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Nobody Can Say They Didn’t See This Massive Property Glut Coming

A report from the Globe and Mail in Canada. “Foreign buying has dropped dramatically in the Vancouver region’s real estate market three years after British Columbia introduced a tax that targets international purchases, a policy move that has helped drive down prices. The proportion of foreign buying in the region has gone from roughly one in every eight transactions before the tax, to one in every 60 this May.”

“‘The market previously was not being kept afloat by local fundamentals but was rather being inflated due to outside sources of money from abroad,’ Josh Gordon, an assistant professor at Simon Fraser University’s School of Public Policy, said in an interview.”

The Irish Times. “Property price growth has slowed to its lowest level in five years, according to a report from Davy and property website myhome.ie, which is owned by The Irish Times. The study also suggests asking prices in Dublin, the most volatile segment of the market, are now falling for the first time since 2013.”

“Davy chief economist, Conall MacCoille, blamed the slowdown on increased regulation. Previously up to 20 per cent of new mortgage loans for house purchase were allowed to have a loan-to-income ratio exceeding 3½ times income. The new rule reduces this allocation; only 10 per cent of trader uppers will now be allowed a ratio of more than 3½ times. ‘These factors are preventing the latent housing demand from translating into rampant house price inflation fuelled by rising leverage on mortgage loans,’ Mr MacCoille said.”

The South China Morning Post. “Two of Hong Kong’s biggest commercial banks have cut their valuation of pre-owned homes in several housing estates in anticipation of declining prices, after the city was rocked over the past month by a record number of street protests.”

“‘Valuations have dropped as a result of the political [upheaval in Hong Kong] since early June,’ said Centaline Mortgage Broker’s managing director Ivy Wong Mei-fung, who provides financing services at one of the city’s largest real estate agencies. ‘Home price corrected in May … the home market was downbeat and homeowners were willing to cut prices. The overall pricing of some estates fell.'”

“The last time Hong Kong’s banks cut their valuations was in October 2018, when they slashed 20 per cent off the value of secondary housing in older buildings, a move that pushed buyers who depended on 90 per cent mortgage financing into negative equity.”

“Already, some of the effects are felt in the market. A house at the Palm Springs project in Yuen Long sold for HK$16.38 million (US$2.09 million) after a discount of HK$2.62 million (US$335,000), about 9 per cent cheaper than market value, according to Centaline.”

From Aliran on Malaysia. “Visitors to Penang Island looking at the big corporate signboards and glossy posters dotted all over the island would be forgiven for thinking they had stumbled onto a developers’ paradise. The names of prominent well-connected developers are conspicously plastered on roundabouts and bus stops all over the island.”

“But behind the illusory facade lies a more disturbing story. The flashy publicity material, complete with fake smiles, paints a fantasy lifestyle beyond the dreams of many ordinary folks. The joke going around is that many of the homes being built are not mampu milik (affordable) but just mampu tengok-je (only for public gawking).”

“The only logical conclusion is that these homes are being built for the wealthy, mainly foreigners: China and now Hong Kong seem to be the likely target markets. Nobody can say they didn’t see this massive property glut in the country coming. Driven by greed and the quest for more profits, state governments and developers refused to see the looming storm clouds.”

From ABC News in Australia. “Data from CoreLogic shows almost one-third of residential properties sold in Perth between New Year’s Day and the end of March went for less than the vendors had paid. ‘You’re looking at values in Perth that are back to levels last seen in 2007,’ said CoreLogic head of research Cameron Kusher. ‘So when you think about that, anyone [who has] bought since 2007 has virtually seen no growth or seen values slightly go backwards over that period of time.'”

From Stuff New Zealand. “A crisis meeting will be held in New Plymouth on Wednesday between harvesters, logging truck companies and exporters involved in the export log trade from Port Taranaki as a sudden price drop begins to hit local suppliers.”

“Taranaki harvesting contractor Richard Dreaver said he had called the meeting after export log price values fell by between 30 and 40 per cent in the past fortnight. Dreaver, who employs 27 staff, including four forestry contracting crews, said his workers were stunned by the sudden developments.”

“‘Let’s see if we can get everyone working together,'” he said. ‘The port (Taranaki) looks like a ghost town.'”

“Dreaver was critical of people in the industry who should have seen the warning signs. The meeting comes on the tail of forest industry reports showing the export log price crashing due to an over supply to China. Dreaver said many in the industry are now only starting realise the repercussions.”

“‘It could affect people who have large loans for a long time. The line hauler had been leased to a young guy who wants to get into the industry but the price drop will hurt him,’ Dreaver said. ‘The bulldozer is still in my yard. A lot of guys have bought equipment on the promise of seven more years of work. Now they have been cut off.'”

This Post Has 59 Comments
  1. ‘‘These factors are preventing the latent housing demand from translating into rampant house price inflation fuelled by rising leverage on mortgage loans’

    Cut the lending gravy, lower prices. It’s that simple.

    BTW, the Malaysian editorial is worth reading in full.

  2. ‘The meeting comes on the tail of forest industry reports showing the export log price crashing due to an over supply to China…’A lot of guys have bought equipment on the promise of seven more years of work. Now they have been cut off’

    You know what they say about assumptions Dick.

        1. How can that be when housing starts are half of what they were then and we have more people generating GDP in other areas?

          1. Can anyone tell us what percentage re is of gdp today vs. 2005 ?

            Residential Fixed Investment | Housing Services | Residential Fixed Investment + Housing Services

            1980 5 12.5 17.5
            1985 5.3 12.5 17.9
            1990 4.5 12.6 17.1
            1995 4.7 12.6 17.4
            2000 4.9 12.4 17.3
            2005 5.9 12.3 18.2
            2010 2.5 12.6 15.1
            2017 3.4 11.8 15.2
            2018 3.3 11.6 14.9
            2017Q4 3.4 11.8 15.2
            2018Q1 3.4 11.7 15.1
            2018Q2 3.3 11.7 15
            2018Q3 3.3 11.6 14.8
            2018Q4 3.2 11.6 14.8
            2019Q1 3.2 11.5 14.7

            Source: National Association of Homebuilders

  3. ‘The last time Hong Kong’s banks cut their valuations was in October 2018, when they slashed 20 per cent off the value…Already, some of the effects are felt in the market. A house at the Palm Springs project in Yuen Long sold for HK$16.38 million (US$2.09 million) after a discount of HK$2.62 million (US$335,000), about 9 per cent cheaper than market value’

    But HK media says “to the moon Alice”? Me confused as constant REIC bottom picking has resulted in stinky fingers!

  4. “‘The market previously was not being kept afloat by local fundamentals but was rather being inflated due to outside sources of money from abroad,’ Josh Gordon, an assistant professor at Simon Fraser University’s School of Public Policy, said in an interview.”

    I fear that in such a scenario, there is a real possibility that someone might’ve overpaid.

  5. Actually, it means massive losses for anyone who purchased after 2007. There was a yuuuuge bubble 2007-2018.

    #####

    “You’re looking at values in Perth that are back to levels last seen in 2007,’ said CoreLogic head of research Cameron Kusher. ‘So when you think about that, anyone [who has] bought since 2007 has virtually seen no growth or seen values slightly go backwards over that period of time.’”

      1. And if they sell they have to pay a realtor and who knows what they have spent for maintenance. Should have stuck their money in the US stock market even with the crash by hanging tight they would have done better. More capital appreciation and dividends to sweeten the deal.

  6. Question: So, what’s everyone going to do for income now with price deflation in the housing sector? Housing prices only go up apparently until they don’t (or “trees don’t grow to the sky”). RRE in the U.S., Canada, and probably worldwide is now an even larger percentage of the eCONomy than ever before. So if flipping houses like pancakes ain’t gonna bring home the bacon (sorry, dreaming of breakfast), what’s it now take to pay the bills? Oh wait, most of the good-paying manufacturing jobs were outsourced to low wage countries by the globalists, leaving, well, the gig economy. There might be some esplainin’ to do by those who sold this bill of goods. Just sayin’. Long torches and pitchforks.

    “Then he went up the chimney himself, the old liar, and the last thing he took was the log for their fire. On their walls, he left nothing but hooks and some wire. And the one speck of food that he left in the house was a crumb that was even too small for a mouse. Then he did the same thing to the other Whos’ houses: leaving crumbs much too small for the other Whos’ mouses!” – Dr. Seuss, How the Grinch stole Christmas!

    “The greatest shortcoming of the human race is our inability to understand the exponential function.” – Albert A. Bartlett (1923-2013), Professor Emeritus in Nuclear Physics at University of Colorado at Boulder

    “Anyone who believes exponential growth can go on forever in a finite world is either a madman or an economist.” – Kenneth Boulding, economist

    “Government “help” to business is just as disastrous as government persecution… the only way a government can be of service to national prosperity is by keeping its hands off.” – Ayn Rand

    “When you see that in order to produce, you need to obtain permission from men who produce nothing – When you see that money is flowing to those who deal, not in goods, but in favors – When you see that men get richer by graft and by pull than by work, and your laws don’t protect you against them, but protect them against you – When you see corruption being rewarded and honesty becoming a self-sacrifice – You may know that your society is doomed.” – Ayn Rand, Atlas Shrugged

    “Capitalism was the only system in history where wealth was not acquired by looting, but by production, not by force, but by trade, the only system that stood for man’s right to his own mind, to his work, to his life, to his happiness, to himself.” – Ayn Rand, Capitalism: The Unknown Ideal

    “Money is made—before it can be looted or mooched—made by the effort of every honest man, each to the extent of his ability. An honest man is one who knows that he can’t consume more than he has produced.”-Ayn Rand, Atlas Shrugged

      1. Since Ayn Rand was mentioned I would like to add some thoughts.

        I think that the blind spot Ayn Rand had was she thought the big capitalist under capitalism would be noble and fair and want to earn everything. Crony capitalism wasn’t a part of her vision of pure capitalism. I don’t think she gave enough credit to the productive middle class who were the people that produced what was envisioned by the capitalist, as well as being the consumer of what was produced.

        So, you have to have regulated capitalism to prevent monopolies and price fixing, political bribes and False markets.

        The creative capitalist that she presents in her books wouldn’t think of rigging the deck to get easy money. History has proven this is exactly what happens.

        While I agree with her ideas that Communist ideas suck, she didn’t take into account that capitalism had to be regulated because of human nature.

        1. ‘capitalism had to be regulated because of human nature’

          This is laughable. Are utilities regulated?

          ‘PG&E Corp. knew for years that hundreds of miles of high-voltage power lines could fail and spark fires, yet it repeatedly failed to perform the necessary upgrades. Documents obtained by The Wall Street Journal under the Freedom of Information Act and in connection with a regulatory dispute over PG&E’s spending on its electrical grid show that the company has long been aware that parts of its 18,500-mile transmission system have reached the end of their useful lives.’

          ‘The failure last year of a century-old transmission line that sparked a wildfire, killed 85 people and destroyed the town of Paradise wasn’t an aberration, the documents show. A year earlier, PG&E executives conceded to a state lawyer that the company needed to process many projects, all at once, to prevent system failures—a problem they said could be likened to a “pig in the python.”

          https://www.wsj.com/articles/pg-e-knew-for-years-its-lines-could-spark-wildfires-and-didnt-fix-them-11562768885

          Didn’t then Attorney General Holder say he wouldn’t prosecute anyone on Wall Street because of a systemic risk? Is that a failure of capitalism, or government? Capitalism has only given us everything we have, in spite of government.

          1. Ben,
            It has to be the right kind of regulations on capitalism.

            I agree that a huge percentage of government regulations wasn’t called for and big government will mess up almost anything it touches. But monopolies with price fixing emerge under pure capitalism, and other rigged decks.

            The Glass-Stegall Act was a example of a good law for the banking and investment industry.
            I think regulations should be very limited but necessary to keep the deck from getting rigged or corrupted.

          2. If you don’t apply the laws you got no where to go. I doubt there is one area where socialists would point to more than the housing bubble, yet the top law enforcer stood up in front of congress and said no one is going to be prosecuted. And this is from the big “progressive” administration. Rigged and corrupted indeed. I think the problem here isn’t people getting up and going to work every day, which is what capitalism really is.

        2. True. Also it is no accident that capitalism developed best in Protestant countries. Calvinism in particular fit the ideology and helped check dishonest behavior. Mr. Banker was also checked by biblical constraints such as a prohibition against usury. It remains to be seen whether capitalism or democracy will even work in an atheistic society. Personally I doubt it. Tyranny and slavery seems to be the fate of the world.

          1. Democracies are on track to lose their global economic dominance as ‘authoritarian capitalism’ rises
            CNBC
            Frederick Kempe
            6 July 2019

            “Within five years at current trends autocratic countries will account for more than half of global income for the first time in more than a century, according to a recent analysis.”

            “Trump may seem an unlikely representative for this American rediscovery of its global purpose. His critics condemn his closeness to autocrats like Xi, Putin and Kim Jong Un.”

            “However, Trump’s record also includes supporting efforts to democratically replace Venezuela’s dictator, his targeting of China’s unfair trade practices and his opposition to Iran’s mullahs and their Revolutionary Guard Corps.”

            https://www.cnbc.com/2019/07/05/democracies-are-on-track-to-lose-their-global-economic-dominance.html

    1. great quotes.
      This part was a bit ahistorical
      “Capitalism was the only system in history where wealth was not acquired by looting, but by production, not by force, but by trade”

      She must have forgotten how key the slave trade, “manifest destiny” and colonialism was to early capital accumulation.

      1. I loved Ayn Rand when I was in my 20s. She makes everything seem so simple and black and white. At some point most people grow out of her overly simplistic prescriptions. She has some value to add, but she hardly gets everything right.

      2. The problem is that ignores for this country the cost of the Civil War. Whatever this country gained from slavery was more than lost in the Civil war. The cost of the war just in treasure was staggering thus the reason that an unconstitutional income tax had to be imposed. Millions were left permanently disabled on both sides. The South is still one of the poorer regions of this country due to the economic destruction. All of our wars together do not equal the death count. It is almost funny how the left can blame the Bush wars for our debt but cannot understand that whatever economic benefit this country gained from slavery was wiped out. Cheap labor is never cheap in the long run something we should remember before we finish adopting an open borders policy.

        1. Actually one correction the civil war death count is about equal to all of other wars combined. It was true when I first learned it while going to school during the Vietnam war but by the end of the war was not true. However even today it is very close

      3. Ben, in response to your post above.

        I was extremely disappointed when they didn’t enforce the laws and the culprits of the “Banking Ponzi Scheme” didn’t get their due . In fact that is when I threw in the towel and figured we were doomed.

        A reinflation of the fake real estate markets is what you get with the taxpayers set up to take the fall, and the culprits win again.

    1. Also very worth it to poke around in the related articles to Dan’s link on this site, particularly the ones authored by Ian Young.

    1. The Financial Times
      Markets Briefing Equities
      Top sovereign bonds under pressure ahead of Powell remarks
      Investors seek clues from Fed chief on monetary policy meeting later this month
      Adam Samson in London and Siddarth Shrikanth in Hong Kong an hour ago

      The debt of highly rated countries on both sides of the Atlantic was under pressure on Wednesday ahead of remarks from Federal Reserve chief Jay Powell that may yield clues on the central bank’s plans for a crucial policy meeting later this month.

      Yield on US, UK and German 10-year government paper all rose around 0.06 percentage points, to 2.11 per cent, 0.78 per cent and minus 0.3 per cent, respectively. Higher yields indicate falling prices.

      The moves mark a reversal from recent weeks, when the sovereign bonds have rallied on the back of expectations major central banks like the Fed, European Central Bank and Bank of England will launch more stimulative monetary policies.

    2. US10Y up .44. Goodnight low rates if this keeps up.

      But, muh new demand/shot in the arm. How’s that crow Danielle Hale?

    3. The Wall Street Journal
      Credit Markets
      Government Bond-Market Measure Says Recession Risk Growing
      Yield on short-term Treasurys has been higher than on long-term notes for more than 30 consecutive trading sessions
      By Daniel Kruger
      Updated July 9, 2019 3:56 pm ET
      The yield on short-term Treasurys has been higher than on long-term notes for more than 30 consecutive trading sessions, a sign that investors are concerned about the durability of the decadelong economic expansion.

      The yield on three-month bills has exceeded that of the benchmark 10-year Treasury note by as much as 0.259 percentage point, the most since May 2007, before the financial crisis. Shorter-term bill yields tend to reflect expectations for Federal Reserve interest-rate policy, while those on longer-term securities…
      To Read the Full Story
      Subscribe

    4. Poor U.S. data could trigger 10% stock plunge, says strategist
      By Barbara Kollmeyer
      Published: July 10, 2019 7:27 a.m. ET
      Critical information for the U.S. trading day
      Magnet Releasing/Everett Collection
      Keep a lookout for the data.

      Step right up to the hot seat, Jerome Powell.

      Investors from here to Hanoi can think of nothing else but the Fed chairman’s appearance on Capitol Hill Wednesday. The big question to be answered: Does Powell agree with the end-July quarter-point rate cut markets are pricing in, even after last week’s strong jobs data?

      1. Yet just today the S and P crossed the 3000 level for the first time ever. Yes we will have another 10 percent correction. They are normal and healthy for a market. Actually I get quite worried when we have not had one for a couple of years.

  7. The REIC just outright lies:

    The Australian
    Home affordability the best in 20 years: HIA
    Housing affordability is the best it’s been in two decades with mortgage repayments now consuming the smallest proportion of earnings since 1999, the Housing …
    9 hours ago

    1. Aussie shacks still overpriced and falling fast. Why buy now? Going lower. This is intuitively obvious to the most casual observer (knife-catcher). Speculators have exited the “market” long ago leaving shelter- buyers of modest means and high debt loads unwilling and unable to buy. A most disingenuous statement by Aussie REIC; made in a futile attempt to stimulate (nonexistent) demand. Self- indicted wound. Price also goes down. Stamp those feet. Stamp ‘em!

      1. With no end-user buyers to be found, it may be time for the Aussie REIC to appeal to their central bank to pull some levers in order to reflate housing demand.

    2. House prices up 400% but now more affordable than ever!

      Any more affordable and they’ll be piled up like Kiwi logs on a Chinese pier.

      1. More affordable because you can take that sweet equity from your present house and have a down payment for a much bigger place. Yes, it is insane thinking but it is the thinking of greed in a mania.

  8. ‘Wealthy American financier Jeffrey Epstein, charged with sex trafficking in underage girls, is now confined to a cell in a fortress-like concrete tower jail that has been criticized by inmates and lawyers for harsh conditions.’

    ‘After his arrest on Saturday at New Jersey’s Teterboro Airport on arrival from Paris in his private plane, Epstein was likely put in solitary confinement at the Metropolitan Correctional Center (MCC) in lower Manhattan, according to defense lawyers and others familiar with the jail.’

    “When you have someone that’s allegedly a sexual predator like Jeffrey Epstein, he’ll need to be in protective custody,” Andrew Laufer, a lawyer who has represented MCC inmates in civil lawsuits against prison officials, said in an interview.’

    “The sex offenders have a hard time,” Jack Donson, a former BOP employee who now works as a federal prison consultant in New York, said in an interview. “He’s definitely going to get ostracized.”

    ‘There are fewer activities and diversions for inmates at the MCC compared to some other jails, Donson said. “It’s pretty confining, pretty boring, not dangerous, but still no picnic,” Donson said. “Especially if you’re a man of wealth: one minute you’re on your yacht or in a helicopter; next minute you’re sitting at a table playing cards with the boys.”

    https://finance.yahoo.com/news/financier-epstein-goes-luxury-life-122428286.html

    1. Yeah, right. This guy is too connected, has the goods on too many people to have to endure any sort of discomfort.

      1. ‘any sort of discomfort’

        It’s already happened. It’s amazing how cynical people are. They found a safe full of child porn, probably with him in it. He’s going to prison for the rest of his life.

        1. ‘He’s going to prison for the rest of his life.’

          I am not too sure about that. Looking at the state of lawlessness in Amerikkan Just-Us system, I think he will walk with his hand slapped.

      2. Keep this in mind …

        “Before the allegations of sexual abuse came to light, Epstein’s Rolodex included celebrities, politicians and academics, including high-profile personalities ranging from president Bill Clinton and Donald Trump to Kevin Spacey and Lady Lynn Forester de Rothschild, many of whom flew on his private jet, vacationed at his Caribbean island and frequented his lavish mansions in New York City and Palm Beach.”

        He belongs to a private club filled with special perks.

        Jeffrey Epstein, the politically connected financier with ties to Trump and Clinton – The Washington Post
        https://www.washingtonpost.com/politics/2019/07/08/jeffrey-epstein-politically-connected-financier-with-ties-trump-clinton/?utm_term=.588d19c9a401

      3. Something interesting about the Power Elite …

        “Castells cites a kind of ‘double movement’ where on one hand, ‘valuable segments of territories and people’ become ‘linked in the global networks of value making and wealth appropriation’, while, on the other, ‘everything and everyone’ that is not valued by established networks gets ‘switched off…and ultimately discarded’.[23] The wide-ranging effects of global capitalism ultimately affect everyone on the planet, as economies around the world come to depend on the functioning of global financial markets, technologies, trade and labor.”

        https://en.m.wikipedia.org/wiki/Elite#Power_elite

        George Carlin: “It’s a private club, and you aren’t a member.”

          1. The ” Power Elite” running everything. I don’t think this is what the Founding Fathers of US had in mind.

    2. Better playing cards with the boys than being someone’s prison “wife” although that is exactly what he and his buddy Bill Clinton deserve. Actually they deserve worse they should be in a cell with Hillary.

      1. I read story this morning about a high school girl who had been massaging him for nearly a year before [it] happened. No mention that she’s a licensed masseuse or a physical therapist. Maybe she just knows the right muscle groups to manipulate?

        I have a daughter, and she never performed as a rich guy’s masseuse, and she never jumped on the backyard trampoline at Hefner’s mansion either.

    3. After all the publicity in 2008 of his conviction in Florida for Florida conduct why was there no investigation in NY by state and federal authorities of NY based conduct? Why has every tabloid talked about the Lolita flights and Bill Clinton for years but no MSM outlet assigned investigative reporters to the story before now?

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