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There’s Plenty Of Good Stock And Prices Are Falling!

A report from the Lethbridge Herald in Canada. “Lethbridge Land released its annual report earlier this week, and the picture it paints of the city’s current home-building slowdown couldn’t be more clear. ‘Over the past two years the amount of building permits has slowed down quite a bit,’ acknowledged Michael Kelly, the City’s manager of real state and land development. ‘We have dropped by almost 50 per cent over the past two years.'”

“Kelly predicted Lethbridge will continue to experience slow growth in the home, commercial and industrial real estate sectors for the next few years; so it’s all about managing expectations, he said. ‘People have to be patient,’ stated Kelly. ‘Real estate is always in cycles. We had a great run from 1999 until this past year.'”

From MENAFN on Lebanon. “The Lebanese economic slowdown affected the country’s residential apartments’ demand significantly as it was affected with a sharp decrease in 2019. Chairman of Ramco Real Estate Advisors Raja Makarem emphasized that ‘the real estate sector is in its worst situation ever.’ Makarem added: ‘banks are only giving loans at high interest rates nowadays prompting citizens to keep their money in banks and gain a high interest rate on their deposits instead of investing in apartments.'”

The Business Report on South Africa. “Over the last three months, sellers in Cape Town’s swanky Atlantic Seaboard and Constantia Upper areas have reduced their asking prices by p to R10 million to conclude a sale according to the latest sales data. Ross Levin, managing director for Seeff Atlantic Seaboard and City Bowl said that as a result of the continued weak demand at the upper price levels, sellers are now offering steep discounts to attract buyers. Some recent sales have been concluded at anything between 20 percent – 50 percent below the asking prices.”

“The market is already down by 40 percent since 2016/17, and despite the expected uptick following the election, the reality has been a further decline of 15 percent in value generated during the first half of this year. High-end sales remain especially slow. Consequently, he says, there’s plenty of good stock and prices are falling!”

From Vietnam Net Global. “Hà Nội has witnessed the rapid construction of modern condominiums, gradually replacing old-style community houses. Quỳnh Anh has recently moved to the new residence on Hà Nội’s Minh Khai Street. But the experience has not been so positive. ‘Although I do not spend that much time here, anytime I come home it is a different disappointment,’ she said. ‘I find a lot of things to complain about – dirty halls, discarded gum on the handrails and noisy neighbours who sing karaoke without closing their doors.'”

“Dwellers’ bad habits are not the only problem in Hà Nội’s apartment buildings. Disputes over maintenance funds, common use areas and the handover of construction documents among investors, management boards and residents have fuelled uproars. Last year, the residents of D’Capitale – a luxury apartment complex protested the investor’s advertisements of the project.”

“They said the development was marketed as high-class and each apartment was sold for VNĐ60 million (US$2,6000) per square metre. However, only until when apartments were handed over, did the residents realise that every corridor is only 1.4m wide instead of 2.4m as stated in the initial apartment template.”

“The building is also not air-conditioned and the construction quality is not as good as was promised. Feeling fooled by the investor, customers staged protests with posters and banners to ask for a price reduction and demanded local authorities’ intervention.”

The Malaysian Reserve. “Developers in Johor Baru (JB) should stop building serviced apartments in a state which accounts for about half the country’s unsold properties and a capital city which is facing massive oversupply, low take-up rate and rising uninhabited structures. The rush to capitalise on wealthy foreign buyers has left the state with over 16,000 unsold properties worth billions. Structures erected in the city were left empty with only a few units taken up. The high price also prevented many of the 3.7 million Johor populations from buying such residences.”

“VPC Realtors (JB) Sdn Bhd AsiaPacific property consultant Bruce Lee said while Johor still has an abundant supply of land viable for development, the state does not have enough population or demand to take up the available properties. ‘Properties in Johor were not built based on current demand, but based on speculations. They assume that more people will migrate to the state, including foreigners. But when those did not happen, the units are left unsold. Stop building serviced apartments in JB until the demand can absorb the supply,’ he said.”

The South China Morning Post on Macau. “Macau’s residential property market has fallen victim to the protracted US-China trade war. Home sales in the world’s largest gambling hub, which sits off the coast of southern China, plunged 42.2 per cent in the first half from the same period a year earlier, to 3,920 registered transactions, said JLL.”

“‘The transaction volumes of various property sectors have declined significantly due to the weakening investment sentiment caused by the global economic uncertainty amid the ongoing US-China trade war,’ said Mark Wong, director of valuation advisory services at JLL Macau.”

The Hong Kong Economic Journal on China. “Lejia Apartment, China’s third-largest rental apartments operator, has suddenly gone bankrupt, creating big trouble for hundreds of thousands of its tenants. To rein in property speculation, Chinese authorities have been encouraging the development of the apartment leasing industry. But the operating model of Lejia was fundamentally flawed, leading to its abrupt collapse.”

“Basically, the company operated as a middle-man platform, matching landlords and tenants. Average yield of mainland residential properties is rather low, less than 2 percent in general. In order to scale up quickly, Lejia often offered excessive returns to lure landlords, and at the same time, lured tenants with bargain deals.”

“If the macro-environment was robust, Lejia could have been able to sustain the cash-burning business model by raising new capital. But as China’s economy has been cooling amid a worsening US trade war war, the option was no longer available. Lejia had been rumored to be facing a credit crunch since June, and many individual home owners complained they were not able to receive rental payment.”

“The company dropped the bomb on August 7, announcing that it’s shutting down after all attempts to sustain the operation failed. It’s a common practice among rental apartment operators to collect one year of rent from tenants in advance, and then pay to individual home owners on a monthly basis. Lejia took the money from tenants, spent it all and is now unable to make payment to home owners. The company is now asking the owners and tenants to sort out the mess themselves.”

The Sydney Morning Herald in Australia. “A resident of one of Sydney’s several evacuated apartment buildings has broken down in tears before a parliamentary inquiry when describing the uncertainty he and his young family are now facing. Vijay Vital, who was evacuated from Sydney’s Mascot Towers on June 14, was overcome with emotion when he addressed the NSW Legislative Council inquiry into the state’s building standards on Monday.”

“Another Mascot Towers resident, Alton Chen, said he may have been better off investing in a caravan. ‘Perhaps what I should have done is invest in a caravan because at least, if it was burnt down, at least I’d be covered by the insurance,’ he said.”

“Mr Chen said he and hundreds of other residents were still waiting for answers to what caused the 132-unit block to be deemed structurally unsound. ‘For a lot of us, this is the only place that we have that we call home … we don’t know when we can go back, a lot of uncertainties are right in front of us,’ he said. ‘We’ve got to pay mortgages for a place we can’t live in. A lot of us can’t afford to go bankrupt … we need the government’s support.'”

This Post Has 57 Comments
  1. ‘However, only until when apartments were handed over, did the residents realise that every corridor is only 1.4m wide instead of 2.4m as stated in the initial apartment template The building is also not air-conditioned and the construction quality is not as good as was promised’

    Air conditioning. In Hanoi? You must be mistaken.

    ‘Feeling fooled by the investor, customers staged protests with posters and banners to ask for a price reduction and demanded local authorities’ intervention’

    Stamp em’!

  2. ‘If the macro-environment was robust, Lejia could have been able to sustain the cash-burning business model by raising new capital’

    This insanity must be drawing close to an end.

      1. Works for me too. I lend piles of money to borrowers who immediately burn through it. The only thing that remains afterwards is the debt – and monthly payments on the debt to yours truly.

  3. ‘We’ve got to pay mortgages for a place we can’t live in. A lot of us can’t afford to go bankrupt … we need the government’s support’

    Well it was cheaper than renting Alton.

    1. “…if it was burnt down, at least I’d be covered by the insurance,” he said.

      Hehe…the honest folks are climbing the learning curve!

      1. “You were bankrupt the moment you took out the loan.”

        Not quit the moment, more like years later. If it is worked right the loan will be paid on for years – decades even – and THEN the borrower will become bankrupt.

      2. It is the whole concept of not being able to afford bankruptcy which has me baffled. You do not need to afford anything but the filing fee to go bankrupt, the question is whether you have sufficient assets and cash flow to get out of bankruptcy.

  4. Aside from your real estate HODLings, have you purchased any negative yielding investments lately?

    1. ft.com
      Capital markets
      Sub zero: grappling with the topsy turvy world of negative yields
      Roughly one-quarter of the global debt market is trading at levels once thought improbable
      Investors go through looking glass world of negative yields
      Tommy Stubbington yesterday

      Making an investment that is guaranteed to lose money sounds like something that would cost you your job. But in bond markets, it has become a fact of life.

      Bonds worth $15tn — roughly a quarter of the debt issued by governments and companies around the world — are currently trading with negative yields. That means prices are so high that investors are certain to get back less than they paid, via interest and principal, if they hold the bond to maturity. They are, in effect, paying someone to look after their money.

      The spread of negative-yielding debt has raised profound questions about the extraordinary lengths central banks have gone to in a bid to revive the economy over the past decade. At the same time, bond markets’ journey through the looking glass has befuddled many investors.

      1. ft.com
        US stocks close sharply lower on growth fears
        Political instability in Argentina and Hong Kong pile on to traders’ list of concerns
        Matthew Rocco in New York, Sarah Provan in London and Daniel Shane in Hong Kong yesterday

        US stocks and Treasury yields turned sharply lower on Monday, in a new burst of negative sentiment around the trade war with China, political developments in Argentina and Hong Kong and fears for the global economy.

        The sell-off in equities picked up steam late in the trading session, knocking the benchmark S&P 500 down 1.2 per cent in a broad-based decline that was led by shares in banks, which came under pressure as yields retreated.

        Technology stocks, which are considered particularly vulnerable to US-China trade tensions, also dropped. The tech-heavy Nasdaq Composite saw a 1.2 per cent slide. The Dow Jones Industrial Average booked a 1.5 per cent loss.

        1. Economics
          Fears of Argentina Default Loom Large as Traders Dump Everything
          By Sydney Maki
          and Aline Oyamada
          August 11, 2019, 8:07 PM PDT
          Updated on August 13, 2019, 12:38 AM PDT
          – Credit-default swaps spike as bond yields soar into distress
          – Peso drops to record, stocks plunge on Macri’s primary debacle

          Argentina is once again on the cusp of a full-blown financial crisis.

          In the wake of President Mauricio Macri’s stunning rout in primary elections over the weekend, investors dumped its stocks, bonds and currency en masse, leaving much of Wall Street wondering whether the country was headed for yet another default.

          1. “Argentina is once again on the cusp of a full-blown financial crisis.”

            “Those who cannot remember the past are condemned to repeat it.” – George Santayana

      2. Three of Europe’s biggest economies are probably in recession — and the ECB is out of bullets
        Yusuf Khan
        Aug. 10, 2019, 03:03 AM
        Reuters/Jason Cairnduff
        – Three of Europe’s largest economies — Germany, Italy, and the UK — are either in recession or are on the verge of it, which could spell danger for the eurozone.
        – Germany, Europe’s industrial backbone, is stuttering. The unemployment rate has risen for the second time in three months.
        – The UK economy contracted for the first time since 2012, as output fell 0.2% in April to June.
        – Italy’s debt crisis is only being made worse by political uncertainty.

        Europe could be about to hit a crisis, as three of its largest economies are tanking at the same time. What’s more, the European Central Bank looks like it’s out of bullets to fire the economy up.

        What happened?

      3. Will the Plunge Protection Team finally step in today and put an end to the horrible market carnage on Wall Street?

        1. The PPT usually doesn’t intervene in the markets until 12:30 a.m. EST, but it looks like they’re coming in the first thing this morning.

        2. Yes a four percent drop over a few months is horrible market Carnage. Lol. The problem is after eight years of a totally manipulated market people do not even know how a normal market reacts. Not that we are there yet, but we are closer to a normal market. A ten percent move is significant any thing less is just normal fluctuations.

          1. Nobody believes that the Fed will allow the market to drop more than a couple of percentage points before intervention comes to the rescue. And hence the dips buyers pile in every time the market drops a few percentage points.

  5. I wonder if Bloomberg has ever bubble-typed the housing market?

    Bloomberg Opinion
    Markets
    Bonds Meet the Four Criteria for Defining a Bubble
    The good thing, though, is that there’s presently no catalyst to burst it. Also, trade wars and Argentina.
    By John Authers
    August 12, 2019, 9:01 PM PDT
    The bond market is full of bubbles.
    Photographer: Frank Rumpenhorst/AFP/Getty Images

    Forever blowing bubbles.

    There has been a tendency since the financial crisis to label any market that is rallying or deemed overvalued to be in a “bubble.” The word has become overused and debased. But if we treat it rigorously, the bubble concept is still vital in navigating financial markets. And the rigorous treatment reveals that bonds really are in a bubble.

    1. So Professor if you cannot get a fall now during the trade war how do you get the collapse you have been posting links about? Germany is going to stimulus spending, China is close. China has set the Yuan strong, Trump has relaxed the tariffs. Coincidence? I do not think so. Tough negotiations are going on, but negotiations nevertheless. People who said China did not want or need a deal with Trump were and are wrong. The supply chain is moving from China and it needs to stop that if it has any hope of servicing its massive debt.

      1. ” …how do you get the collap$e you have been posting links about? ”

        Con$umers are knot reducing debt$, they are piling on even more$:

        (gettin’ wor$er & wor$er!)

        Con$umer Debt by the Number$:

        Americans’ credit spending was greater than ever in 2018, as debt levels reached record totals. Overall consumer debt reached $13.3 trillion in the last quarter of 2018, while the total amount of unpaid revolving debt hit $4.1 trillion. Record-setting numbers, based on Experian data from the fourth quarter of 2018, spanned several credit categories:

        Credit card debt$ reached an all-time high of $834 billion.

        Mortgage debt$ reached a new high of $9.4 trillion.

        Per$onal loan debt$ totaled $291 billion and was the fa$test-growing type of consumer debt in the past year.

        Student loan debt$ reached a record high of $1.37 trillion.

        Auto loan balance$ hit $1.27 trillion, an all-time high, coupled with a new record for the average monthly auto payment, at $523.

      2. any hope of servicing its massive debt

        What? We were told countless times that debt in China didn’t matter because they “owed it to themselves”. Where is that guy?

        1. They do owe it to themselves largely. Thus the reason they still have the ability to borrow more. However you can see over the last few years growing external debt still low but rising. Countries implode quickly when they have relied on external debt. Countries such as Japan have even higher debt levels and have continued at those levels due to the the debt being primarily internal. Nevertheless, the debt does need to be paid back at some point. When we last. Had this discussion we were discussing whether the implosion was imminent. I said no, you were in it is close camp. Well it was not then, and it has been around four years. Without Trump it may have been decades before the fall. It called for a US policy change concerning unfair trading practices and the theft of intellectual property. Did not happen under Obama. It Is happening under Trump. When the facts change my opinion changes.

          1. critical debt load was 90% of debt to GDP

            My guess is that it’s kind of like house payments. More debt can be serviced if interest rates can be pushed really low. I think those rules of thumb assumed reasonable rates of return on capital that no longer exist so that more debt can be carried. And here we are.

          2. More debt can be serviced if interest rates can be pushed really low

            At prices 10x gross income (pick your own number) the debt cannot likely be serviced even without interest payments.

        1. + American$ of recent decade$ have.thee.very.BAD.habit$ of knot: $aving.

          (Seems carrying debt$ is far more promi$ing than $aving. Right Mr.banker?)

    1. Investments in any sector aren’t stable. That’s the problem with modern day investment that’s built on sand.

      1. “Investments in any sector aren’t stable.”

        I agree with this statement with one exception: Stupidity.

        If one correctly invests in stupidity then he is sure to do alright financial wise, good times or bad.

        1. I do not know when something is oversupplied it tends to fall in price, I see no shortage of stupidity.

          1. “… when something is oversupplied it tends to fall in price.”

            This is true for most things but it is not true for stupidity. The reason for this is rather stupid but it cannot be explained because the reasoning is circular, stupidly so.

            The best advice I can give is to always go long on stupidity.

          2. “I do not know when something is oversupplied it tends to fall in price, I see no shortage of stupidity.”

            =

            agdan $elf.portrait

          3. An example: During buying manias the stupidest buyer is the buyer who is willing to pay the stupidest price. The less-than-stupidest are relegated to doing without.

            Some of these less-than-stupidiest realize just how stupid the prices have become and hence drop out of future price bidding. Their dropping out causes the population that makes up the buying pool to become very, very rich in very, very stupid people and thus future prices will reflect this richness of stupidity.

          4. It is important to buying manias to have a pool of very stupid people doing the price bidding. If there wasn’t a pool then the prices wouldn’t become so stupid. This is because the stupid buyer wouldn’t have to bid against anyone else; His bid, being the only bid, would always be the lowest bid.

            But when the bidding takes place among members of a bidding pool composed of some VERY stupid people who stupidly bid against each other the result can be a very stupid price, a price that is set by the stupidest bidder.

          5. So for the purpose of promoting prosperity as measured by increases in asset prices it is important that extremely stupid people have access to money so they will willingly commit themselves to stupidly committing themselves to paying some very stupid prices that are vital in supporting our stupid consumer-based economy.

          6. Maybee try batting left.handed, try anything, ’cause yer swinging’ & swattin’ & missing is: $ad.

            BUSINE$$ NEWS|AUGUST 13, 2019 ,

            Pa$t-due student loan$, credit card debt$ could weigh on U.S. growth

            Reuters |Trevor Hunnicutt

            U.S. credit card balance$ grew to $868 billion in the second quarter, from $848 billion in the previous three months, and the proportion of those balances $eriously pa$t due is on the ri$e, according to Federal Reserve Bank of New York data released on Tuesday.

            U.S. consumer debt$ has continued to hit new peak$, rising $192 billion, or 1.4%, to $13.86 trillion in the second quarter. The figure is higher than the previous peak of $12.68 trillion before the 2008 global financial crisis, according to the New York Fed’s U.S. household debt and credit report.

            While total student loan balances decreased slightly, from $1.49 trillion to $1.48 trillion in the quarter, the share of those loans being left unpaid for several months increased.
            Payments on some 9.9% of student loan balances started being at least 90 days late during the three months that ended in June, compared with 9.4% in the January-March period.

            A comparable measure shows credit card users, too, are falling behind. Payments on about 5.2% of those balances were 90 days overdue in the latest quarter, up from 5.0% in the first quarter. The figure has been on the rise since 2017. Similar delinquency rates declined for auto loans, home equity lines of credit, mortgages and other debt categories.

            Consumer spending accounts for two-thirds of activity in the world’s largest economy, and a growing job market and higher wages have helped the longest U.S. economic expansion on record continue this year.

          7. But when the bidding takes place among members of a bidding pool composed of some VERY stupid people who stupidly bid against each other the result can be a very stupid price, a price that is set by the stupidest bidder.

            So you’re saying we’re in a stupidity bubble…

  6. “Basically, the company operated as a middle-man platform, matching landlords and tenants.

    In the Internet age, why would landlords and tenants require the services of a middleman?

  7. in the big recession it may be fun to buy 5 acres in the woods
    make stuff-blow stuff up- shoot stuff
    get beer n Oxide

    1. “make stuff-blow stuff up- shoot stuff”

      I have a co-worker friend who does exactly that, on raw acreage he bought in nearby state.

  8. Total deal breaker ………sing karaoke without closing their doors.’”

    Glad i never got involved with that side of the business. ( ok a few times to know better)

    1. The karaoke business? What I like as a musician is that you now have very good bands making very good backing tracks for the whole industry. Useful for lots of musical things, not just drunk amateurs trying to sing. So nice compared to the old MIDI stuff.

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