They’re Now Stuck With A Property That Is Virtually Worthless

Tokyo office buildings at dusk

A report from Global News in Canada. “Back in 2016, Vancouver’s white-hot real estate market looked as if it would never cool down. Three years later, industry experts say times have changed. ‘Prices now are back to where they were around, say, mid-2015,’ Brendon Ogmundson of the B.C. Real Estate Association said.”

“A home in Vancouver’s Southlands neighbourhood had a listing price of $5.29 million last year and is now available for $3.6 million. It’s a similar story in other parts of Metro Vancouver. Detached properties in the Tri-Cities have sold at a loss, going for well below assessed, with attached units and townhomes following suit. Those plunging prices are paired with a tangible drop in buyers.”

“Sales are only sliding further this year, according to realtor Steve Saretsky, and inventory continues to accumulate as buyers and sellers sit on the sidelines. ‘We’re five months in, it’s pretty much at 30-year lows,’ he said. ‘I think right now the big thing is just trying to get sellers to come to grips with the changing market reality.’”

The Tri-City News in Canada. “Cash bonuses of up to $100,000 for realtors; free flights, skis and golf; free mortgage interest and property tax payments for the first year; no strata fees for life; eight per cent interest paid on deposits for presale buyers. All of these and more are among the tempting incentives being dangled by Metro Vancouver condo developers.”

“But in some cases the buyer bait is not enough to turn the tide on what the Real Estate Board of Greater Vancouver says is the worst housing sales slump in 19 years. As of the end of May, there was an inventory of 766 newly completed and unsold condo apartments in Metro Vancouver, compared with 326 for all of 2017, according to Canada Mortgage and Housing Corp.”

“Currently, 25,158 condo apartment units are under construction in the Metro region, representing 70 per cent of the total housing units underway. In the current market, developers may set out a nine-month marketing window as they attempt to sell half the units in a project. Just two years ago, it was not uncommon for an entire condo project to sell out within days.”

From CBC News. “The new condo market is cooling faster in Calgary than anywhere else in Canada. ‘It’s been an oversupplied market for quite some time and that’s caused those prices to continue to trend down,’ said Ann-Marie Lurie, chief economist at the Calgary Real Estate Board.”

“Lurie said the resell condo market in Calgary is also struggling. As of May’s numbers, a typical apartment-style condo is being resold for $248,000 in Calgary. During the highs of 2014, those dwellings were resold for $300,000 and up, Lurie said.”

The Epoch Times on China. “More than a dozen large state-owned enterprises in China are liquidating their equity holdings in real estate projects recently. According to Securities Times, a Chinese financial publication, 20 real estate projects in Beijing had equity transfers from May 1 to June 14. In comparison, there were only two equity transfers in the first four months this year.”

“Chinese financial scholar He Jiangbing told Radio Free Asia in a June 19 interview that these activities are an indication that the state-run companies have a pessimistic outlook for China’s real estate market. ‘This shows that they heard about the plans of the top leadership before the general public does. In addition, on June 13, Guo Shuqing, the Party head of China’s central bank and chairman of the China Insurance Regulatory Commission gave a speech in Shanghai, saying that the houses are not for speculation. He also warned that there is an oversupply of housing inventory, and when the vacancy rate is too high, it can be very dangerous,’ he said.”

“He believed that Guo’s speech indicates that the long-disputed real estate tax may become a reality in the near future.”

From Domain News in Australia. “A $1000 offer for a Sydney apartment, even in a building that’s cracked and uninhabitable? Tell him he’s dreaming. Potential buyers have been making opportunistic offers on units in the troubled Mascot Towers project since it was evacuated last week due to safety concerns.”

“And genuine buyers elsewhere in the suburb are drying up, with real estate agents seeing low inquiry levels and questions about structural integrity of buildings from the buyers who do express interest. ‘We had a lot of ridiculous offers but we take those with a grain of salt,’ MGM Properties’ Michael Xylas said. ‘We don’t consider our clients are that stupid … it’s almost insulting. We’ve had offers as little as $1000, $10,000, $100,000.’”

“The problems at Mascot Towers bring to mind memories of the Opal Tower in Sydney Olympic Park, where residents were forced to exit on Christmas Eve after cracks appeared.”

From ABC News in Australia. “7.30 has spoken to owners around Australia who are worried they are living in structurally unsound buildings, with little choice but to pay for the defects themselves. Melbourne apartment owner Andy White said the system had not been working for him.”

“Following a fire in one of the apartments in his complex, it was discovered the building was covered in flammable cladding. But the builders went into voluntary liquidation in August 2018, meaning the owners will now have to cover the estimated $2-3 million rectification costs.”

“He said the apartment he bought for $320,000 was worth much less today. ‘A lot of people are feeling frustrated and hopeless that they’re now stuck with a property that is virtually worthless at this point of time.’”

The Australian Financial Review. “As property prices crumbled and the sharemarket sagged last year, Australian household wealth plunged by close to $500 billion, according to Fidelity International estimates. No surprise that the effects of lower house prices have ‘reverberated’ across the economy, PIMCO portfolio manager Aaditya Thakur says.”

“It’s the property market that dominates conversations. And here the outlook is worse than you might think, Thakur says. Thakur explains that ‘a major weight on the housing market comes from structural changes in mortgage underwriting standards,’ which forced banks to tighten lending criteria. These changes ‘will be virtually impossible to unwind,’ he says.”

“What’s more, roughly a quarter of mortgages are on interest-only terms. Most of these were written in 2014 and 2015, and the five-year contractual window will end in this year or the next. ‘Most’ will switch to principal and interest terms, boosting repayments by 20 per cent.”

Leave a Reply

Your email address will not be published. Required fields are marked *