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There Are Stories About Buyers Walking Away From Their Purchases Every Day

A report from the South China Morning Post. “A buyer has walked away from the purchase of a luxury house on The Peak, losing a deposit of some HK$36.09 million (US$4.6 million) in the latest sign of trouble in Hong Kong’s property market. The unidentified buyer did not proceed with the transaction for House 16 on Mount Nicholson, according to official documents, after agreeing to buy it for HK$721.88 million on December 31.”

“‘It is definitely not good news for the market,’ said JLL executive director Joseph Tsang. ‘There are stories about buyers walking away from their purchases every day, but this one is more eye catching.'”

“The house, with a private garden, rooftop and swimming pool in Asia’s most expensive address, was sold at a unit price of HK$90,484 per square foot in December, more than 7 per cent cheaper than the adjoining house which was sold in April.”

“As Hong Kong’s property market cools rapidly from its over two year surge up until last August in the face of a slowing economy, rising mortgage rates and uncertainties over the US-China trade war, cases of cancelled sales have been rising – there were nine in the first nine days of this year alone.”

“One notable one involved the HK$50.62 million purchase of a 1,576 sq ft unit at the luxury Ultima residential development in the Ho Man Tin district, where the buyer ­forfeited a HK$2.53 million down payment, according to the ­government website.”

“‘But what is most worrying is the rising number of homes being repossessed by banks and the growing number of companies filing for bankruptcy,’ said Tsang. ‘This is a reflection of the worsening economy, although it is still too early to say whether it would trigger a wave of defaults.'”

The Herald Sun in Australia. “Melbourne ended 2018 with a more than 36,000 home hangover as the city’s struggling auction market and falling house prices fell short of seller expectations. New figures from SQM Research reveal the number of homes still listed for sale at the end of last year was up 25 per cent on the about 29,000 listed at the same time in 2017.”

“SQM Research boss Louis Christopher said the higher figure at the end of 2018 was a sign homesellers were refusing to accept low-ball offers. ‘It’s predominantly older listings that are just not selling,’ Mr Christopher said. ‘This is just further evidence of the extent of the housing market correction. The base of the market in Melbourne has just blown right out.'”

“But that was not an open invitation for homebuyers to make low-ball offers. ‘Buyers can’t be too greedy and try to pick up a property for a ridiculous price,’ he said. ‘There are a lot of people who are refusing to sell for less.'”

“Further figures from SQM show the number of homes for sale across the city fell from 43,727 at the end of November last year, but Mr Christopher estimated a substantial portion of that reduction was driven by homesellers withdrawing their property rather than selling it.”

“‘There’s been a fair bit of people pulling out of the market entirely,’ Mr Christopher said. ‘The reality is that by and large sellers have not been willing to accept the initial bids and that’s meant that there’s more and more pressure on the market,’ Mr Christopher said. ‘Those who meet the market sooner are far better off than those who ride the market down.'”

This Post Has 36 Comments
  1. ‘But that was not an open invitation for homebuyers to make low-ball offers’

    Yes it is Louis.

    ‘Buyers can’t be too greedy and try to pick up a property for a ridiculous price’

    This is an interesting notion. Just who exactly is receiving money and who is paying?

    1. Those aren’t lowball offers, Louis. That’s the new market value. And that’s as good as it’s going to get. It’s all downhill from here as FBs capitulate and chase the market down.

  2. ‘losing a deposit of some HK$36.09 million (US$4.6 million)…after agreeing to buy it for HK$721.88 million on December 31’

    That was an expensive 10 days.

    1. You have to wonder about the thought process that leads an investor to flush millions of dollars down the toilet like that. What were they thinking when they made the downpayment, and what change in their thinking led them to walk away, despite the massive loss?

      1. This story brings to mind an incident in my own family towards the end of 2006. Lil Sis and my former BIL jumped at the chance to buy lakefront property for what sounded to me like a peak bubble price, in addition to the large family-sized home their family of three already owner-occupied. I talked her out of signing the contract, but ex-BIL got the final say, and after some arm-twisting, they went ahead and bought.

        The lakefront property became a source of marital friction and a factor in their eventual divorce. Ex-BIL wound up all alone in the large lakefront home, a sad scenario destined to get even sadder when the mania valuation finally deflates in the incipient real estate bust.

        1. “The lakefront property became a source of marital friction and a factor in their eventual divorce”

          And to think, the realtor that sold them that beautiful lake front shack assured him it would fix all their problems and bring them closer together.

          1. We did have some fun family times down at the lake house as our kids were growing up, but eventually the backlog of unadressed home maintenance concerns, coupled with the realization that the place was destined to remain an uncompleted construction project in perpetuity, outweighed all benefits of ownership.

  3. ‘Buyers can’t be too greedy and try to pick up a property for a ridiculous price,’ he said.

    Watch and learn, Louis.

    1. It worked for sellers on the way up. Bubbles are more-or-less symmetrical. Why shouldn’t it work for buyers on the way down? BTW, I don’t think “ridiculous speed” will be enough on the price cutting side. Let’s go right to “ludicrous speed” and get this thing over with already! 🙂

      https://www.youtube.com/watch?v=ygE01sOhzz0
      Space Balls – Ludicrous Speed

    2. “Why shouldn’t it work for buyers on the way down?”

      That’s a good question to ask your local Federal Reserve Bank representative, as it is their policy to backstop housing prices.

    3. No rules in RE. If your a “must sell” seller, I will be sure to low ball the sh!t out of your shack. You don’t like my offer then let the bank rip the rug out from your feet

  4. ‘Buyers can’t be too greedy and try to pick up a property for a ridiculous price’

    I bet this guy NEVER ever said that sellers can’t be too greedy and try to get rid of a property for a ridiculous price 😀

    1. There’s no law prohibiting sellers from asking a price no buyer will pay, or buyers offering a price no seller will accept. However, by definition, the former is above market value while the latter is below. And if no homes are selling because sellers are generally unwilling to accept what buyers are currently offering, there’s a market collapse.

    2. Only works one way long as it’s up so as not to effect the realtors commission check. For my own research (just to hear what realtors hear as guidance), I have been listening to some realtor coaches, Tim and Julie Harris. The tone they have is sellers SHOULD be willing to lower prices and the used home salesmen need to knowledge them to do so. Someone on the HBB posted a link to them and I actually find them to report “some” factual RE info / advise (mabye they source it from HBB?). The latest podcast I heard they are recommending reverse offers. Basically sellers making offers to buyers that come to open houses.

      1. “Basically sellers making offers to buyers that come to open houses.”

        Such as, ‘If you purchase our home, we promise to regularly return to feed the squirrels’?

  5. The one China export the world doesn’t want
    By Matt O’Brien
    10 January 2019 — 11:51am

    You shouldn’t worry too much about the big Wall Street sharemarket sell-off. You should worry about China’s instead.

    Indeed, while it might not have gotten as much attention, China’s benchmark stock index was, with its 25 per cent drop, the world’s worst-performing in 2018.

    Part of this was because of the fear that US President Donald Trump’s nascent trade war might turn into something even more serious, but only a part.

    More significant than what Washington was doing, you see, was what Beijing was up to. That’s because, in what has seemingly become an every-other-year tradition recently, China’s government has stepped on the economic brakes pretty hard in an attempt to put an end to what looks like some bubbly behaviour.

    The important thing to understand here is that, in the depths of the Great Recession, Beijing unleashed a stimulus the likes of which the world hadn’t seen since World War II.

    It amounted to some 19 per cent of its gross domestic product, according to Columbia University historian Adam Tooze. By point of comparison, US President Barack Obama’s stimulus was only about 5 or 6 per cent of US GDP.

    Aside from its size, what made China’s stimulus unique was the way it was administered. The central government didn’t borrow a lot of money itself to use on infrastructure, but it pushed local governments and state-owned companies to do so.

    The result was a web of debt that’s been even harder to clean up than it might have been because of all the money that unregulated lenders – “shadow banks” – were frantically handing out above and beyond what Beijing had been hoping for.

    1. Here’s the takeaway from the article:

      It’s long been said that when the United States sneezes, the rest of the world catches a cold. Well, it’s been a long time since China has sneezed, but with its industrial profits falling for the first time in three years and its car sales dropping for the first time in nearly 30 years, we might find out just how sick it can make everyone else.

      That’s one Chinese export we don’t want.

    2. It amounted to some 19 per cent of its gross domestic product

      We were hearing numbers like $24trillion. That would be multiples of its GDP.

    1. One of the benefits of digital devices, is their wonderful ability to take amazingly clear photos of vehicle license plates of knuckleheads doing de$truction on taxpayers funded $tate & Federal land$.

      (Yes, eye am a proud American volunteer camp host …informant!)

  6. Are you gonna buy Mr Market’s baby bear dip this morning? January isn’t even half over yet, so there’s plenty of time for more January effect stock market gains ahead. And the big scary dips of December 2018 are a thing of the past, now that the Plunge Protection Team is back from the government shutdown.

    1. ANALYSIS | Jan 02, 08:11 GMT
      Fake Markets and Return of the “Plunge Protection Team”
      Clint Siegner
      Clint Siegner Money Metals Exchange

      It’s amazing what passes as a market these days.

      Stocks rallied during the Christmas week, and the mainstream financial press would like you to believe bargain hunters swooped in after the weeks of heavy selling to grab some deals. The truth is there are very few actual people still evaluating the merits of publicly traded companies.

      The markets are driven by programmed trading and central planning. The artificial nature of markets was on full display last week.

      Let’s walk through the series of events…

      1. “Let’s walk through the series of events…”

        The yellow gold brick$ of the $till pro$pering 10 year$ bull $heet QE road is going over them yonder hill$. $eems like there’$ NO END IN $IGHT dear Professor! …$hazam!

  7. Here you go ……..Read: Sale of $750 million in junk bonds would end 40-day drought
    Junk maturities jump to $110 billion this year and $191 billion in 2020, compared to $36 billion last year, points out McDonald, citing data from Moody’s Investors Service. It gets even worse after that. In 2021 there will be $293 billion worth to roll over, and then $385 billion in 2022. These numbers represent leveraged loan and high-yield bond maturities.
    “Leverage is a very dangerous beast. The larger it becomes the more perfection it demands in capital markets functionality,” says McDonald. “If capital market formation stays challenged, that will lead to a colossal default spike of unprecedented proportions.” And investor panic, which will tank stocks.
    Read: As maturity wall looms, refinancing risk for junk bond market hits nine-year high, says Moody’s

    1. I predict some great returns ahead in junk bonds, for the patient. First we need to get through the risk premium spike, and then the Hunger Games period. I’m thinking maybe 18-24 months out from now?

      1. ” … maybe 18-24 months out from now”

        Bugs: “eh Professor, look@ those migrating gee$e (headin’ $outh) … & knot x1 black $wan can be found among$t all them flapping wing$!

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