thehousingbubble@gmail.com
Blog

Owners Have Understood That Times Have Changed And Conditions Must Be More Flexible And Prices Lowered

A report from the South China Morning Post. “Some heavily indebted mainland Chinese owners have been forced to sell their luxury apartments in Hong Kong at huge losses or discounts, as the economic slump at home takes a toll. At least 10 transactions – nine residential properties and one parking space – have incurred big losses, of up to HK$8.2 million (US$1.06 million), or been sold with steep discounts since the second half of July, according to agents.”

“‘The economies in both mainland China and Hong Kong are so-so during the pandemic, causing some mainland buyers to sell their properties at lower prices and losses, because they need cash,’ said Derek Chan, head of research at Ricacorp Properties.”

“Earlier this month, a third-floor unit at Fleur Pavilia in North Point was sold by creditors for HK$21.6 million, just three quarters of the HK$28.61 million that was paid less than three years ago. The mainland Chinese owner had been forced to abandon the luxury apartment when he failed to repay the mortgage, according to media reports.”

The Times of India. “At present, around 60% of the 3,000 villas between Neelankarai and Uthandi on ECR are vacant. Mohan Kartha, a real estate agent who has been dealing with expat rentals for a decade, said the villas market now become a tenant’s market. ‘There was a time when the landlord used to have three prospective clients from different MNCs and selected the best. Now, they are ready to revise their rent even by 50%, but cannot find expats.'”

The Guardian Nigeria. “These are trying times for property owners in highbrow areas as the exit of expatriates is forcing them to reduce rents. The reality of the moment has continued to dawn by the day in the nation’s real estate sector, mostly in luxury segment of the property market. It is worsened by depressed economic sentiment, and the excess supply of these properties – which is outstripping demand.”

“Nigerian Institution of Estate Surveyors and Valuers (NIESV), Sam Eboigbe said that if the pandemic lingers, most of the properties vacated by the evacuated expatriates will ultimately have their running tenancies and leases attain expiration and the sector will be negatively imparted with colossal loss of income. According to the Chairman, Royal Institution of Chartered Surveyors (RICS) Nigeria Group, Mr. Gbenga Ismail, ‘the absence of expatriates has caused a glut in the higher end rental market. Effectively, the rents have dropped at least by 50 per cent in Ikoyi particularly.'”

From Gulf News on Dubai. “Service charges on freehold property in Dubai will need to start dropping if new investors are to feel comfortable with buying again. More so as rental income has dropped by 30-40 per cent in the last 24 months, according to Rizwan Sajan, Chairman of Danube Group. ‘If rents have dropped to this extent, there’s no way property investors will want to keep paying high service charges like they do now,’ said Sajan. ‘Those service charges made sense when rental income was high… not now.'”

The Baltic Times. “The number of apartments in the Tallinn rental market this summer is higher than ever before, granting tenants a clear advantage, according to Karin Noppel-Kokerov, manager of real estate portal City24.ee. ‘Growth in the number of rental ads was already observed in spring, but no one could predict at the time we’d reach such figures,’ Noppel-Kokerov said.”

“Changes in the rental market are also indicated by ads increasingly being tagged as ‘without commission,’ ‘commission down 50 percent,’ or ‘first month free.’ ‘Rental apartment owners have understood that times have changed and conditions must be rendered more flexible and prices lowered for the purpose of finding tenants and maintaining profitability,’ Noppel-Kokerov said. The average offer prices of Tallinn rental apartments were 17 percent lower in July compared with the same month last year.”

From Expats on the Czech Republic. “More flats are available for long-term rental on the Prague market, and rents are dropping due to the effects of coronavirus, which has limited tourists who would have used short-term rentals. The number of available flats for long-term rental in Prague at the end of the second quarter of 2020 increased by 97.7 percent year-on-year to 14,738, compared to 7,453 in Q2 2019. This is the most flats available in the last four years. Compared to the previous year, rents fell in all parts of Prague, although in Prague 5 and Prague 9 the situation could be described as closer to stagnation.”

“‘We are seeing more significant changes in the metropolis in the rental housing market, where supply has doubled year-on-year —mostly at the expense of apartments that were originally intended for short-term rental. The growing supply of rental apartments also affects their prices. These have been gradually declining since the end of last year,’ Trigema board chairman Marcel Soural said.”

The Property Industry Eye on the UK. “Increasing numbers of landlords have had to shift from short to long-term lets due to lockdown. Analysis by Hamptons International found the reduced number of tourists and corporate relocations in Great Britain during the pandemic has caused landlords to look for tenants in the long-term rental market. This trend has mainly been concentrated around inner London, the agent said.”

“More than a third (37%) of homes in London which had previously been advertised on a short let basis are now being offered for long- term occupation, according to the research. However, landlords switching from a short to a long-term let are also having to take a reduction in rent. On average the change means a 35% cut in rental income, equating to £1,952 a month less, Hamptons International said.”

From Now Toronto in Canada. “Toronto rent is way down in the downtown area, according to a July 2020 report from Rentals.ca. The average price for condominium apartments in the M5H area listed on the site is $2,444. That’s down 22.2 per cent year-over year. The M5H area, which includes the financial district, suffered the steepest price decline, followed by the south core M5E area, which dropped 16.8 per cent. The M5A area, stretching from St. Lawrence Market to Regent Park, dropped 12.8 per cent. The M5V area, including the fashion and entertainment district, dropped 11 per cent.”

“According to Rentals.ca, downtown condo rents peaked at $2,740 in August 2019. The current average fell 16 per cent to $2,302. According to the Toronto Regional Real Estate Board, rental listings during the COVID-19 pandemic were up 42 per cent year-over-year. Meanwhile, rentals were down 24.8 per cent.”

The Australian Financial Review. “One in seven Sydney vendors slashed their asking prices in July, three times more than last year, as the decline in home values accelerated in the past three months, data from Domain shows. Across Sydney, 14.7 per cent of sellers have cut their prices, a figure slightly lower than the 15.2 per cent recorded in June, but still the highest proportion of reduced price listings in the country. A year ago, just 5.1 per cent of Sydney vendors were discounting their asking prices.”

“Vendors have slashed their asking prices by 4.3 per cent on average, roughly in line with the amount recorded in July last year. In Melbourne, more than one in 10 (11.5 per cent) vendors reduced their selling prices – almost four times the discount rate in 2019 and the second-largest proportion of vendor discounting nationally. Sellers had reduced their selling prices by an average of 4 per cent.”

“Domain senior research analyst Nicola Powell said the high proportion of vendors dropping their selling prices suggested the housing market would weaken further. ‘It’s correlated to price growth, so in a weaker market, you get a higher level of discounted listings and in a strong market, fewer vendors would cut their prices,’ Dr Powell said. ‘At the moment, vendors feel compelled to revise down their asking prices, which means that values are likely to continue to fall each month because we’re still seeing a portion of vendors having to lower their asking prices.'”

Related Posts

It Just…Stopped!

https://www.youtube.com/watch?v=2UGymKDG1xk https://www.youtube.com/watch?v=cAl5786Z6Bo https://www.youtube.com/watch?v=-Bq565Y7vSs

This Post Has 85 Comments

  2. ‘the sector will be negatively imparted with colossal loss of income…‘the absence of expatriates has caused a glut in the higher end rental market. Effectively, the rents have dropped at least by 50 per cent in Ikoyi particularly’

    Colossal lose of income? Glut? 50% off is unrealistic! Actually there’s some place in this article off 70%.

  3. Hollywood, SC Housing Prices Crater 24% YOY As Retirement Property Market Tanks

    https://www.zillow.com/hollywood-sc/home-values/

    *Select price from dropdown menu on first chart

    As one Central South Carolina broker put it, “We’ve got more retirees dying than we have people to replace them. What are we going to do with all these empty houses?”

  4. ‘rental income has dropped by 30-40 per cent in the last 24 months’

    Prices and rents have been falling in Dubai for 6 years. Same with London.

    1. What is even more amazing … is the 1,952 pounds less. That means that they were getting 5,500 pounds/month for short term leases – what the heck?
      ——–
      On average the change means a 35% cut in rental income, equating to £1,952 a month less, Hamptons International said.”

  5. The mainland Chinese owner had been forced to abandon the luxury apartment when he failed to repay the mortgage, according to media reports.”

    Point of correction: “Owners” don’t own anything until the final mortgage check clears. The lender reclaimed IT’S luxury apartment. There, fixed it for ya.

  6. A John Maudlin opinion…

    We Have an Economic Eight-Body Problem
    AUGUST 20, 2020
    If you have three large objects that have gravitational impact on each other, you can determine where they have been in the past.

    However, you cannot predict where they will be in the future. At least, not without great difficulty.

    In physics, this is called the three-body problem.

    In economics, we are well beyond the three-body problem. I think it is more like an eight-body problem. See if you agree:

    Body No. 1: The service economy has imploded. We don’t know when it is coming back. I am not going to argue the correctness of whether we should lock down or open up. I am simply talking about what is. And it appears that much of the economy is going to be locked down for some time. There is simply no telling when that part of the economy will normalize.

    Body No. 2: We have seen the largest central bank intervention, not just in the US but in many parts of the world, ever in history. Clearly that is keeping markets up. Furthermore, governments are providing fiscal stimulus in an unprecedented manner. In essence, the government borrowed money to give people the money that they would’ve earned in their jobs. Interestingly, not all of it was spent. We have seen a record amount of disposable income being added to savings.

    The US government is in a food fight over the next round of stimulus. Some amount will likely be determined. That is a major economic gravitational body, and we have no idea what it will look like this year, let alone next year and 2022.

    Body No. 3: Federal Reserve policy and, to some extent, government policy has short-circuited both Schumpeter’s creative destruction cycle and moral hazard. Companies with the lowest-rated junk bonds are refinancing their debt at lower rates. In some cases, that means we are keeping zombie companies afloat.

    Body No. 4: Global trade is beginning to implode. This is a global depression and it affects everyone. I was writing 20 years ago that the biggest threat to prosperity in the future would be protectionism and tariffs. I have made it clear that China is not a good actor, and we need to review our policies and our reliance upon them. But tariffs are just a bad idea, whether it’s China or Europe or whatever country.

    Body No. 5: On average, six companies with assets larger than $50 million have filed for bankruptcy every week since April. This is going to increase and become a tsunami. Small local companies don’t even bother filing because it’s too expensive. Every one of them represents jobs.

    This is the hard one…

    Body No. 6: The working class will be last to see the recovery. Most of the jobs that are being lost are by the least-well-off in our society. We’re talking about tens of millions of workers who can’t work from home. Those with children have to figure out how to take care of them in case schools don’t open… or if they don’t want to send them back. Unemployment insurance won’t cover the bills when the federal money runs out. And employment is not going to bounce back miraculously in Q1. It is going to be a long, slow climb.

    Now for some good news…

    Body No. 7: Entrepreneurs will re-emerge, and new ones will seize this moment to shine. All those businesses going bankrupt or out of business? They are run by entrepreneurs who have the entrepreneurial bug. It is part of their DNA.

    I was talking to a Dallas restauranteur who is “down” to three restaurants. He is stretching his cash and hoping for another round of PPP. He will breathe easier when he can get his normally booming restaurants up to 50% occupancy.

    Depressed? Not at all. He believes this will all eventually normalize, and he will have the greatest opportunity he has ever had. He can see 10 restaurants in his future. This is the kind of vision that accelerates recoveries.

    He and hundreds of thousands of other entrepreneurs throughout the country and the world look for opportunity. It’s just what they do. They can’t help themselves.

    It will take time, and they have to figure out where the capital will come from. But I am convinced that entrepreneurs will be the ones to dig us out from this, not governments.

    Body No. 8: We are in the midst of The Greatest Transformation in history. Elon Musk just launched and landed a massive rocket as a test. That is just a very visible example of tens of thousands of new technological revolutions happening all around us.

    These disruptive technologies will truly change the world. I can’t even begin to describe what is happening in the biotechnology and aging space. Artificial intelligence, robotics, self-driving cars, incredible advances in agriculture, shipping, quantum computers… you name it. The list is just too long. And it’s growing.

    Every one of the “bodies” I mentioned will have a significant recovery impact. We don’t know how they will interact.

    In the meantime, take heart. Yes, there are a lot of miles left on this road, and it’s going to be lumpy and bumpy. But we have a lot to look forward to along the way. Get my timely take as that happens here: https://twitter.com/johnfmauldin.

    We Have an Economic Eight-Body Problem | Mauldin Economics
    https://www.mauldineconomics.com/editorial/we-have-an-economic-eight-body-problem/zhb

    1. Body No. 8: We are in the midst of The Greatest Transformation in history. Elon Musk just launched and landed a massive rocket as a test. That is just a very visible example of tens of thousands of new technological revolutions happening all around us.

      LOLZ. Give me a fawking break. There’s nothing new there. Fanboi-ing over Elon Musk and adding it to the article? Pleeeeease….

      2. What SpaceX is doing is cool. But I don’t think it will have the kind of economic and technological impact the original space race did. Sure, he’s undercutting the competition and he’s recycling his rockets. But few are mesmerized by what SpaceX is doing. I don’t think any kids are buying Revell Falcon 9 model kits. I looked on the Revell website. They don’t offer it.

        1. The cars and the rockets are sexy. But I’m still partial to his Boring company. And maybe he can work his magic on the electricity storage issue. Then California can air-condition its citizens later than 7 pm.

    2. “We are in the midst of The Greatest Transformation in history.”

      Funny the effect of a little transistor has had on the lives of 9 Billion two.leggeds who need to sleep in $helter.$hacks.

  7. Effectively, the rents have dropped at least by 50 per cent in Ikoyi particularly.’”

    is that a lot?

    1. Effectively, the rents have dropped at least by 50 per cent in Ikoyi particularly.

      I’d love to see this come to a town near me. Unfortunately all I see are wishing prices on everything.

  9. ‘Growth in the number of rental ads was already observed in spring, but no one could predict at the time we’d reach such figures,’ Noppel-Kokerov said.”

    I keep thinking there was this fringe blog on an obscure corner of the Internet where posters regularly made such predictions, but the name escapes me at the moment.

  10. On average the change means a 35% cut in rental income, equating to £1,952 a month less, Hamptons International said.”

    Yes, but Shirley their mortgage payment has a corresponding drop, does it not? So you see it all equals out.

    Oh, wait….

  11. ‘It’s correlated to price growth, so in a weaker market, you get a higher level of discounted listings and in a strong market, fewer vendors would cut their prices,’ Dr Powell said.

    You know, Dr. Powell, a guy holding a stop sign at a road construction site could’ve told me the same thing.

      1. San Francisco is changing, again, sort of like that sci fi movie, Dark City, where “tuning” changes the landscape.

        It seems like every driveway there has a sign that says, “No Parking.” At one house, the sign said, “Don’t even think about it!”

        1. There’s a house on my block that has a sign that says “Beware of…well, just beware.” The guy also flies a Gadsden flag.

    2. San Francisco turned ghost town? Here’s how empty the city really is

      The place was an absolute armpit for years. I remember that article where the young “professional” thought she’d give SF a whirl. After people beating on her door, feces and needles everywhere outside of her rental, terrifying interactions with deranged druggies and homeless men on a constant basis, and an overall fear for her own well-being that never subsided, she left the state after less than a year.

      1. There’s lots of beautiful places to live in SF, but they don’t come cheap. You can escape a lot of humanity by living out in “the avenues” where the foggy dampness makes life miserable for the street people.

        1. I never knew “The Avenues” was a real place. I always just thought it was a made up Night Ranger lyric.

          1. In the sunny eastern half of SF the addresses are streets, e.g., 19th street whereas out in the foggy western half of town it’s 19th avenue.

    3. Meanwhile, just south of SF…

      Santa Cruz County asks visitors to leave immediately as fires grow
      Wildfires
      by: Alexa Mae Asperin
      Posted: Aug 20, 2020 / 12:37 PM PDT / Updated: Aug 20, 2020 / 02:51 PM PDT

      SANTA CRUZ COUNTY, Calif. (KRON) – All tourists and visitors who are staying in local hotels, motels, and vacation rentals in the county are asked to leave immediately.

      The request comes from the Santa Cruz County Emergency Operations Center in an effort to free up spaces that can be converted into shelters as the CZU Lightning Complex fires continue to grow.

      Officials said local shelters are near capacity.

      “The scale of existing and anticipated evacuation orders is unprecedented and the need to safely house evacuees is critical,” said Jason Hoppin, county spokesperson, in a statement.

      New visitors are advised not to travel to the county.
      …

  14. The prospect of a Democrat back in the WH has been very stimulative for gun sales.

    The Financial Times
    US gun and ammunition sales surge ahead of election
    Industry executives attribute demand to the pandemic, protests and presidential politics
    The number of new gun buyers triggering background checks hit a record in June
    © GETTY IMAGES NEWS & SPORT
    …

    1. Gun and ammo sales have gone through the roof. The MSM says this is because of COVID. Because shooting a virus will halt this pandemic in its tracks.

  15. Somehow the DNC has my email info but they’re referring to me as “Janet.” I have no idea where they got it from as I have never been a registered Dem and I voted for Trump. Weird.

      1. Love the American Gothic reference!

        It was on loan during my 2016 visit to the Art Institute of Chicago, so I missed my first chance to see it first hand in over two decades.

    1. Forgive them for they know not what they do, their reality has been hijacked and they mindlessly obey.

    2. I like to see my feet when I’m walking sort of like my fingers while keyboarding. Anyway, it really looks dangerous unless its made of a transparent material. How about a hat with mosquito like netting to catch those droplets?

  18. Normally I wouldn’t post two songs in one night but then I saw the comment below.

    Trampled Under Foot (1990 Remaster)
    Led Zeppelin

    Mehdi Saad
    2 years ago

    My car had the check engine light on. Then this song came on and it went off.

    thumbs up 510

    https://youtu.be/vamReLUOlrA

    1. 1990 Remaster

      These modern *.flac audio files paired with a bluetooth noise cancelling headset are awesome!

  20. Have you ever before seen a market where the bears were more consistently wrong?

    I have. It was Henry Paulson’s Plunge Protected rally in 2007 against the backdrop of a subprime mortgage lending implosion the likes of which the world had never before seen, just aead of the 2007-2009 financial collapse. And yet the headline Wall Street market indices kept us collectively awestruck with their consistent daily gain, before the wheels fell off.

    2. U.S. Futures are deep in the red this morning. The PPT is going to have to pump some serious liquidity today to make sure these Ponzi markets close in the green. European markets are solid red, too.

      2. The PPT has done an amazing job of overriding market forces that keep trying to realign share prices with fundamentals.

          1. I wonder what stopped them from doing it forever in the 2007-2009 50% off sale on Wall Street?

          2. I wonder what stopped them from doing it forever in the 2007-2009 50% off sale on Wall Street?

            They had more Congressional oversight. Now they answer to nobody.

        2. market forces that keep trying

          Don’t discount persistent mania. Take the Lumber Futures, continuing a moonshot while spot lumber prices and housing starts are flat. No “market force” is visible. Nobody actually using 2x4s would pay double for a future rail-car load what they could pay for delivery today.

        3. The PPT has done an amazing job of overriding market forces that keep trying to realign share prices with fundamentals.

          The nice thing for manipulators is that you don’t have to buy all the houses or all the stocks to keep prices up. You just need to buy a few that were the most likely to go down significantly to make the investment seem safe. Then the speculators with credit will do the rest.

  21. ‘Under legal pressure, the rule-making arm of California’s court system, the largest in the United States, has rescinded its pandemic-related emergency order that blocked the state’s courts from hearing eviction proceedings.’

    ‘Landlords in California and across the country have reportedly been hard hit by emergency eviction moratoriums and by the inability of some of their tenants to pay rent in the troubled economy.’

    ‘The Judicial Council of California voted 19–1 to scuttle emergency rules governing evictions and judicial foreclosures imposed by the body on April 6. California Chief Justice Tani G. Cantil-Sakauye acknowledged in a statement that the council had overreached.’

    https://www.theepochtimes.com/california-court-system-lifts-eviction-moratorium-after-lawsuit_3469374.html?ref=brief_News

          1. Bill Burr with his Howdy Doody face gets nervous above 100th. But he had to go up there to get to his girlfriend’s house. At least according to the bit :-).

          2. I grew up around 207th Street. Kids from the projects who went to the middle school down the block used to sit on our stoop blocking our way into our apt building. One time a girl put her hand out and said “Give me a tip.” My friend, no shrinking violet, put her hand flat on her face, pushed her over backwards and said “Don’t smoke in bed.”

  23. Barron’s: Tesla’s stock has become unstoppable

    Home Markets Need to Know
    Need to Know
    Here’s why stock prices are unsustainable, according to this fund manager
    Published: Aug. 21, 2020 at 7:12 a.m. ET
    By Steve Goldstein

    Terri Donelson, left, and her husband, Stephen, walk up their driveway to see friends and family awaiting him at his home in Midlothian, Texas on June 19, 2020, after his 90-day stay in the Zale Hospital. A pandemic has proven an unusual backdrop to record stock market prices.

    In a week in which the S&P 500 set a record in the midst of a pandemic, it’s fair to at least consider the bottom 495 or so components.

    Michael Batnick, the director of research at Ritholtz Wealth Management, points out 94% of the S&P 500 (SPX, +0.31%) components are trading below their 52-week highs, though the median gain is 63% from its 52-week low. This chart really demonstrates how tilted the recovery has been toward the bigger companies.

    Christopher Pavese, chief investment officer at North Carolina boutique investment firm Broyhill Asset Management, posts a similar chart comparing the MSCI All-Country ex-U.S. index to the S&P 500, which itself is just driven by the technology giants.

    Pavese outlines all the uncertainties — including whether there will be a second, or third wave, of coronavirus, how many businesses will fold and whether record stimulus will create rampant inflation or whether the crisis will result in deflation. “What we do know is that we have never seen stock prices at such extremes coincide with this degree of uncertainty. We also know that living in an imaginary world of certainty can create big problems managing money in the real world,” he says in an investment letter.

    Pavese says there are about to be the best opportunities in distressed investing in a decade, as he calls the current market unsustainable.

    “If markets are trading at half of today’s levels in a year or two, it will seem obvious to everyone in hindsight, that today’s stock prices and extreme divergences were completely unsustainable,” he writes. “The consensus is eager to look past today’s earnings, through to next year’s V-shaped rebound in profits. But we are a long way from anything that resembles normal, as profit margins are likely to remain depressed by revenue shortfalls and incremental costs for years. As a result, today’s stock prices, still levitating near all-time highs, leaves little margin of safety and even less to get excited about.”
    …

    1. Will a steady shower of Democrat-provided green energy subsidies turn TSLA into a perennial cash cow?

      1. i$n’t there any Corpooration$ ca$h cow$ to found in the x786 billion$ (yearly) $pent in Mega.Military.Defen$e.expenditure$?

        Got.I$lamic.Nation.Building?

      2. Tesla’s stock set to extend gains above $2,000, while peers and the broader market are falling
        Published: Aug. 21, 2020 at 8:50 a.m. ET
        By Tomi Kilgore

        Shares of Tesla Inc. TSLA, 2.50% rallied 1.6% in premarket trading, to extend the recent run up to their first-ever close above the $2,000 mark, and to buck the weakness seen in its peers and the broader stock market. The electric vehicle maker’s stock shot up 6.6% on Thursday to close at a record $2,001.83, just 50 days after it first closed above $1,000 on June 10.
        …

    2. A pandemic has proven an unusual backdrop to record stock market prices.

      It’s not so unusual when you have a cabal of Keynesian fraudsters in charge of our monetary policy.

  24. Is the red hot summer real estate sales season in California as hot as it seems this year? The market seems to be on fire.

      1. And prices are commensurately high. Plus people who stopped paying the monthly are being allowed to live rent free, for the time being, which tends to limit inventory.

        At what point will the Great California Exodus catch up with the San Diego County real estate market?

    1. “A single mother of three children, Sandra Bivin of Denver, Colorado, is now being forced to try to survive on $58 a week since the $600-a-week expanded unemployment benefits expired on 26 July.”

      Did she endlessly henpeck her family’s provider until he escaped?

      1. More likely her three children were sired by three different deadbeat bad boys, otherwise there would be court ordered child support income.

        Wouldn’t she and her three kids qualify for SNAP, WIC and other guberment free cheese?

      1. I think we figured out this was due to a COVID-19 related supply squeeze. Which suggests there could be a price collapse after COVID-19 ends.

        1. All the lumber mills around here are running. I don’t think COVID needs to end for price discovery to happen on lumber.

Comments are closed.