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For Many Property Owners, The Dream Run Has Already Ended

A report from ABC News in Australia. “The tide is turning on Australia’s $7.6-trillion property market. Home prices in more than four out of five council areas have reached their peak and are sliding towards an unknown nadir, according to CoreLogic. As the slump moves into its second year with little or no prospect of rebound, the downturn in capital city property markets threatens to drag down the rest of the economy.”

“‘If we look at Sydney, it’s falling pretty much across the board … The rate of the current decline is generally much faster than many of the other periods we’ve seen,’ says Cameron Kusher, head of research for Australia at CoreLogic.”

“For many property owners, the dream run has already ended. Mark and Samantha Burgess took a double hit from tougher lending conditions and falling property values when they bought a Sydney apartment off the plan in 2016.”

“The couple were initially told they needed a 10 per cent deposit on a $1.6 million purchase. But when it came time to settle in August this year, the bank asked for a 20 per cent deposit on a property now valued at $300,000 less.”

“‘We were on the verge of losing the deposit and losing the property,’ Mr Burgess says.”

From Domain News in Australia. “The Sydney weekend auction clearance rate was 44.4 per cent from 331 reported results. A total of 733 auctions were scheduled on Saturday, but, of these, 155 were withdrawn from auction sale, typically because not enough buyers had shown interest in the listed homes.”

“Buyer agent Peter Kelaher said he suspected constant commentary about falling prices was landing on deaf ears. ‘You can only give the market so much of a hounding,’ he said. ‘But, in the worst cases, it has come off by 20 per cent: out west and down south is a nightmare, and that’s what is bringing the median price down.'”

From BC Local News in Canada. “Homes sales are dropping across Metro Vancouver, and the Maple Ridge/Pitt Meadows market has not escaped the downturn. Sales of detached homes dropped almost in half, down 47.6 per cent according to the statistics from the Real Estate Board of Greater Vancouver.”

“Ralph Telep, a realtor for 43 years, said buyers should not be looking for the bottom to fall out of the market, based on the long-term growth it has seen. The proximity to Vancouver and the favourable climate in ‘the California of Canada’ mean Maple Ridge and Pitt Meadows will always be desirable.”

“‘It’s not coming to an end. Maple Ridge was hotter than a pistol,’ he said. ‘It has cooled, but it’s not the end of the world. Nothing to worry about.'”

The Sunday Times in South Africa. “Balwin Properties, SA’s largest seller of sectional title property, has turned its focus to the rental market to cope with an oversupply of residential property aimed at the middle-income segment.”

“Chareen Mota, Pam Golding Properties’ Hyde Park manager, agreed there is an oversupply of houses for sale. ‘It is currently definitely a buyers’ market, with an oversupply of property stock in some places, giving buyers lots of choices, which in turn puts pressure on pricing,’ she said.”

From AFP on Lebanon. “Ghostly apartment blocks and half-built buildings dot Lebanon, as entrepreneurs and experts fear that the country’s key real estate sector is on the brink of collapse. The small Mediterranean country’s construction sector witnessed an unprecedented boom from 2008, fuelled in part by sales to wealthy Gulf Arabs and Lebanese expatriates.”

“‘Some 3,600 unsold apartments exist today in Beirut alone,’ says Guillaume Boudisseau, an expert at the Ramco real estate consultancy firm.”

“In front of Beirut’s port, a building dubbed ‘The Coast’ is one of many luxurious apartment blocks desperately looking for buyers. A road back from the Beirut seafront, the construction of another tower grinded to a halt two years ago, with only the concrete outer shell completed.”

“‘We only sold a single apartment off plan,’ its owner said, asking to remain anonymous. He reduced the price by 20 percent, ‘but it didn’t help,’ he added.”

“To make matters worse, at the start of the year, the central bank suspended a subsidy to real estate loans for less well-off Lebanese. Among them, 33-year-old bank employee Marwan, who signed a contract to buy a flat in January.”

“‘The next day, I learnt that the subsidised loans had been suspended,’ he said, asking that his family name be withheld. Marwan paid 20 percent of the apartment’s cost when he signed, but ‘was counting on the loan to pay the rest,’ he said. ‘Now I risk losing the amount I already paid, without even getting a flat.'”

From Stuff New Zealand. “Investors say they should be given more time to adjust to changes that will limit their ability to claim tax breaks. At the moment, if a rental property costs more a year to own than it provides in rent, you can use the difference to reduce your other income.”

“Many landlords use this as a way to help them hold properties long enough to benefit from capital gains, particularly when house prices are high compared to rents. But the bill would instead require that the losses were only claimed against future rental property income.”

“Investor Nick Gentle said that was a problem. ‘For whatever reason a lot of investors have negatively geared real estate. They’ve just had the rug pulled out from underneath them. With gradual rent increases and five years to put extra money into the mortgages, many people would have been able to make it work. Now they are faced with sell or suffer.'”

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This Post Has 42 Comments

  1. ‘The Sydney weekend auction clearance rate was 44.4 per cent from 331 reported results. A total of 733 auctions were scheduled on Saturday, but, of these, 155 were withdrawn from auction sale, typically because not enough buyers had shown interest in the listed homes’

    So even the auction clearance stuff has become meaningless.

    1. “…the downturn in capital city property markets threatens to drag down the rest of the economy.”

      Nothing like a little gloom-and-doom REIC propaganda to pressure governmental financial authorities into passing bailout measures to make real estate gamblers whole on their highly-leveraged real estate gambles.

  3. <em<“‘It’s not coming to an end. Maple Ridge was hotter than a pistol,’ he said. ‘It has cooled, but it’s not the end of the world. Nothing to worry about.'”

    Keep whistling past the graveyard, Ralph.

  4. From BC Local News in Canada.
    “‘It’s not coming to an end. Maple Ridge was hotter than a pistol,’ he said. ‘It has cooled, but it’s not the end of the world. Nothing to worry about.’”

    Related quotes:

    “Monty Python and the Holy Grail”, The Black Knight: “Just a flesh wound.”, or “’tis but a scratch”.

    “No man is happy without a delusion of some kind. Delusions are as necessary to our happiness as realities.” ~ Christian Nevell Bovee, 1820-1904, American Author, Lawyer

    “Nations, like individuals, cannot become desperate gamblers with impunity. Punishment is sure to overtake them sooner or later.” – Charles Mackay, Extraordinary Popular Delusions and the Madness of Crowds

    “No warning can save people determined to grow suddenly rich” – Lord Overstone

    “Illusions commend themselves to us because they save us pain and allow us to enjoy pleasure instead. We must therefore accept it without complaint when they sometimes collide with a bit of reality against which they are dashed to pieces.” – Sigmund Freud

  5. I’m a little shocked how fast its falling apart here in North County San Diego. I’ve seen $100,000 price reductions on sub-$1mil inventory in just 30 days. I’m watching a few neighborhoods and want to see if sellers hit the panic button once it hits 120 days. Then again, looking at recent comps these $100,000 price reductions are putting their new neighbor $150,000 in the hole just a few month later. Quite spectacular.

    1. I live nearby in La Mesa, but I’m looking to buy in Carlsbad or Encinitas. I have about 100-125 homes favorited on Redfin, and I see those same price reductions. Can’t imagine what those buyers from the very recent peak are thinking and feeling.

      1. “Can’t imagine what those buyers from the very recent peak are thinking and feeling.”

        Maybe ‘Oh sh!t’?

      2. They are ok. They stroll down to the beach and just bury their heads in sand and repeat Ralph’s “nothing to worry about” quote to themselves. Well then the tide comes up and…

    2. Just looked at Zillow. Look at all those red dots! Carlsbad is stuffed full of inventory. In my area (Maryland suburbs of DC), our inventory has picked up but the dots are still sparse in comparison. No wonder prices are dropping.

      1. Someone was just inquiring as to projections of which regions would lead the way for bubble 2.0. I think it will remain Seattle but NorCal and SoCal will be running a close race. Those little “red dots” now look like the resemble the recent Ca fire maps. Shortage?

  6. The New Zealand FB “Help Protect Me” Law might be going away…
    Why do FBs expect to subsidized for their foolish decision to chase that sweet equity?

    ++++

    From Stuff New Zealand. “Investors say they should be given more time to adjust to changes that will limit their ability to claim tax breaks. At the moment, if a rental property costs more a year to own than it provides in rent, you can use the difference to reduce your other income.”

    “Many landlords use this as a way to help them hold properties long enough to benefit from capital gains, particularly when house prices are high compared to rents. But the bill would instead require that the losses were only claimed against future rental property income.”

  7. Is propping up the stock market part of the Fed’s mandate now?

    A bruised stock market looks to the Fed for relief
    By Sue Chang
    Published: Dec 9, 2018 6:25 p.m. ET
    U.S. stocks had worst start to December since 2008
    IStockphoto
    The stock market has not been kind to investors.

    With three weeks left until the end of 2018, both the Dow Jones Industrial Average and the S&P 500 are mired deep in the red. And it will be essentially up to the Federal Reserve to determine whether the stock market will extend its winning streak for a third year or take a breather.

    Stocks have been on a wild ride recently, sandwiched between the harsh realities of a prolonged trade war with China and hopes that the Fed will back off from its tightening bias.
    …

    1. “Is propping up the stock market part of the Fed’s mandate now?”

      According to Prez Trump it is. IIRC, Candidate Trump said something different.

  8. “…the downturn in capital city property markets threatens to drag down the rest of the economy.”

    Nothing like a little gloom-and-doom REIC propaganda to pressure governmental financial authorities into passing bailout measures to make real estate gamblers whole on their highly-leveraged real estate gambles.

      1. That’s true unless a sizable number bought into home ownership at mania price levels, and now face years ahead of household balance sheet shrinkage as the largest asset they ever owned generates losses in virtual perpetuity while they repay the lender at a fixed rate. We’re talking about tens of millions of once-wealthy, presently-desperate homeowners expecting personal bailouts, based on the Obama precedent.

        1. I’m not buying it. Is this a controlled economy? Who sets shack prices? I want to speak to the Czar about this!

          3. I want to speak to the Czar about this! One does not simply speak to Czar, comrade zek. If the Czar wants to hear from you, he’ll tell you what to ask.

          4. “Used Tesla prices have dropped 31% at Carmax as inventory swells”

            I’ve been watching used P85/90/100D models and I’m not seeing much dropping on the good stuff yet. You can get a beater P85D for 40k but most of it is still pretty steep.

  10. “…they needed a 10 per cent deposit on a $1.6 million purchase. But when it came time to settle in August this year, the bank asked for a 20 per cent deposit on a property now valued at $300,000 less…‘We were on the verge of losing the deposit and losing the property,’ Mr Burgess says.”

    The Burgess couple had already lost the 10% deposit because the value of the property had dropped 20% (as of August). Now they’ve lost the other 10%. Is the math that hard?

    Is $300,000 alot of money in Australia?

  11. Mr Market is having trouble finding a direction. The article posted below says futures are up, but the quotes show up in red with preceding negative signs.

    And I’m no trade export, but I’m guessing ‘weaker than expected’ exports is unfavorable, as it may translate into lower-than-expected GDP (= C + I + G + X – M). Why would traders deliberately overlook this development? Makes no sense…

    Stock futures turn slightly higher, as traders seek to overcome global growth, trade concerns
    By Barbara Kollmeyer and Chris Matthews
    Published: Dec 10, 2018 8:35 a.m. ET
    China exports weaker than expected
    Getty Images

    U.S. stock futures pointed to a slightly higher open for equities on Monday, as investors struggle to weigh the importance of a still-healthy U.S. economy with evidence of slowing growth and continued trade tensions.

    Benchmarks

    In choppy action, Dow Jones Industrial Average futures (YMZ8, -0.18%) were up 12 points or 0.1%, 24,447, while S&P 500 futures (ESZ8, -0.14%) rose 2.5 points, or 0.1%, to 2,639.25. Nasdaq-100 futures (NQZ8, -0.21%) advanced 22.75 points to 6,645.
    …

    1. Are you buying the dips, or selling the rallies?

      ‘Sell the rally’ replaces ‘buy the dip’ as battered market enters critical week
      By Shawn Langlois
      Published: Dec 10, 2018 5:50 a.m. ET
      Critical information for the U.S. trading day
      Getty
      Buy the dip?

      Where have all the dip-buyers gone?

      After weeks like the train wreck that just passed, investors are supposed to come along and scoop up bargains, right? That’s been the norm for decades, after all. Alas, it’s not the norm any more, as you can see from this Wall Street Journal chart:
      …

    2. Scary thought for stock market HODLers: with interest rates levitating off the zero bound, where ZIRP held them pinned to the floor for years, fundamentals, such as positive current and eexpected future corporate earnings and low corporate debt levels, may soon begin to matter once again. If so, the share prices of companies which lack these favorable attributes may soon sink, if they are not already sinking.

    3. Cash is king for now, at least for dollar HODLers. But where do you stash it if the dollar is poised to weaken, aling with stocks?

      1. Business
        Contrarians Made the Right Market Calls in 2018. Here’s What They’re Saying Now
        By Katherine Greifeld, Vildana Hajric, Ben Bartenstein, and Aline Oyamada
        December 7, 2018, 9:01 PM PST
        – Dollar surge, rocky U.S. stocks, EM pain upended consensus
        – Greenback and equities expected to face pressure in 2019

        With just three weeks to go, 2018’s market contrarians are proving prescient.

        The outlook was decidedly bullish for U.S. stocks and developing-nation assets 12 months ago, with both forecast to build upon a stellar 2017. The beaten-down greenback wasn’t expected to fare any better in 2018, as a rosy international growth outlook threatened to lure investors away from American markets. And despite some tough talk between the U.S. and China, risks of an all-out trade war were an afterthought.

        Not much has gone according to plan, but DWS, Cantor Fitzgerald and Morgan Stanley were among the few who bet against the trend and got it right. Federal Reserve rate hikes against a backdrop of sharply escalating trade tensions roiled markets in 2018, punishing U.S. stocks and causing risk-averse investors to flee developing nations. Meanwhile, the down-and-out dollar has gained against virtually all major currencies amid rising rates and buoyant U.S. growth.
        …

  14. Cheap Boarding Houses proposed to house Akron homelessLINK
    Idea seems good on the surface of it. However, some homeless are that way because they don’t get along with others. Some are substance-addled most of the time. Strangest “homeless person” I ever knew turned out to be a trust fund baby. He refused to live in the home provided by the fund trustee, and preferred to make a nuisance of himself on the streets of his small town. Eventually the judge of probate found out about the trust fund.

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