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Perfect Family Homes Sitting Vacant — Because Nobody Wants To Buy Them

A report from Bloomberg on Hong Kong. “Amid all the doom and gloom in Hong Kong’s housing market, there appeared to be a silver lining, when a developer sold all 488 apartments on offer in a single day. Sino Land Co Ltd. reported the sellout in Kowloon East on Thursday. But the average price of HK$17,500 ($2,241) per square foot was about 20 percent below recent prices for projects in the area, according to Bloomberg Intelligence.”

“Country Garden Holdings Co Ltd. sold just 21 of 110 units on offer at a New Territories project since sales started in late November, despite discounts. Another project, by different developers and featuring some of the city’s smallest apartments, sold only two of 73 units last week.”

“Developers could be poised for a challenging year, with more than 30,000 new units going on sale in 2019, the newspaper Oriental Daily estimated, citing its own data. That’s more than double the number sold this year.”

From Mingtiandi on Hong Kong. “Distressed mainland conglomerate HNA Group has reportedly taken a big loss on properties it owned in Hong Kong’s Causeway Bay district, selling them off this past week for HK$70 million less than what it paid for them just last year.”

“The airline took a 21 percent loss of HK$70 million on its cut-rate sale of the homes at the Yoo Residence project, after paying HK$330 million for the package last December. The 5,193 square foot (482 square metre) duplex had set the record for priciest home in Causeway Bay at the time, when HNA purchased it for an average price of HK$63,000 per square foot.”

“The Causeway Bay haircut follows just one month after HNA sold two retail spaces in the same at a HK$33.5 million loss, taking its total losses to over HK$100 million on the combined properties, or the equivalent of about 30 percent of its original investment.”

From Shine on China. “Weekly sales of new homes fell below the 100,000-square-meter threshold again in Shanghai as weakness extended for another week, according to the latest market data. ‘Only the Pudong New Area managed to register more than 10,000 square meters of sales while several downtown districts suffered zero sales again as momentum among buyers continued to fall,’ said Lu Wenxi, Centaline’s senior research manager.”

“On the supply side, three developments, or 111,000 square meters of new homes in total, were released to the market, a surge of 262 percent from the previous seven-day session.”

From News.com.au on Australia. “Across the country, there are scores of brand new, spacious, perfect family homes sitting vacant — because nobody wants to buy them. For example, there are a slew of homes in the newly established suburb of Moncrieff in the Gungahlin district of Canberra which have been languishing without buyers for months — and even years — on end.”

“The four-bedroom home pictured below, for example, is described as ‘perfection’ and a ‘dream home’ and is listed for $755,000 — yet has been on the market since July 2017. And it is far from unique, with houses in new estates across Australia’s states and territories struggling to sell in the current market.”

From Toronto Storeys in Canada. “The size and sheer volume of GTA condo cancellations in 2018 sent shockwaves through the industry and left thousands of purchasers stunned and upset. According to condo analytics firm Urbanation, from January 1 to mid-December, 2018, 4,202 units  (or 12 buildings across nine developments) were cancelled.”

“That’s staggering, considering that in 2017 there were 1,678 cancelled units in eight buildings and just 379 cancelled units across three buildings in 2016.”

“‘All projects that cancelled in the last year had more than 80 per cent of the units sold,’ says Pauline Lierman, Urbanation’s director of market research. ‘The biggest factors are cost and financing.'”

“Icona, with its 51 and 53-storey towers, launched in February 2017. The condo sold out quickly but was cancelled in September. The Gupta Group also cited an inability to obtain satisfactory financing as the reason for their project’s termination.”

From The Guardian in the UK. “Asking prices for homes coming on to the market in the UK are nearly £10,000 lower than they were in October, as the property market headed for its worst annual performance in almost a decade.”

“Miles Shipside, a Rightmove director and housing market analyst, said there was more to the drop in asking prices than the usual festive slowdown in buyer interest. He said: ‘It’s usual for new-to-the-market sellers to price lower in the run-up to Christmas to tempt distracted buyers, so we should not read too much into the mere fact of two consecutive monthly falls.'”

“‘However, these falls have been larger than usual, making this the largest fall over two months for six years, showing that there are more than just seasonal forces at play.'”

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This Post Has 33 Comments

  2. ‘The size and sheer volume of GTA condo cancellations in 2018 sent shockwaves through the industry and left thousands of purchasers stunned and upset’

    The way the Canadian media reports this is “oh these poor buyers missed out on all that appreciation while they waited!” Truth is, they’d be hosed if it wasn’t cancelled, and the reason they can’t get financing (if that’s not just an excuse from the developer) is it would collapse. People would just walk away from their deposits leaving the lender stuck.

  3. ‘‘Only the Pudong New Area managed to register more than 10,000 square meters of sales while several downtown districts suffered zero sales again as momentum among buyers continued to fall’

    Lu did say prices were up. Just how you get higher prices on zero sales must be Chinese math.

    1. “as momentum among buyers continued to fall”

      This sucker could go down — George W. Bush, 2008

    2. Does the Pudong New Area have a designated patio where all the residents who overpaid can go to stamp their little feet?

  4. “Distressed mainland conglomerate HNA Group has reportedly taken a big loss on properties it owned in Hong Kong’s Causeway Bay district, selling them off this past week for HK$70 million less than what it paid for them just last year.”

    Can someone explain how this is parallel to the Japanese in the 80’s? What are the similarities and differences between the two?

    1. Don’t know about parallels, but it looks like that HNA Group is a heavily indebted government airline losing its ass in real estate speculation.

  6. “Across the country, there are scores of brand new, spacious, perfect family homes sitting vacant — because nobody wants to buy them.

    Wrong. They’re not selling because they’re not priced to sell. Nobody wants to overpay, especially when the downside risk vastly outweighs any upside potential.

  7. I bring sad tidings of great sorrow for the stock market bulls who are HODLing out hope for a Santa Claus rally:

    THE WORST IS YET TO COME.

    1. The trend ain’t your friend. And it may have dawned on you by now that Bitcoin, stocks, and housing are all following the same downwards trending trajectory, though on successively longer time horizons.

      In all three cases, the best plan is to sell now, or get priced in forever.

      The S&P 500’s lower low warns that the worst is yet to come
      By Tomi Kilgore
      Published: Dec 17, 2018 6:16 p.m. ET

      The benchmark index’s fall to 14-month low on rising volume, coupled with recent lower peaks, suggests primary trend is down
      Everett Collection
      Bearish signs keep piling up

      The S&P 500 index just did something that a widely followed, century-old theory of market analysis would say is a sign that warns the worst may be yet to come.

      The S&P 500 (SPX, -2.08%) fell 2.1% Monday, to close at the lowest level since Oct. 9, 2017. Following a recent pattern of lower recovery highs, the Dow Theory would suggest the primary trend is now down.

      “Quite simply, upside follow-through has been lacking, keeping negative momentum in the driver’s seat,” said Frank Cappelleri, executive director and technical analyst at Instinet. “And if this doesn’t change, the same scenario will persist.”

      The Dow Theory has remained relevant with investors for over 100 years, because it’s more about how investors behave when fear and greed take over, which hasn’t changed, than about monitoring numbers on a chart. The theory looks to identify major trends, with the idea being the best way to make money is to follow the market’s trend, not to try to beat the market by picking turning points.
      …

  8. How far back into 2017 price levels do you expect the headline Wall Street indexes to retrace by year-end?

    1. The Financial Times
      US equities
      US stocks fall 2% to lowest level in 14 months
      Gloomy mood extends to Asia, where Japanese equities hit 18-month low
      © Getty
      Peter Wells and Nicole Bullock in New York
      2 hours ago

      US stocks closed at the lowest level in 14 months as investors worried about the health of the global economy ahead of the final policy meeting of the Federal Reserve this year.

      The declines drove Wall Street deeper into correction territory after a late-afternoon wave of selling swept through the tech, energy, materials and financial sectors and led to a more than a 2 per cent stumble on Monday for the major indices.

      Asia-Pacific stocks went into retreat on Tuesday, with Japan’s Topix hitting an 18-month low with a drop of 1.7 per cent. Hong Kong’s Hang Seng index was down 0.9 per cent in early afternoon trading while China’s CSI 300 index of Shanghai- and Shenzhen-listed companies shed 1.2 per cent, with losses deepening after a speech by China’s president Xi Jinping that failed to hint at any major new initiatives or reform.
      …

  9. I live in Hong Kong.
    I saw the second hand home price decrease a few percent only.
    The starting home price per feet in Kowloon East was $17500 ( around 200 units ) and thousand people rushed to buy. The developer ( Sino ) increase the selling price a few percents in each selling stage ( 100 – 200 units ) but still a lot of people bought immediately.

    1. “It’s going to take a very specific buyer who wants to spend a few million on 5,000 square feet of space for a secondary home,” explains Histed.

      What’s wrong with a luxury hotel if you visit Palm Springs?

    2. “Either way, a buyer will still benefit from a significant discount from the $9 million asking price of four years ago.”

      How does the buyer actually benefit from this? For example, if they could turn around and resell the property for $9 million, I’d call that a benefit. I’m struggling to see a tangible benefit here; besides, as the article points out, there is quite a bit of additional cash required for updating in order to bring the property up to modern standards.

  14. “The Causeway Bay haircut follows just one month after HNA sold two retail spaces in the same at a HK$33.5 million loss, taking its total losses to over HK$100 million on the combined properties, or the equivalent of about 30 percent of its original investment.”

    There go them Christmas bonuses

  15. I remember 1994. It felt like we were still in a recession…especially California.

    How the stock market’s 2018 performance ‘rhymes’ with 1994, in one chart
    By William Watts
    Published: Dec 17, 2018 3:53 p.m. ET
    1994 is a ‘possible analog’ to the current market environment: Canaccord’s Dwyer
    Everett Collection
    Forrest Gump was one of the highlights of 1994.

    Here are some ingredients for stock-market gloom: A trade dispute between the world’s two largest economies, a Federal Reserve pushing the yield curve toward inversion, and a U.S. president under investigation by an independent counsel.

    But enough about 1994.
    …

    1. I remember 1994. It felt like we were still in a recession

      Yeah it did. I was in my senior year of my engineering program and not getting much response in my job hunt. The only bright spot was just discovering the internet in the form of special interest email lists.

      1. 1994 I took a job as a “human directional” aka sign flipper trying to attract people leasing empty Orange County apartment complexes. This was during the infancy before it got fancy with sign-flipping schools and what not.

        Good money – $10 an hour cash for a 16 year old kid needing insurance and gas money for his car.

    1. https://www.bloomberg.com
      Time to line up some bagholders to buy crypto from the pros.

      Technology
      Pros Are Ditching the Bitcoin Market, JPMorgan Says
      By Gregor Stuart Hunter
      December 18, 2018, 4:38 AM PST
      – Cryptocurrency trading dwindles as price holds below $4,000
      – Falling open interest, hashrate signal market freezing over

      The prolonged digital-asset slump is scaring off institutional players, according to JPMorgan Chase & Co., suggesting a fulcrum for cryptocurrency markets is giving way.

      “Participation by financial institutions in Bitcoin trading appears to be fading,” analysts including Nikolaos Panigirtzoglou wrote in a research note dated Dec. 14. “Key flow metrics have downshifted dramatically,” including in futures markets and in average volumes, they said.

      /news/articles/2018-12-18/pros-are-ditching-bitcoin-market-as-interest-ebbs-jpmorgan-says

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