months ago.”

  7. Am I missing something, or did McRents just RISE year-over-year to the highest on record?:

    https://www.zerohedge.com/news/2019-05-17/rents-climb-fresh-record-highs-despite-slowest-price-increase-11-months

    Don’t get me wrong, here. I’m cheering on a McBust as much as the next bear, but I have to deal in facts. And thus far, the facts that I have pointed out over the past two days are as follows:

    1. McMansion prices have barely budged in either Las Vegas, or Encino, CA; two areas with which I am intimately familiar.

    2. McRents have RISEN to the highest amount on record.

    Would somebody please help a Sin City Saint understand why the above two things are happening, when we’re supposed to be three years into a McBust?

    Anybody?

    Bueller?

    1. ‘Don’t get me wrong, here. I’m cheering on a…’

      Straight out troll, and I’ve seen this exact line a million times. Stick your Bueller up your ass troll.

      1. I’m not sure how you even correlate mortgage payments and rents.

        It would seem to make sense, though, that rents would increase if home sales slowed, if people were concerned enough about any current risks of investing in property now, as ultimately they still need a place to live. It’s just demand shifting between them.

    2. Simple supply and demand. As more and more potential FBs are pushed out of the over priced RE market the demand to rent will go up. If you look at rent cost vs purchase cost in a majority of areas it’s a no brainer. Renting may be high but the cost to jump in as an FB right now is much higher.

      1. Yes if a $500,000 house drops 5 percent it costs you $25000 thus renting at $2000 a month is a better deal. Of course that ignores the taxes, insurance and maintenance on the house which are only partially offset by tax policy. It is leverage that is the friend or foe of speculating homeowners. If you only put 5 percent down a five percent increase doubles your money. Of course the converse is true. However, this type of speculation was reduced with 20 percent down payments. Of course policies have encouraged such speculation due to asymmetrical risk. People only lose their 5 percent when their bet goes wrong but keep the gain when it goes up.

      2. This is why we are seeing the rise of the “none of the above” from the Bloomberg RV article highlighting the rise of impromptu RV parks in Mountain View. The plebs know that buying is foolhardy, and renting at insane amounts is too. There was an article about San Francisco residents living on boats too in order to save on rent (like Blue Sky does). I think the individuals who neither buy nor rent are the ones that are scrappy and have a chance to make it out of this rigged economy.

    4. I was looking at Rental in Raleigh last week. The places I could “afford “ had either renovated in the past 3 or 4 years, or were currently renovating apartments.

      The places that had both renovated and non-renovated Apartments had higher prices (price differences) on the renovated ones.
      This fact may not explain all the rent increases but it is driving average rents up.
      Plus, of course, all the new places are skewed towards the top end of the rental pool.

    5. Bubbles are irrational so logic had limited application in predicting their duration. How long can large numbers of people behave irrationally? A lot longer than a rational person could ever understand.

      1. This is particularly true when you have governments actively promoting bubbles in the developed world in order to promote demand for the undeveloped world’s products

  8. Upstate ny ,where we prices pay inflation or 40 years
    Gov unions rule and people flee

  10. This is so amazing about the amount of corruption. If something doesn’t make sense (or cents), there is something fishy going on. Did they just drag everyone down, or were they subtly bribed.

    And what happens to the business loans made in China. I am sure that they do not take write-downs (to embarrass themselves) – so the wrong things are on the books – just like our banks

    —————–
    Ms. Dumaine, an expert in financial crime, represents Chinese banks hunting fraudsters in Vancouver. Many took out sizable business loans in China, then fled to B.C.’s Lower Mainland, where they hid the money in real estate, shielding their identities through corporations, numbered companies and trusts. Transparency International, a corruption watchdog group, estimates that 50 per cent of owners at the high end of Vancouver’s housing market have hidden their identities this way.

    Like it or not, their identities will be made public next month, when the province unveils a residential property registry. This could be another reason for the flood of new inventory, up 46 per cent over last year, says Ms. Duhaime: Some owners may be trying to get their money out of the market before the disclosures take effect.

    The city has also become a favoured destination for global cartels and gangs that have been washing billions of dollars through B.C.’s housing market and casinos. This week, in announcing a public inquiry into the explosive growth of money laundering in the province, B.C. Finance Minister Carole James said the criminal activity had increased home prices in Vancouver by as much as 20 per cent.

    It’s a strange new world for Vancouver, where the median cost of a home tripled to $1.5-million in the decade before 2015. The sharp rise was fuelled by cheap mortgages and a flood of new speculators hunting for investment gains, particularly after Blackrock chief executive Laurence Fink, one of the world’s best-known investors, named Vancouver condos one of the greatest places in the world to park money.

    1. Chinese firms generally keep three sets of books:

      One fake version for investors; another fake version for the Government; and a real one for internal use.

      China is still paying off its write-downs from their banking sector in the 1990s, but after 2008 went on another credit binge — the ghost cities are real and quite creepy. It was easy to handle this debt overhang when global headwinds were in their favor thanks to lopsided trade agreements by monopolists in the West and CPC. It will be harder in an environment of rising tariffs from their largest consumer market, emerging market debt saturation, offshoring manufacturing thanks to wage inflation, outrageous real estate costs sapping domestic consumption, and a government that believes a return to the 1960s command economy is a great idea.

      It won’t end well.

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