Archive for October, 2011
According to data from the People’s Bank of China (PBOC) and published by the China Daily, new property related loans including loans provided to property developers and new home buyers fell to 992.3 billion yuan between January and September, down 42.8 percent compared to the same time the year earlier.
Quarterly statistics show a continued trend down. In the January to March quarter 509.5 billion yuan of loans were written, followed by only 281.7 billion yuan in the June quarter and 201.1 billion in the September quarter.
The Central Government has been working to cool the overheating property market in China using interest rate rises, increases in bank reserve ratios and limits to the number of houses citizens could purchase.
Zhang Dawei, a senior researcher with the Centaline Property Agency Limited told the China Daily “Home sales are falling and inventories building up. Real estate developers, especially those small and medium-sized firms, are under unprecedented pressure.”
The reduction in demand for loans is having a flow on effect on prices with some apartment developers having to drop prices by as much as 36 percent in order to move inventory. For owners who have just brought, falling property prices is causing anger and protests in the streets.
The Wall Street Journal reported a group of about 400 home buyers in Shanghai demonstrated about falling property prices outside of a showroom of China Overseas Land & Investment Ltd. During the demonstration, some owners trashed the showroom.
In another case in the Jiading District, 30km from Shanghai homeowners smashed a glass door and sprayed graffiti over the walls of the Moco showroom of property developer Longfor. Some of the graffiti accused Longfor of being a swindler, while other walls read “Get rid of Longfor” and “Pay my money back.”
» Falling housing loans add to home builders’ woes – China Daily, 29th October 2011
» Home prices decline in suburbs – China Daily, 25th October 2011.
» China developer warns on price falls – Financial Times, 25th October 2011.
» Homeowners protest price cuts in Shanghai – Market Watch, 25th October 2011.
» Shanghai owners protest as developers slash prices – Taiwan News, 26th October 2011.
» Protests hit China as property prices fall – Agence France Presse, 27th October 2011.
Posted in China | 5 Comments »
A plan announced on Thursday to address the Eurozone debt crisis has bouyed markets around the world. But questions remain if it will go anywhere near fixing the problem.
Eurozone leaders have formed an agreement with private banks and insurers to accept a 50 percent loss on Greek’s bonds. Long term, the aim is to cut Greece’s debt to GDP ratio to 120 percent by 2020. Despite Greece not being able to service it’s initial debts, this is not called a default. It’s also deemed to be voluntary as to not trigger any credit events (CDS). Bloomberg reports there are $3.7 billion in debt insurance contracts on Greece.
To help stabilise economies in the Eurozone, and in fact most of the world, the European Financial Stability Facility (EFSF) will be ‘leveraged’ up to 1 trillion euros and many European banks recapitalised. It’s this term again, ‘leverage’ that has caused so much concern. Ironically, it is in part what caused the GFC. The EFSF was first created in May last year, but it’s feared the fund is to small to be of any real assistance, so the plan is to leverage it by 4 or 5 times.
It’s not yet known how the leverage will be performed. Klaus Regling, the CEO of the European Financial Stability Facility flew over to Beijing after the deal was sealed on Thursday to gauge China’s interest in becoming a potential investor for EFSF bonds or investing into a Special-Purpose Investment Vehicle (SPIV). China Daily writes :
He said his conversations with Chinese officials were partly aimed at getting their preference, in order to find the “right structure” that would appeal to potential investors, adding the leverage mechanism would be “simple” and “transparent”, just like home mortgage loans.
ECB President Jean-Claude Trichet has said the eurozone sovereign debt crisis is not over – “The crisis isn’t over, but after the decisions made this week, I’m nevertheless confident that the governments will succeed in restoring financial stability,”. Only time will tell.
» Euro zone to leverage EFSF by 4 times to 1 trln euros – sources – Reuters, Wednesday 26th October 2011.
» Euro bailout chief says talks with China ‘productive’ – China Daily, Sunday 30th October 2011.
Posted in Australian economy, UK economy, US economy | 6 Comments »
According to a News Limited article with the headline “HOUSING STRESS: PM struggles to find a rental property”, Prime Minister Julia Gillard is having trouble finding a rental property in a difficult market.
The number of rental vacancies around the country continue to increase as cost of living pressures force renters to consolidate into share accommodation or move back in with Mum & Dad.
According to SQM research, there were 48,179 rentals vacant around the country in September, up 21% from the same period last year. In Canberra, the home of The Lodge, rental vacancies are up 18%, and in Juila’s home capital of Adelaide, vacancies have shot up 69% in the past year.
But the problem might not be Australia’s rental market where vacancy rates are quickly returning to normal, but the requirements. The Prime Minister needs a rental with secure entry, bulletproof glass and a granny flat for live in accommodation for body guards. It’s unknown if gas is a requirement, or if an electric cooktop will suffice.
Posted in Australian economy, Australian Housing | 3 Comments »
In recent weeks we have heard claims from property management companies saying rents are surging and will continue to do so. One company even claimed double digit rises.
The only trouble is, these claims are not supported by actual figures from Australian Property Monitors (APM). The median weekly asking rents for houses either made no ground or fell in every state of Australia for the September quarter. Nationally, this saw rents fall 0.2% for houses.
Sydney, Melbourne, Brisbane, Perth, and Darwin all recorded no rental growth for the quarter. Rents fell in Hobart by 1.6 percent, Canberra 2.1 percent and Adelaide 2.9 percent.
The unit market was not much better, recording a 1.1 percent rise due only to a 2.2 percent rise in Sydney’s unit rents. The Sydney unit market was the only segment to record rent rises, with units in Melbourne, Brisbane, Adelaide, Perth and Darwin recording no gains. Rents fell 2.3 percent in Canberra and 6.0 percent in Hobart.
Once again, these figures, along with surging housing stock on the market and falling building approvals don’t bode to well for a country with a so called chronic shortage of houses.
» September 2011 Rental Report – Australian Property Monitors
Posted in Australian economy, Australian Housing | 4 Comments »
Treasurer Wayne Swan has told the ABC he doesn’t agree with the IMF report indicating Australia’s house prices are overvalued by 10 to 15 percent.
“I don’t share its assessment in terms of housing. There is a shortage of housing in Australia. A structural shortage of housing,” he said.
Despite the comments from the Treasurer, data from SQM research released last week showed there are now 362,793 houses listed for sale Australia wide, representing an increase of 24.3 percent when compared to the same period last year.
Melbourne has the biggest change, with 65.3 percent more listings compared to a year ago. SQM Research’s Louis Christopher says ”It represents what I now regard as a massive oversupply situation for the city and I believe it will translate to further house price falls from here,”
With the number of homes for sale increasing, we are starting to see home grown videos surface on the internet eerily similar to 60 minutes footage of the United State’s housing crash.
While the source and location is unverified on this one, it’s believed to be Yamanto in Queensland.
» Swan welcomes ‘enviable’ IMF report – 8th October 2011.
» Australian Homes for Sale Jump 5.6% in September, SQM Says – 6th October 2011.
» Rich pickings for the canny as city prices soften – 8th October 2011.
Posted in Australian economy, Australian Housing | 40 Comments »
Highly leveraged property investors are set for their first full night sleep in 8 months after a news article out today from The Age’s Ian Verrender saying a chance of a property crash in Australia is “as rare as hen’s teeth”.
Read more on why Australia’s property bubble can’t crash Here. With 265 comments at time of writing this, it has created quite a stir.
» A crash in property prices? Don’t bet on it – The Age, 6th October 2011.
Posted in Australian economy, Australian Housing | 16 Comments »
The two day tax forum in Canberra has ended today showing negative gearing is still firmly on the chopping block.
In April we reported (Negative Gearing Rort added to Endangered Species List) on discussions the Gillard government had been having on abolishing what is considered Australia’s largest tax concession. Figures from the Australian Taxation Office show Australia had 1.7 million loss making property investors in 2008-09, losing collectively $6.5 billion. While this is down from losses of $8.6 billion in 2007-08, six out of ten investment properties lose money every year and so landlords can avoid paying income tax. It’s also thought negative gearing is one of the drivers that has seen our housing bubble surge to one of the biggest in the developed world.
Saul Eslake, an economist with the Grattan Institute told the forum, “There is no country in the world that allows negative gearing as generously as the Australian tax system does.”
As Bob Hawke and Paul Keating found out in July 1985, abolishing negative gearing is sure to create a stir. Eslake today re-enforced this saying “There are now 1.7 million of them [negative gearing, loss making landlords] and they vote, which is why that subject is off the agenda for both major political parties,”
But the perfect window of opportunity is fast approaching to wind it back. Negative gearing requires investors to make a loss on rental income in return for capital gains in the future. With house prices now falling for eight months and expected to continue for quite some years, the carrot of capital gains may no longer be in sight for many investors. As our economy starts to de-leverage and our housing bubble deflate, getting plans together to wind back negative gearing in a couple of years will coincide with a period where negative gearing may be ineffective for many investors.
The other housing related topic to come up in the Tax forum is from Nicholas Gruen, CEO of Lateral Economics. He has called on the First Home Saver Accounts to be canned, instead allowing young Australians in their 20s and 30s to be able to use their super towards a house.
» Let Generation Y buy a house with super savings, Nicholas Gruen says – News Limited, 5th October 2011.
Posted in Australian economy, Australian Housing, Negative Gearing | 8 Comments »