Investing Looked Like A Slot Machine That Always Paid Off, Until It Didn’t

A report from the Los Angeles Times. “The Southern California housing market is downshifting. ‘There is really no urgency from buyers,’ said Mark Schlosser, a Compass agent in the Los Angeles area. ‘They are waiting.’ In the last year, asking rents for apartments in many parts of Southern California have ticked down. Experts say the trend is driven by a rising number of vacancies, which have forced some landlords to accept less in rent. Vacancies have risen because apartment supply is expanding and demand has fallen as consumers worry about the economy and inflation.”

Fox 13 in Florida. “As the Bay Area continues to recover from the devastation of this year’s historic hurricane season, many homeowners are choosing not to rebuild but to sell their damaged homes ‘as is.’ A growing number of these properties are being snapped up by large investors. In St. Petersburg’s Shore Acres neighborhood, this trend is especially noticeable. ‘Of the 40 homes sold since the hurricane, 38 were bought by investors,’ said Kevin Batdorf, a realtor and the Shore Acres Civic Association president. ‘My biggest concern is that investors are going in and, as we say in the business, slapping lipstick on a pig to resell them. The biggest concern is for (the) person who buys it from the investor because they won’t be aware of how bad the damage was and may not be able to get insurance.'”

“However, a local real estate expert, Allie Paige, assures her clients that this trend could be good. ‘The good thing about investors buying is that they’re going to fix it up, and they already know what the regulations are,’ Paige said. ‘They are not going to make a mistake because that’s just going to hit their bottom line. You can trust what they’re doing; they probably have more experience than likely and are going to get it done the right way. Instead of somebody coming in and maybe making a few mistakes, because then that affects your property values.'”

Fox 35 in Florida. “Cindi Moran, a condo owner at Winter Park Woods, says her fees have surged dramatically since she purchased her unit in 2022. Despite spending significant time and money on renovations, she has not seen any substantial improvements to the property. ‘Renovated it, gutted both bathrooms, gutted the kitchen, repainted everything, redid all the trim, doors, everything,’ she said. The HOA fees were $400 a month when she moved in, and now they are rising to $2,081 going into 2025, she told us. Retiree Alexander Austriaco, another resident, also faces similar increases and says he may need to return to work to cover the rising costs.”

Bisnow on Pennsylvania. “There are plenty of options for renters in Philadelphia proper, but a new report found that prospective tenants could use more choices in the city’s supply-constrained suburbs. A large number of multifamily projects entered Philly’s pipeline before the city scaled back its 10-year tax abatement program at the end of 2021. The market is still working through that glut with more units slated to come online in the near future. ‘Philly is in a bad way for apartments right now,’ Scully Co. CEO Jessica Scully told the Philadelphia Business Journal, adding ‘there’s two and three-month concessions on all the new [buildings].'”

From KTAR News. “Neighborhood Ventures, an Arizona real estate crowdsourcing company, is buying a distressed apartment complex near Grand Canyon University in Phoenix. The property is called Thom Slate on Colter. It consists of 123 units near Camelback Road and Interstate 17. The previous owner spent $2 million in renovations, including chiller systems, plumbing, electrical and roofing, but lost the property due to a difficult debt situation. Neighborhood Ventures agreed to acquire the complex directly from the lender for $13 million ($105,000 per unit). ‘This acquisition aligns perfectly with our strategy of finding distressed assets in high-demand markets and delivering strong, consistent returns to our investors,’ Jamison Manwaring, CEO of Neighborhood Ventures, said in a press release.”

The Oregonian. “The offices at downtown Portland’s Broadway Tower sold in early 2020 for more than $132 million, or $773 per square foot, hailed in the business press as a local record — before COVID-19 had upended workplace norms. It was a crowning moment for Walter Bowen, the ambitious developer who would go on to open the Northwest’s first Ritz-Carlton several blocks away. Yet there was unfinished business at 1455 S.W. Broadway. Bowen refinanced debt backed by Broadway Tower’s hotel portion in 2022 for more than $47 million, records show. Now, the lender is suing Bowen and associates, alleging default on the note and asking for a foreclosure sale. It filed a lawsuit in Multnomah County Circuit Court in November against Bowen, BDC/Broadway Hotel LLC and the Walter C. Bowen Trust.”

“The lender is asking the court to appoint a receiver to take over the property, including the Marriott International-branded Hotel Vance inside Broadway Tower. ‘Immediate court intervention is necessary to ensure the orderly operation and maximize value of the Property, including the continuing operation and maintenance of the hotel within the Property, and to ensure compliance for its agreements with Marriott, for the benefit of all creditors,’ the lender noted in court records.”

Soo Today in Canada. “The real estate empire built by a group of insolvent, out-of-town landlords linked to SID Developments — including dozens of properties in the Sault and northern Ontario — is now in the process of being sold off as the result of ongoing insolvency proceedings. Last week, Ontario Superior Court Justice Peter J. Osborne officially endorsed an order approving the sale of 323 properties to secured lenders through the credit bid process, which allows those with first and second mortgages to bid the face value of their secured debts on the properties being liquidated. The properties being sold off in the credit bid process account for 79 per cent of the insolvent landlords’ portfolio. A total of 47 properties in Sault Ste. Marie are expected to be acquired by new owners in the process.”

“In his Dec. 6 endorsement, Osborne acknowledged the ‘significant’ number of people who have been ‘adversely affected by this entire situation.’ ‘In approving the transactions as I am doing today, the court is not for a moment condoning the actions and events that led to the unfortunate situation in which all affected stakeholders find themselves today,’ he wrote. The now-insolvent landlords — Dylan Suitor, Ryan Molony, former YTV child actor Robby Clark and his wife Aruba Butt — collectively owned more than 600 rental units across Ontario, including the Sault, Sudbury and Timmins.”

The Maple Ridge News. “The economic engine of new condo construction in Canada appears to be breaking down, at least in part, and that could throw a wrench into efforts to keep building more homes. Or, it could be just what we need to finally start bringing housing costs down to sane levels. It’s too early to tell. Construction of condos is dependent on pre-sales. Once enough buyers have signed up, lenders will open their wallets and construction starts. But a great portion of those buyers have no intention of ever living in the condo. Many also don’t plan on becoming long-term landlords, though they will rent out the properties. Instead, these buyers are what have come to be called ‘investor’ owners.”

“Over the last 20 years, real estate has been on a near-constant tear in Canada. The latest spike began in 2016, and the pandemic only added more fuel. For years, the equation for investor buyers was simple: Real estate + cheap credit + time = hefty profits. This led to some strange situations. For example, many investors would buy a condo that cost them $2,000 a month in mortgage payments, plus $400 in strata fees and property taxes, plus $100 in utilities. And then they’d rent out this unit costing them $2,500 a month for $2,000.”

“They would lose money steadily for three or four years. And then they’d sell the unit, which they had bought for $400,000, for $500,000. Sure, they were in the hole $24,000 for their expenses, but they made $76,000 in profit! A recent StatsCan report found that 21.4 per cent of all condo purchasers in the Vancouver area between 2018 and 2020 were investors. In Kelowna, it was a staggering 25.2 per cent. Condo investing looked like a slot machine that always paid off. Until it didn’t. In Vancouver, preconstruction condo sales are down 27 per cent this year – and that’s nothing compared to Toronto, where they have plunged by 73 per cent, according to the Altus Group.”

“On the other hand, this situation was obviously never sustainable. A condo construction market predicated on speculators and ever-increasing prices was never going to stay standing forever. And, like a shaky Jenga tower, it might now finally come crashing down.”

Kronen Zeitung in Austria. “City Hall’s campaign against slum speculators, launched at the beginning of November, is beginning to bear fruit: the owners of the building at Salzachstrasse 46 in Brigittenau are no longer in charge. The city’s tenants’ association won the appointment of a receiver in court to carry out the most necessary maintenance work after the owner had ignored requests to do so. However, it is about more than restoring decent conditions in the building. Rather, the city is also using tenancy law as a lever to put the thumbscrews on the profiteers where it hurts: the money. This is because the necessary work is paid for from the rents, which are now transferred directly to the forced administrator. Just as the city had hoped, this is also having a wider impact.”

“Banks that have been involved in the business so far are already starting to back away from their shady customers, reports Christian Bartok, head of Mieterhilfe. Where there is no rental income, sooner or later there will be no more loan repayments.The idea is to scare them. It’s obviously working: the black sheep among the landlords often didn’t even reply to letters from the city in the past, but now ‘things are starting to move,’ says Bartok: ‘Some of them are already starting to work on their own.'”

From the View. “Bellevue Hill, in Sydney’s eastern suburbs, has been named the most expensive suburb in Australia for houses in 2024. While the median price for a house is just under $10 million, wealthy homeowners have seen prices drop by eight per cent. Likewise, according to CoreLogic, one of Melbourne’s most exclusive suburbs has also seen a drop in prices. Yes, you can still expect to pay a median price of more than $3 million. But that again is down for the year, with house prices dropping by 3.3 per cent in the bayside suburb. ‘Broadly speaking, the top end of the market has underperformed over the past 12 months,’ CoreLogic economist Kaytlin Ezzy said. ‘You also see a decline in value when you have a decline in activity. It’s not that people are leaving the market; it’s just they are not buying into them, and so you see the effect of seeing values decline.'”

“Leading prestige property agent Michael Pallier of Sydney Sothebys, who sells across the city’s eastern suburbs said the market had pulled back from last year. ‘Prices have gone down by between 5 and 10 per cent on last year,’ Mr Pallier said. ‘Last year, the market was almost overshot and too expensive, but it’s reached a healthy consistency now.’ He said that while many believed that super-wealthy buyers were immune to interest rate rises, this was not the case. ‘It does affect them as they have businesses; they may be developers, and they have debt,’ he said.”

“When it comes to apartment prices in the luxury end of the market, prices were again down across all five of Melbourne’s top five most expensive suburbs, from Brighton to Ashburton. The most significant price drop happened in Balwyn North, where the median unit price dropped by more than 10 per cent (-10.1 per cent) to bring the median price to $1.15 million. In Sydney, the harbourside suburb of Darling Point, which was identified as one of the top five most expensive suburbs for apartments, has also seen prices drop. There has been a drop of -8.6 per cent in 2024, bringing the median apartment price to a hefty $2.512 million. For 2025, it looks like more challenging times could be on the cards. ‘We are seeing that declining trend that has been spreading through Victoria now hitting parts of Sydney,’ Ms Ezzy said.”

Manila Standard in the Philippines. “Several property developers are quietly slashing prices on unsold inventory. This comes as developers grapple with an oversupply of residential and commercial properties, and as cautious buyers struggle with rising interest rates and inflation. Santos Knight Frank director Lovelle Taleon said a ‘silent fire sale’ is underway among property developers to reduce their unsold residential units. ‘Regarding strategies to selling out the Metro Manila inventory, I think yes, there is a sort of a silent fire sale that has been happening. It’s a strategy that’s being implemented by all developers. The goal there is to sell it out. They don’t want to be holding on to the property anymore,’ Taleon said.”

“Taleon said developers are keeping the sales under wraps, avoiding public promotions or large-scale advertising campaigns to prevent further market instability. These discounts are reportedly being offered only to preferred clients and repeat buyers. Another strategy being implemented by property developers is offering huge discounts to bulk sales. Property consultant Leechiu Property Consultants (LPC), in its recent report, said there is now an oversupply of 29 months’ worth of condominium units in Metro Manila.