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The Double Whammy Of Fewer Foreign Buyers

A report from the Australian Financial Review. “A group of 25 apartments in the Sydney suburb of Hurstville has hit the market following the collapse of its private developer GR Capital as the apartment market slowdown continues to claim casualties. In an all too familiar trend, receivers and managers Ferrier Hodgson were appointed to sell the unsold units at ‘The One’ tower in one line after GR Capital’s private lender Everest Financial triggered the receivership.”

“Colliers International’s Matthew Meynell, James Cowan and Joseph Lin are managing the sale of the 25 residual apartments after recently completing another one-line sale of 61 apartments in Epping in Sydney’s north to boutique investor Altis Property Partners.”

“‘When you look at the profile of developers getting into difficulty, they are typically offshore developers without a proven track record in the local market,’ Mr Meynell said. ‘APRA’s tighter banking regulations, China’s restriction of direct investment into residential real estate and higher stock levels are also factors contributing to the challenges some of these developers face.'”

The West Australian. “House prices in Perth are the same as in April 2006, with a median of $436,000, according to RP Data Core Logic. Its latest report says that since prices peaked, Perth is down 19.2 per cent and regional WA has fallen 32.5 per cent. ‘In Perth values were previously this low in April 2006 and values haven’t been this low across regional WA since July 2005,’ the report said.”

The New Zealand Herald. “More than one-in-three Auckland suburbs have defied the market slowdown and risen in value, according to the latest OneRoof housing market figures. But the city is also home to some of the country’s biggest house price drops, with some suburbs dipping out of the $1 million club.”

“Nine out of 10 of the nation’s biggest fallers in median house values are in Auckland, including the country’s wealthiest neighbourhood, Herne Bay, which slipped 12 per cent to $2.19m. Just under 20 per cent of Auckland suburbs experienced value drops of more than 5 per cent and seven suburbs – Kumeu, Whitford, Albany, Herne Bay, Pukekohe East, Ti Point and Sunnynook – suffered double-digit slumps.”

“Sunnynook’s median value was $1.14 million a year ago, but is now $995,000. However, that’s still up from three years ago when the suburb’s value was $720,000. Kumeu on the city’s north western fringe is New Zealand’s biggest faller, dropping 18 per cent on a year ago (from $1.455m to $1.195m), while Albany is down more than 12 per cent, off $140,000 from its high of $1.145m last year.”

“OneRoof editor Owen Vaughan said the swings in median values reflected the change in the sorts of properties now selling.”

“Some of the suburbs that had taken a hit in the North Shore were some of the fastest rising in previous years, and particularly popular with overseas investors, said James Wilson, head of valuation at OneRoof’s data partners Valocity. ‘They had higher value because of that coastal influence, good housing stock and proximity to good schools, they grew faster and reached higher price points,’ Wilson said. ‘But now there’s anecdotal evidence that in a generally less heated market, they’re also seeing the ‘double whammy’ of fewer foreign buyers.'”

This Post Has 73 Comments
  1. ‘Nine out of 10 of the nation’s biggest fallers in median house values are in Auckland, including the country’s wealthiest neighbourhood, Herne Bay’

    Once again, the most expensive neighborhoods in the most expensive city falls first, fastest and further. Signs of a bubble popping.

    1. A group of 25 apartments in the Sydney suburb of Hurstville

      I totally read that as “Hurts-ville”

  2. ‘Owen Vaughan said the swings in median values reflected the change in the sorts of properties now selling’

    It’s the mixxxxx! Notice these property data people are always making up excuses. You would thing they would just dish out the data. And they never mention mix when prices are up.

  3. Got gubmint bond$?

    Wsj.com
    Credit Markets
    U.S. Government Bonds Extend Gains
    Falling tech stocks, central banker comments add to impetus created by continuing concerns about U.S. tariff policies, signs of slowing global growth
    By Sam Goldfarb
    Updated June 3, 2019 4:45 p.m. ET

    U.S. government bond prices climbed again on Monday, benefiting from a decline in technology stocks and a Federal Reserve official opening the door to a near-term interest rate cut.

    1. Got gold? The Fed “balance sheet” (cough! cough!) will not return to pre-GFC levels. The Fed is essentially buying gov’t. bonds. This is debt monetization. Financial slight-of-hand. Borrowing from Peter to pay Paul. Banana republic stuff. Low rates and a central bank enable unbridled gov’t. spending. Notice the national debt and deficits. Not small numbers. Sure, gov’t. bonds look good when everything else is going down, and I won’t argue that they’re a good investment in recessions, but in the long-term there’s gold, because you can’t print it.

      It’s also no small concern that the world’s central banks enabled this global housing bubble with their funny money. It seemed good and proper on the way up, but now not so much on the way down. There be dragons.

      “Gold is money, all the rest is credit” – JP Morgan testifying in Congress in 1912

      “Fiat money eventually always goes back to its intrinsic value – zero” – Voltaire

      “Betting against gold is the same as betting on governments. He who bets on governments and government money bets against 6,000 years of recorded human history.” – Charles De Gaulle, Leader of the French resistance during WWII and 18th President of France

      “In reality, there is no such thing as an inflation of prices, relative to gold. There is such a thing as a depreciated paper currency.” – Lysander Spooner

      “Nations are not ruined by one act of violence, but gradually and in an almost imperceptible manner by the depreciation of their circulating currency, through its excessive quantity.” – Nicolaus Copernicus

          1. if they implement helicopter money (I believe they will at some point), there will be inflation

        1. there will be inflation

          We’ve already had a ridiculous amount of inflation. In fact, you’ve been able to have as much inflation as you could stand for decades. Just borrow more and shazam! There’s your more money. They won’t drop it on your head, they loan it to you. Then you pay interest and they get richer while you get poorer. Why in the world would the bankers create money to give to you for free? That would ruin everything for them.

        2. Yes but, who gets to say what inflation is? Basically the guy you loaned the $$ to! I don’t trust it.

          What happens in hyper inflation? I think bondholders are wiped out. Stock holders do better right? They still have a claim on a productive asset (company xyz) that is now selling goods and paying wages at the inflated rates but still in business.

        3. President Obama: “Never Again Will the American Taxpayer be Held Hostage by a Bank that is ‘Too Big to Fail'”

          “The Fed chairman said tools used during the last financial crisis — near-zero rates and asset purchases that took the balance sheet to more than $4.5 trillion — are likely to be deployed again.” —MSNBC

      1. You certainly are welcome to have your long-term gold, and enjoy it, too. However,

        In the long run we are all dead. Economists set themselves too easy, too useless a task if in tempestuous seasons they can only tell us that when the storm is long past the ocean is flat again.

        — John Maynard Keynes

    2. A rate cut. I still don’t understand why (with a “roaring” economy) why we need a rate ……..cut. Isn’t this the time to, IDK, raise interest rates? Can anyone explain this to me? Ive been wondering about this since the Yellen Years.

      1. Yeah, I was walking by a TV in the break room today and the news-graphic proclaimed that a 75 basis point cut was a sure thing this year. As though the Fed themselves had announced it. Where did that come from?

        1. Bought-off news media influencing and bullying the Fed. They did that in 2001-2002. CNBC had running chirons like “Fed to cut interest rates? [*HINT HINT*]” If you say it enough times, the Fed will believe you.

      2. “A rate cut. I still don’t understand why (with a ‘roaring’ economy) why we need a rate ……..cut.”

        This “roaring economy” is a financial economy, one driven by asset price increases.

        A rate cut is necessary in order to drive asset prices higher. This, driving asset prices higher, is how wealth is created in our wonderful consumer-driven financial economy.

      3. Sean,
        Assuming your comment isn’t sarcasm, here’s the deal: The Fed stopped raising rates and announced an end to QT back in Jan. after a minor market dislocation in Q4 ‘18. Why? Because our overly indebted economy “can’t handle the truth” of FFR > 2.5%. The Fed raised FFR until “something broke.” They then panicked and backed off. This is their new age play book. Next step: Cutting rates as global economy slows further. This is when stocks realize the charade/Potemkin economy is over and sell off big time. Probably starting this Fall.
        Summary: Rate cuts coming this year -from a lower base – due to growing debt pile. Economy is slowing. The Fed knows it. MSM and DJT tweet storm say “everything is fine.” Someone’s a lyin’.

        1. Agree, red pill. Past recessions were inventory based (companies hired workers, produced product and oops, there not enough demand. Layoffs, then downturn). Now they are asset based (assets inflated, borrowing based on higher asset values then oops, can’t make debt service, BIG downturn). These types of recessions are more accurately described as near depressions because, unlike inventory recessions, they lead to cascading defaults.

          We are now on the cusp of another asset based recession, this time with bigger asset bubbles than 2008. The panic in the recent Fed communications is almost palpable. Powell’s comments today “Perhaps it is time to retire the term ‘unconventional’ when referring to tools that were used in the crisis. We know that tools like these are likely to be needed in some form in future ELB spells, which we hope will be rare”

          1. Thanks for the summations rpe and Mike! I sense that the majority of the public barely understands what’s going on in front of the curtain let alone what’s going on behind the curtain.

        2. It’s not sarcasm, just a distortion from what I thought would happen. Better economy equals stronger dollar with higher rates.

          Savers vs. Spenders, and it seems like the spenders and their “how much a month” always get rewarded.

    3. Bonds
      10-year yield continues collapse on slowing growth fears, hits session low under 2.07%
      Published Mon, Jun 3 2019 4:51 AM EDT
      Updated Mon, Jun 3 2019 3:23 PM EDT
      Thomas Franck

      The yield on the benchmark 10-year Treasury note fell below 2.07% on June’s first day of trading as mounting global growth fears pushed the rate to its lowest level since September 2017.

      At around 3:16 p.m. ET, the yield on the benchmark 10-year Treasury note, which moves inversely to price, had fallen 7 basis points to 2.067%, its lowest level in about 20 months. The yield on the 30-year Treasury bond was also lower at around 2.53%.

      The 2-year Treasury note yield extended an 12-basis-point drop after St. Louis Federal Reserve president James Bullard said Monday that a U.S. interest rate cut “may be warranted soon” given the rising risk to economic growth posed by global trade tensions. It was last seen at 1.83%.

  4. Add in property taxes, maintenance and insurance…housing is a terrible investment.

    And is STILL way overpriced.

    #####

    “The West Australian. “House prices in Perth are the same as in April 2006, with a median of $436,000…‘In Perth values were previously this low in April 2006 and values haven’t been this low across regional WA since July 2005,’ the report said.”

  5. “House prices in Perth are the same as in April 2006, with a median of $436,000, according to RP Data Core Logic. Its latest report says that since prices peaked, Perth is down 19.2 per cent and regional WA has fallen 32.5 per cent.

    And still no end in sight to the cratering. Mercy Me….

    Shacks might look like compelling values again once they hit early-1990s prices.

  6. Speaking of foreign buyers, what happened to the Chinese stock market bulls?

    Asia Markets
    Chinese stocks fall on continuing trade tensions
    Published 5 hours ago
    Updated 12 min ago
    Eustance Huang
    Key Points
    – Shares in Asia traded cautiously in the afternoon.
    – Overnight stateside, the Nasdaq Composite dropped around 1.6% to enter correction territory, closing more than 10% below its record high set in late April at about 7,333.02.
    – Federal Open Market Committee voting member James Bullard said Monday that an interest rate cut “may be warranted soon” due to the potential impact of global trade tensions as well as weak U.S. inflation on economic growth.

  7. Did your FAANG stocks get schlonged?

    The Financial Times
    Technology regulation
    Tech shares slide as US regulators prepare for antitrust probes
    Regulators agree oversight of Facebook, Amazon, Google and Apple as Congress also acts
    Kadhim Shubber and Kiran Stacey in Washington, Mamta Badkar in New York, and Richard Waters in San Francisco 8 hours ago

    US antitrust enforcers have carved up jurisdiction for possible investigations into Google, Facebook, Amazon and Apple, according to two people familiar with the matter, in a development that wiped more than $133bn from the market value of the technology giants on Monday.

    The agreement between the Department of Justice and Federal Trade Commission has paved the way for antitrust investigations into the four companies, though it is unclear what matters the agencies are examining or how aggressively they intend to move.

    Tech stocks were dragged lower on Monday on the news, which was followed after the market closed with an announcement from the House judiciary committee that it would launch its own investigation into competition in digital markets.

    The revelations marked a decisive shift for the technology sector as both the Trump administration and Congress are now signalling a tougher stance on digital competition whereas, for many years, the primary antitrust risk for large US tech groups had emanated from the EU.

    “The growth of monopoly power across our economy is one of the most pressing economic and political challenges we face today,” said David Cicilline, the Democratic lead on antitrust issues on the House judiciary committee. “Market power in digital markets presents a whole new set of dangers.”

    1. “it is unclear what matters the agencies are examining ”

      If the media is unclear, then someone is buying their silence. It’s well-known that conservative commentators are routinely kicked off digital platforms like FB or YouTube. Even Patreon go into the act by not allowing some youtubers to collect donations. It’s not just Alex Jones either. You could say you didn’t like how women are over-promoted in the Star Wars and Avengers and that’s enough. You could say “Well they’re a private company they don’t have to abide by First Amendment.” But that doesn’t work in monopolies. If you deny some people to buy your soapboxes, then there should be a other soapbox companies to choose from.

      1. It’s well-known that conservative commentators are routinely kicked off digital platforms like FB or YouTube.

        Sources? I do think the tech platforms are monopolies and need to be regulated or broken up. But the only people I see getting kicked off are people publish hate speech or deny things that actually occur (like the Sandy Hook shooting).

        1. I’ve heard some names, but there aren’t that many. I don’t think it’s an big issue yet. But at the current time, the infrastructure is there to ban or defund folks. Breaking up these monopolies will at least prevent a private citizen like Zuck from deciding what counts as hate speech.

        2. Define “hate speech”. Milo is probably the best example of someone who got completely shut out by the system (even the financial system!), but you probably call him hate speech?

          1. First they came for Milo, and I did not protest because I didn’t listen to this annoying flamboyant fame whore….

            Then they came for Alex Jones and I did not protest because I’m not keen on blowhard conspiracy theorists….

            (See where I’m going with this?)

          2. (See where I’m going with this?)

            Not really. Sounds like you could go either way to me? I’m pretty big on the first amendment applying to everyone, regardless of the labels people put on them.

          3. Not really.

            It’s a slippery slope when we allow people with whom we may disagree to be silenced. Who will save the least outspoken when the most outspoken are long gone?

      2. what matters the agencies are examining

        WAG: anti-competitive behavior to maintain the power to illegally surveil and manipulate the population

        1. First act of manipulation: Framing all this BS as being “connected.” Seriously, listen to any commercial for any telecom and count how many times they say “connected.”

          And all the cool kids fell for it hook like and sinker. Hey Gen Y/Z: Got FOMO? Give up some data and you’re in the clique! Marketer’s dream.

  8. No more luxury developments, City Hall. Clean our filthy city first
    Los Angeles Times-2 hours ago
    Now’s not the time for more luxury improvements — we need to get back to the … clean up the streets and find a way to move homeless people into housing.

    Filthy? But weather?

    1. San Diego is smaller scale, but otherwise no better. Despite a decade of Fed-funded recovery, there are more homeless camped out downtown now than I have ever seen.

      1. “more homeless camped out downtown now than I have ever seen”

        Any recent census info out that shows this? I would be curious to know how fast this homeless plague is spreading. I think it’s doubled up here in the last year.

    2. Pay for the weather… 🙄 Does that weather send you a refund check when there’s a fire, mudslide, earthquake, drought, or other disaster? No? Oh that’s right. *I* do, with my federal tax money.

    3. ‘Institutional memory is a powerful ally. But San Francisco in an era of $1.77 million shacks and cleaning ladies paying $3,200 rents in Visitacion Valley and tsunamis of IPOs and jarring public misery and filth in the face of it all may have transcended history. We’ve gone off book. We’ve sailed off the edge of the map. George R.R. Martin couldn’t write quickly enough and now we’re making stuff up as we go along.’

      https://missionlocal.org/2019/06/san-francisco-is-not-dying-san-francisco-is-not-rotting-but-things-are-bad-and-they-may-never-get-better/

          1. Tent camping with bears is not for the timid.

            In Wyoming we do it only with large bore magnum pistols next to your pillow and horses hobbled fairly close to give warning and something for the grizzly to do while we prepare to shoot.

            Shoot, shovel, and shut up. The Wyoming state poem.

  9. Warnings have been raised for years about a U.S. farmland bubble. Is it official now?

    The Financial Times
    Agriculture
    US farmers’ borrowing boom is built on shaky land values
    Debt levels approach peak before rural bankruptcy crisis of the 1980s
    Gregory Meyer and Robert Armstrong in New York yesterday

    It was the Red River Valley’s biggest farmland auction in years: several thousand acres of prime Minnesota ground for growing corn, soyabeans and sugar beets. No parcel was unsold when bidding closed.

    The $21m paid by 15 buyers was “surprising”, said Steve Dalen, who conducted the sale last month. With the seller in financial trouble, a huge number of acres to offload and the US-China trade war curtailing grain exports, conditions were not encouraging.

    “When this auction went off we worried about collapsing the market,” said Mr Dalen, a real estate agent at Pifer’s Auctions and Realty in Moorhead. In fact, he ended up with about $4,500 an acre, well above the local price a few years ago.

    1. Who cares about food, when there are McMansions to be built and commissions to be earned?

    1. Eh what’s a couple hundred grand these days, it’s the new 60k that was spent back in 1999 to purchase this dream box. Did you happen to read the article for BoardRE, a wonderful company that is now able to help future FBs to purchase all cash with other peoples money.

    2. a couple hundred grand on a 12 year old double wide

      The bubble has gotten so crazy in Boulder that a couple paid a couple hundred grand for a remodeled single wide this year across the street from the double wide I bought in 2009 for 40k. Long time readers may remember…turned out to be a great place to get divorced in. Easy for me to walk away from and easy for her to live in without having to work.

        1. IIRC, bipolar and lucky to have Carl making and paying for better life choices.

        2. Already at retirement age?

          In her dreams. But yeah, diagnosed bipolar. If you meet her she’s like a little kid. She can be cute until it’s time to actually produce something. Then it’s all complaints and eyerolls and “you do it!”.

          1. So is Carl, now.

            I do have to admit life is significantly better. Commitment to ex is now a fixed cost with a definite end date. I start to feel bad for her but then have to interface again for whatever reason (son’s graduation was a couple of weeks ago and I saw her in person…he was 6 when I first started reading here) and I remember how lucky I really am. I complain about the rental and homebuying market in Folsom but the job is good and the current rental is nice. Backyard is full of ripe lemons and I’m making lemonade like there’s no tomorrow. Even get to play a little guitar again finally. Could be a lot worse.

          2. I’m making lemonade

            This is my outlook. It’s been 15 years for me. At first the freedom from caring for a woman who wouldn’t comply with treatment was strangely difficult, then extremely easy. Living on the boat helped immeasurably.

          3. At first the freedom from caring for a woman who wouldn’t comply with treatment was strangely difficult, then extremely easy. Living on the boat helped immeasurably.

            Yup. I have a little survivor’s guilt, as odd as that might sound. But otherwise I agree. BTW I am actually making lemonade :-). For a Wyoming guy it’s weird that citrus is something that actually exists outside of grocery stores. I’m liking that there’s a tree in the back yard. I peeled and ate a lemon the other day at work like it was an orange and the locals looked at me strangely.

  10. California’s (and other milder-climate states’) homeless problem isn’t home-grown. If it was, it would still be a big problem, but it would be more manageable.

    The reality is, the federal government decades ago decided to get out of the care and housing of the severely mentally ill. (And no, you can’t blame this solely on Reagan; the planning was in the works as far back as the Kennedy administration, and maybe even the Eisenhower administration.)

    So we shut down the institutions and instead inadequately funded a too-small number of group homes and treatment centers. Worse yet, we shifted our focus on mental health care from the most severely affected to those whose mental health issues were debilitating but not incapacitating. It’s cheaper and a whole lot simpler to ignore the sickest. But between the legal rulings severely restricting the power to involuntarily commit and the lack of facilities to house the ambulatory insane, we have a huge population of people who are mentally ill and, if not actively dangerous, pose a health hazard to the community by their prevalence and lack of self-care.

    Of course these people flock to where the weather is milder. If you’re living outdoors, it makes sense. And these people can’t simply be housed in apartments – they’ll not only destroy them, they will also pose a threat to others in the building. That’s why they’re not living in group homes: they’re unmanageable.

    Talk to homeless outreach professionals and they’ll tell you the majority of people who end up homeless due to circumstance end up finding assistance and a fresh start after a relatively short period on the streets. The street lifers are the ones that aren’t capable of keeping it together. They need to be forced into institutional care.

    If we want our parks and streets cleaned up and these people given shelter, we’ve just got to pass legislation permitting forced institutionalization, and raise taxes to pay for it.

    You can have them out of sight, or on the streets. Either way, there’s a steep cost to dealing with them.

    1. severely mentally ill

      “Severely” is subjective. Many with what would be classified as mental illness are treatable. We don’t do a very good job of offering that.

    2. Excellent summary with the issue. The revolving door of medical treatment keeps those ER rooms full at a pretty expensive cost. But like I said the other day, one man’s waste is another man’s paycheck.

  11. ‘“Severely” is subjective. Many with what would be classified as mental illness are treatable.’

    The severely mentally ill don’t commit to taking their meds, usually preferring to self-medicate with street drugs or booze. It’s one of the reasons why so many of them end up on the streets and eventually in jail or prison. Noncompliance leads to loss of job, home, family and friends.

    We can have free-range major mental cases, or we can incarcerate and forcibly treat them. We can’t just incarcerate them, because they then pose a danger to their caretakers and fellow inmates.

    Minnesota passed a law giving jailed mentally ill persons priority to get beds in mental health treatment centers. The unanticipated outcome has been a steep rise in staff injuries caused by out of control patients. As a group home staffer explained, in a large mental institution you have dozens of staff who’ll all come on the run and pile on when a danger code sounds. In a group home, you usually have only one or two staff per shift. So when a patient goes bonkers, there’s no way to restrain them.

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