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Fear Of Getting Stabbed By A Falling Knife

A report from the Globe and Mail in Canada. “The psychological shift among Vancouver homebuyers threatens to prolong the city’s deep slump, Bank of Montreal warns. ‘The market remains in all-out correction mode, and the psychology there is clearly shifting, from ‘FOMO’ to ‘FO getting stabbed by a falling knife,’ said BMO senior economist Robert Kavcic.”

The Daily Mail on the UK. “Five luxury properties are to be demolished just three years after they were built as their owner blames Brexit uncertainty for the lack of interest in high-end homes. The modern, four-bed homes in Poole, Dorset, which have been marketed at £1.3million each, are failing to sell as buyers hold on to their cash at the top end of the market. Instead, developer Alex Collier is ploughing £5million into replacing the homes with a block of 30, one and two-bed flats, which he hopes to sell for around £400,000 each.”

The Malaysian Star. “Earlier this week, the National Housing Policy 2.0 (NHP2.0) 2018-2025 was unveiled with the main aim to address the issue of oversupply as well as affordability, which has created a massive mismatch that we are in now.”

“Question is, don’t developers know what is happening in the market and they continue to build unwanted homes that are not saleable and worse, at the wrong location?”

The Epoch Times on China. “Since about 2009, investment has become the top horse pulling the Chinese economy. The most active investments were in real estate and infrastructure, which brought a ‘construction prosperity’ phase of less than 10 years. Construction prosperity accelerated urbanization nationwide, but also caused a real estate bubble.”

“The housing supply is enough to cover demand for the next 20 years, and prices are boosted to unaffordable levels for salary earners, meaning that the real estate bubble cannot grow any bigger. Today the bubble is already shrinking.”

The Australian Financial Review. “One in four buyers of housing lots in Melbourne, the country’s biggest residential land market, are defaulting on their purchases, says Financial Review Rich Lister Nigel Satterley.”

“Mr Satterley, who runs the country’s biggest private land developer, Satterley Property Group, had warned in December that around 5000 lots in new housing estates would either default or have to be on-sold quickly over the next 30 months due to Uber-driving speculators and foreign investors not being able to get finance.”

“But, speaking with The Australian Financial Review this week, he said the situation was ‘much worse than I previously thought.’ ‘At a minimum, the fallover rate is 20-25 per cent in the Melbourne land market,’ Mr Satterley said including across Satterley’s own housing estates. ‘This is up from 5 per cent in December 2017.’ Mr Satterley said in Perth the fallover rate was about 35 per cent and in Sydney about 15 per cent.”

“While developers retain the deposit if a buyer walks away, they then have to resell the lot in a market where prices are falling and sales volumes have crashed amid the credit squeeze and housing market slowdown. One industry source said he knew of a Melbourne home builder with a 40 per cent default rate.”

“Speculators, desperate to flip their sites or lose their deposits, have turned to classifieds website Gumtree in droves. ‘Any speculator sitting on a block is on Gumtree hoping to sell it, that activity has ramped up. A lot of them put a deposit on blocks with no hope of getting finance and they’re panicking,’ said Kelvin Ryan, CEO of home builder the Simonds Group.”

This Post Has 26 Comments
  1. ‘Question is, don’t developers know what is happening in the market and they continue to build unwanted homes that are not saleable and worse, at the wrong location?’

    That’s three questions really. Gauging real demand, at a reasonable price, and the location. Look at these articles we see every day. Speculators taking $20 million ass-poundings on some airbox they never slept in! And there are canyons of these things in many major cites.

    Oh but we can’t build a house that ordinary people can afford! You might as well try to fly to Mars with your arms! Well that’s a load of horseshit. So what’s the problem here? Markets have been distorted for decades by bad government and central bank policy.

    1. Yes, the global economy is now incredibly distorted by central bank machinations. It’s like some giant hot water boiler held together with duct tape and chewing gum; the safety valve disabled as the pressure continues to build. It’s like living in the financial version of “The Matrix” or “Alice in Wonderland”. We have minimum price discovery and maximum moral hazard. Interest rates, stock and bond market indicies are no longer useful signals for investors. Free markets and sound money are “out the window”; replaced with monopoly paper money. This has predictably led to malinvestment, including speculation and exponentially expanding unproductive debt, asset inflation, pulling demand forward, and a host of social ills as wages fall behind rapidly rising asset prices.

      The global housing and stock markets are examples of how badly the economy has been mismanaged by a) Governments via centrally planned, command based policies, as aided and abetted by central banks, b) Wall St. via financialization and regulatory capture, and c) a toxic combination of (a) and (b) via crony capitalism.

      The world has gone through several episodes of asset bubbles over the span of history. Unfortunately, we’re in the throes of another one. I don’t see how this can go on much longer, but I’ve been saying that for a while now. Maybe this is why:

      Remarks by Governor Ben S. Bernanke
      Before the National Economists Club, Washington, D.C.
      November 21, 2002
      “What has this got to do with monetary policy? Like gold, U.S. dollars have value only to the extent that they are strictly limited in supply. But the U.S. government has a technology, called a printing press (or, today, its electronic equivalent), that allows it to produce as many U.S. dollars as it wishes at essentially no cost.”

      1. “November 21, 2002”

        They were still dealing with the collapse of the dot com bubble, the scale of which I didn’t fully appreciate at the time.

      2. But the U.S. government has a technology, called a printing press (or, today, its electronic equivalent), that allows it to produce as many U.S. dollars as it wishes at essentially no cost.

        You just have to get someone to borrow it. Which is where Mr. Banker and his hordes of penniless pukes come in.

  2. ‘The housing supply is enough to cover demand for the next 20 years’

    Wa happened to my shortage? Remember when we were told the Chinese just have a different way of building cities? Looks like that was another twitter.

    1. It’s got TV screens in the back seat, bro, so you can pull up to the soccer field like a real baller.

  3. AAAND PG&E does it again!

    https://www.zerohedge.com/news/2019-02-06/pge-gas-line-explosion-engulfs-san-francisco-buildings-flames

    This is why I will never live in a house with gas. And here’s the kicker:

    “Eight construction workers, hired by an unidentified third-party contractor, were digging in the ground to install fiber optic cables when they hit a gas main,”

    Are you getting a visual on this? One guy was actually digging, seven guys were standing around watching him. Same thing happened a few years back up in New Jersey, some guy digging (two other guys watching him) for a plumbing contractor hit a gas line and some poor lady in her condo villa got blown to kingdom come. Do ya feel lucky? Do ya?

    1. See all the construction experts commenting on that thread? Not a one of them mentioned OneCall….. Anyways… I’ll wager these ham and eggers didn’t get OneCall clearance before proceeding with work.

        1. Call Before You Dig. Any utility with buried lines has to come out and paint the ground where their lines are.

  4. Nearly half of California voters say they can’t afford to live here, poll finds
    SFGate-1 hour ago
    Nearly half of California voters — 43 percent — say they can’t afford to live here, according to … As the San Francisco Mayor’s Office of Housing and Community …

    More Californians think illegal immigration a priority than education …
    The Mercury News-8 hours ago
    The Public Policy Institute of California poll comes amid rancorous debate in the … weeks in a funding standoff over White House demands for a “wall” along the …

    1. The great reset in CA. I wonder if after the crash the exodus tries to return from AZ and NV? College towns have rooms renting for $1000 a mo to students.

  5. A lot of them put a deposit on blocks with no hope of getting finance and they’re panicking,’ said Kelvin Ryan, CEO of home builder the Simonds Group.”

    I love the smell of burning speculators in the morning. It smells like…victory.

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