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Bought With The Expectation Of A Handy Capital Gain, But Many Are Now Selling At A Loss

A report from Global News in Canada. “Greater Vancouver’s housing market correction is finally having a noticeable impact on condo prices. The median Greater Vancouver condo is priced at about $764 per square foot, down 8.3 per cent year-over-year, the report found. In the City of Vancouver, the median condo was selling for $1,044 per square foot, down 6.3 per cent, it found.”

“‘Higher inventory levels have resulted in the market nearing the point of oversupply and price per square foot has been decreasing considerably in this category,’ said Adil Dinani, real estate advisor with Royal LePage West Real Estate Services.”

From Mansion Global on the UK. “A mansion-sized flat overlooking London’s Hyde Park is back on the market with a £10 million (US$12.2 million) price cut. The leasehold apartment hit the market this week with a new brokerage asking £20 million, two-thirds what it was asking when it last listed in 2017.”

From Q Costa Rica. “The vertical housing options continue to grow in Costa Rica and their overall condition is healthy, but sales have slowed since 2018, due to the current economic situation that has increased the caution of buyers and financial institutions, which increases the difficulty in selling and the high prices of some housing projects.”

“Although sales are still on the rise, the number of high rise units available in the Costa Rican market has increased, from 888 to 1,213 between 2017 and 2018, and 1,418 up to June 2019. Pedro Sanchez, director of Newmark Knight Frank Central America, (NKF), explained that the speed of sales was reduced significantly – in principle – by the environment of economic uncertainty, but added that prices also influence, telling Nacion.com that ‘… a significant percentage of vertical projects have high prices that limit the number of potential buyers.'”

The South China Morning Post. “Some 8,000 agents face ‘elimination’ as the prolonged protests and US-China trade war hasten the decline in Hong Kong’s property prices and shrink transactions amid a lack of buying interest. ‘In the last two weeks, the extent of decline has sped up,’ said Sammy Po, chief executive of the residential division at Midland Realty, adding that some homeowners were willing to slash prices by 10 per cent or more in the hope of finding buyers quickly.”

“Meanwhile, an investor made a loss of 14.4 per cent on the sale of a parking space at Kingswood Villas in Tin Shui Wai. The space, which was bought for HK$1.33 million less than four months ago, was sold for HK$1.14 million on Wednesday, according to Centaline.”

From Reuters on Australia. “Australian construction spending slid to its lowest in almost three years last quarter as a deepening downturn in home building spread to other sectors and posed a downside risk to growth across the economy. The weakness in housing is also unlikely to turn anytime soon as the industry wrestles with an overabundance of new apartment blocks begun when the market was red-hot.”

“‘With construction representing around 13% of the economy this result will dent GDP, potentially in the order of 0.4 percentage points,’ said Westpac senior economist Andrew Hanlan. ‘The housing downturn still has further to go and will weigh on conditions throughout 2019 and into 2020.'”

From Property Observer in Australia. “A Port Pirie, South Australia mortgagee home has seen it’s asking price slashed to $89,000. The house is being offered for less than it sold for in 2004 when the home transacted at $102,500.”

From Interest New Zealand. “There was plenty to choose from at the latest Auckland apartment auctions and although there were plenty of buyers in attendance, they remained extremely cautious and only around a quarter of the apartments on offer were sold under the hammer with most of those were leasehold.”

“However the vendors took a hit on price with both units selling for well under their original purchase prices. The first unit was a 36 square metre, one bedroom unit which sold for $145,000 compared to its 2006 purchase price of $335,000. The second unit with two bedrooms, two bathrooms and a floor area of 61 square metres, sold for $170,000 compared to its 2006 purchase price of $485,000.”

“The unit in The Landings sold for $170,000 compared to its 2005 purchase price of $270,000. The Parnell unit, which had building maintenance issues, sold for $210,500. Although a sales history wasn’t available for the Parnell unit it had a 2017 rating valuation of $730,000.”

“A feature of the current Auckland apartment market is the high number of newly completed apartments coming on to the market. These were usually bought off the plans two to four years ago, often by foreign buyers, with the expectation of reselling them for a handy capital gain when they were completed. But between them signing their contracts and the buildings being completed, the market has softened and many are now selling at a loss.”

“And even those owners who sell for near their original purchase price are left significantly out of pocket once agency commissions and other costs are deducted. At the latest apartment auctions three apartments from the newly completed The SugarTree Altro complex in Nelson Street on the fringe of the CBD, and another in the newly completed Union & Co. Building just around the corner, were put under the hammer. All were passed in.”

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  2. ‘The first unit was a 36 square metre, one bedroom unit which sold for $145,000 compared to its 2006 purchase price of $335,000. The second unit with two bedrooms, two bathrooms and a floor area of 61 square metres, sold for $170,000 compared to its 2006 purchase price of $485,000’

    ‘The unit in The Landings sold for $170,000 compared to its 2005 purchase price of $270,000. The Parnell unit, which had building maintenance issues, sold for $210,500. Although a sales history wasn’t available for the Parnell unit it had a 2017 rating valuation of $730,000’

    Over a decade of bubble wiped out. Oh dear…

    1. Changing the name of this development to The Hard Landings probably wouldn’t fly from a marketing perspective.

    2. Sounds like places in NZ are going for over 50% off. Is this a harbinger of the beginning of the end of the great Housing Bubble, or will the central banker fire brigade come to the rescue with another round of hair-of-the-dog hangover cures? It’s too early to say…

    3. It’s hard to keep up with every market, but wasn’t it recently that New Zealand was on fire? That is some seriously rapid crater. Same with Australia. At the same time, over $1,000 per square foot for Vancouver, still, seems outrageous. Vancouver is on the slow track.

  3. “Australian construction spending slid to its lowest in almost three years last quarter as a deepening downturn in home building spread to other sectors and posed a downside risk to growth across the economy.

    Up next: cascading defaults. The folly of encouraging debt-fueled speculation as public and monetary policy is going to be revealed for all to see, with policymakers, regulators, and enforcers the enablers of rampant fraud and criminality.

  4. “Meanwhile, an investor made a loss of 14.4 per cent on the sale of a parking space at Kingswood Villas in Tin Shui Wai. The space, which was bought for HK$1.33 million less than four months ago, was sold for HK$1.14 million on Wednesday, according to Centaline.”

    Still cheaper than renting!!!

  6. That over 30% of the world’s highest rated bonds currently pay negative yields reminds me of an argument I had with one of my academic advisors back in the summer of 2007. I was telling him about the looming subprime lending disaster, as evidenced by the Markit ABX subprime mortgage index collapse. Channeling Ben Bernanke, he asserted that the situation was contained.

    In retrospect, we were witnessing the calm before the storm, and also the interlude between when Wile E. Coyote overruns the edge of the cliff and when he leaves a crater in the valley floor below.

    1. Business News
      August 30, 2019 / 8:14 AM / 2 days ago
      Month of bond market milestones – How low can you go?
      Dhara Ranasinghe, Ritvik Carvalho, Tom Arnold

      LONDON (Reuters) – August has turned out to be another month of milestones for bond markets as an escalating trade conflict fans recession fears, pushing borrowing costs deeper and deeper into negative territory.

      Some $16 trillion of global debt, including corporate and sovereign bonds, now yield less than 0%, up from almost $13 trillion in early July.

      Investors, desperate to grab any yield, have rushed into longer-dated bonds: U.S. 30-year borrowing costs are down 60 basis points in August, set for their biggest monthly decline since the 2011 euro debt crisis.

      Long-dated Japanese bond yields have also hit three-year lows and are set for their biggest monthly declines in more than three years.

      “The bond market is sending a clear message that it expects low economic growth and low inflation,” said Neil MacKinnon, global macro strategist at VTB Capital in London. “It is saying: secular stagnation, here we come.”
      …

    2. This piece of the US real estate market is flashing a warning sign
      By Julia Horowitz, CNN Business

      London (CNN Business)The US market for commercial real estate flashed a warning sign in the first half of 2019.
      For the first time in seven years, overseas investors in office buildings and retail space became net sellers of properties, according to a new report from Real Capital Analytics, which tracks the sector.

      This follows a strong 2018, when cross-border acquisition of commercial real estate hit near-record levels.

      “These investors still purchased assets,” wrote Jim Costello, the report’s lead author. “They simply sold more than they bought.”
      …

    3. Insiders are selling stock like it’s 2007
      By Matt Egan, CNN Business
      Updated 1356 GMT (2156 HKT) August 27, 2019
      Rise in insider selling a yellow flag for bull market

      New York (CNN Business)
      The leaders of Corporate America are cashing in their chips as doubts grow about the sustainability of the longest bull market in American history.

      Corporate insiders have sold an average of $600 million of stock per day in August, according to TrimTabs Investment Research, which tracks stock market liquidity.
      August is on track to be the fifth month of the year in which insider selling tops $10 billion. The only other times that has happened was 2006 and 2007, the period before the last bear market in stocks, TrimTabs said.
      …

    4. The Financial Times
      Opinion Equity valuation
      Negative rates are a risk investors have not seen before
      It is virtually impossible to predict where the best place to put your money will be
      Merryn Somerset Webb
      August 30, 2019

      Stocks are overvalued, and US stocks are particularly overvalued. Their prices are unusually high in comparison to sales, earnings, the value of their asset books, and relative to gross domestic product (that last is Warren Buffett’s favourite measure).

      So you shouldn’t buy them. That’s hard to argue with. And it is why strategy group GMO’s latest estimate of the probable seven-year returns from stocks is profoundly gloomy: they reckon you will see a negative 3.8 per cent return from large US stocks and a negative 1 per cent return from small US stocks.

      Go global and you might see a small positive return. But GMO predicts that you would have to put much of your money into risky emerging market value stocks if you want to see anything that comes close to the long-term average real return from US stocks of 6.5 per cent.

      It all seems very straightforward. It isn’t. That is because the world’s most bizarre financial experiment ever, negative interest rates, continues. The European Central Bank currently charges banks minus 0.4 per cent on their deposits. The Swiss National Bank is even more out there, with minus 0.75 per cent.

      Negative rates are becoming the norm for institutional deposits — having to see cash on hand as a cost has taken a bit of getting used to, but now passes almost uncommented on in board meetings. The same could be on the way for retail deposits. UBS is introducing a negative rate on large deposits and rivals are likely to follow. Yields on German government bonds are negative across all timeframes. The 10-year UK gilt yield is now below 0.5 per cent for the first time ever. US 10-year yields are not negative, but they are at an all-time low. In total, $16tn worth of government bonds now actively eat your money if you hold them to maturity.

      Expect more of the same.
      …

    5. History has not dealt kindly with the aftermath of protracted periods of low risk premiums.

      — Alan Greenspan

    1. Trade war enters the realm of the surreal
      Economic clouds hanging over China and the standoff with the US threaten to rain on Xi Jinping’s big parade
      By Gordon Watts

      President Donald Trump uttered a word that is not even in his vocabulary. Then, China basically called him a liar.

      In the space of a week, the trade war between the United States and China reached new heights of rhetorical absurdity, rattling markets along the way, and ending in an escalation in tariffs.

      On Monday, Trump went into overdrive at the Group of Seven summit in France when he was asked at a media briefing whether there was any kind of strategy behind his ‘good cop, bad cop’ approach to Beijing.

      “Sorry, it’s the way I negotiate,” he replied, rolling his tongue over the S-word. “It has done very well for me over the years … It’s doing even better for the country.”

      Pause for breath. Hours earlier, Trump had gone on the offensive following the latest round of tit-for-tat tariffs before the G7 gathering. “China called last night our trade people and said let’s get back to the table,” he claimed. “They understand how life works.”
      …

    2. Business
      Trade war: US set to hit China with new wave of tariffs
      3 hours ago

      The US is due to impose fresh tariffs on $112bn (£92bn) of Chinese goods from Sunday.

      It marks a sharp escalation of the bruising trade war between the world’s two largest economies.

      The move is the first phase of US President Donald Trump’s latest plan to place 15% duties on $300bn of Chinese imports by the end of the year.

      Beijing says it has “ample” means to retaliate, while also calling for both sides to continue trade negotiations.

      If fully imposed, Mr Trump’s programme would mean that nearly all Chinese imports – worth about $550bn – would be subject to punitive tariffs.
      …

  8. In one market I pay attention to, it was exactly 6 years to the month from the price peak to the bottom, Jan/2006 – Jan/2012. Prices are at all-time highs right now. If this bust followed last, that would mean it would be another 6 years to see price lows, and that’s assuming prices didn’t continue to go up from here. In other words, it’s going to take years to sort this crap out.

    1. “If this bust followed last, that would mean it would be another 6 years to see price lows,…”

      Sounds about right, based on the last two significant housing busts (1990-1996, 2007-2013).

      1. I do not agree with a 6 year timeframe unless we start it in 2014. I do agree we likely still have awhile before true price discovery happens but this bubble is much more than that of the predecessors. When the funny money stops it will be like going down a steep roller coaster. We are already heading down, the QE brakes won’t hold us from the decline for much longer.

  9. A nation of broke-assed losers …

    America’s Wealth Hinges on Its Ability to Borrow Big – or Else
    https://finance.yahoo.com/news/america-wealth-hinges-ability-borrow-120000587.html

    (Bloomberg) — The U.S. economy is consistently ranked among the world’s strongest. But cut off its addiction to debt and exhaust its gold and currency reserves, and a very different picture would emerge.

    The nation’s health as measured by gross domestic product per capita would plunge into negative territory without its dependence on borrowed money, according to data compiled by Bloomberg.

    In fact, the U.S. would fall almost to the bottom of a ranking of 114 economies by GDP per capita. Only Italy, Greece and Japan would fare worse. That’s a seismic shift from America’s comfortable No. 5 spot on a list based on conventional measures.

    To get this somewhat dystopian measure, Bloomberg took each economy’s 2020 GDP as projected by the International Monetary Fund as a starting point. We then adjusted the number by removing the ability to borrow, while adding reserves to create an alternative wealth measure.

    U.S. per capita income of $66,900 would be slashed to a negative $4,857 using this measure. That’s a total loss of almost $72,000 for every man, woman and child.

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