October 27, 2016

Kicked From Full Steam Ahead Into Reverse

A report from The Australian. “One of Australia’s largest developers, Mirvac, revealed the number of apartments failing to settle had increased in recent months, raising fresh fears about the sustainability of the nation’s apartment market. More than 20 per cent of Mirvac’s pre-sales are to mainland Chinese. BIS Shrapnel residential property manager Angie Zigomanis said settlement risk was rising across the new apartment market as banks tightened lending standards, especially for foreign ­buyers.”

“‘The buyers who are settling now probably bought their apartments two years ago and in that time in Melbourne and Brisbane the prices have been flat or in some areas may have gone backwards,’ he said. ‘At that time, the buyers may have planned to borrow 90 per cent of the purchase price but prices could have gone down and wiped out that deposit and they’ve got to find effectively another 20 per cent.’”

From The Advisor. “Mortgage brokers are in no way shocked by tighter credit controls on certain suburbs announced by one major bank this week, which they expect will continue into 2017 and beyond. Media reports over the weekend revealed that NAB had compiled a ‘blacklist’ of more than 100 postcodes across the country where buyers will need to pay as much as a 30 per cent deposit to secure a mortgage.”

“Perth-based broker Bianca Patterson of Calculated Lending, who was crowned Broker of the Year at the 2014 Better Business Awards, told The Adviser that she is not concerned about NAB’s announcement, but feels disappointed for those who own properties in areas where the bank has capped LVRs at 70 per cent. ‘It will have a direct effect on those investors. My advice to investors buying in areas that are quite speculative is that this is one of the risks. With properties that offer greater returns there are greater risks,’ she said. ‘[NAB’s announcement] was to be expected.’”

News Corp Australia. “It’s a great time to be a tenant with vacancy rates hitting a record high in Brisbane’s middle ring. It’s the first sign that suburbia is losing the battle to keep tenants as owners of rampaging levels of new inner-city apartments up the ante. REIQ chief executive Antonia Mercorella said the middle ring was being hit by a triple whammy.”

“‘Inner-city property managers and landlords are particularly sensitive to the oversupply question at the moment and rents have become extremely competitive, luring tenants from the middle ring into the inner ring,’ she said. ‘Also, a significant level of development has come online in the middle ring and some agents have reported that without being able sell, many of those properties have been put into the rental pool.’”

The Northwest Star. “In news that will surprise few home owners in the North West, a new report says the Mount Isa property and rental market has weakened by over a third in the last three years with the likelihood it may not have bottomed out. The Herron Todd White ‘Townsville in Focus August 2016′ mainly looks at Townsville but also has a section on Mount Isa’s market and the prognosis is not good.”

“‘The Mount Isa property market has been progressively weakening over the last three years, with average sale volumes remaining low and prices tending to soften,’ the report said. ‘The median house price trend has lowered from a trend level of $383,200 in the June quarter of 2013 to $248,600 during the June quarter of 2016, an apparent reduction over the three years of 35%.’”

“‘During the June 2016 quarter the median house rent came down to $355 per week while the median unit rent reduced to $215 per week,’ it said. ‘House rents have reduced by 37%, and unit rents by 43%, over the last three years.’”

From ABC News. “Western Australia’s slide to the bottom of the economic ladder in Australia has seen the state’s property market kicked from full steam ahead into reverse. But while property professionals see the post-mining boom market to be a readjustment to more ‘normal’ price levels, a looming apartment glut has many analysts concerned about further pain in that sector of the market.”

“‘We’ve had a lot of development of apartments in the inner city ring and that’s where the developments sites have really gone from being feast to famine, they were red hot a couple of years ago, not so much in mind today,’ said Gavin Hegney, an independent property valuer. ‘People are bailing out of their investment properties, saying I’ll just quit the investment property, I don’t like this investment property anymore. So that usually spells when you’re at the bottom of the market, from here we should see some hope,’ said Mr Hegney.”

“Mr Hegney believes the price falls in Perth are a sign of things to come for the east coast capitals. ‘Off the plan sales creates demand for two properties, when the real demand is only for one. When people move into their new apartment they have to move out of their rental accommodation or sell their existing home,’ he said. ‘That’s when you get the problem and that’s what’s coming for Sydney, Brisbane and Melbourne.’”

“In those east coast capitals, a recent survey revealed there are more cranes building apartments than in major United States cities.”

“With building activity in trouble in Perth, investors are trying to offload their units. Retiree Ron Campbell is selling his investment property after 10 years. His concern is that in a falling rental market, upcoming changes to the pension asset test will mean he would be left with nothing to live on. ‘What happens there is of course the rental value drops that there’s less income coming into your wages and plus you’ve got higher water rates, shire rates, all those sort of things come into play and your income is not enough to support, especially going back to January 1, where I might not have any income at all,’ he told ABC News.”

Buyers Are Setting Their Sights Lower

A report from the Buffalo News in New York. “Amid record prices and crowded open houses, Western New York’s booming housing market has hit an unexpected stumbling block for many buyers: they simply can’t find homes to buy. Sales in July fell 9.1 percent from the prior year, according to the Buffalo Niagara Association of Realtors, and even pending deals dropped. Activity came back up in August, with a 5.7 percent gain in transactions. However, that was still much less than the 10 prior months, when sales grew at double-digit rates of as much as 60 percent from year to year.”

“After more than a year of go-go homebuying across the region, the region may just have become a victim of the very factors that drove months of frenetic activity in the first place. ‘Prices are increasing to the point that it is denying buyers an opportunity to buy,’ said David Weitzel, an agent at RE/Max North in Amherst.”

From Bloomberg. “Home prices in New York’s Hamptons fell the most in almost three years as buyers in the beachfront towns sought out less-expensive properties and shunned the middle of the market, priced from $1 million to $5 million. Homes in the area, a second-home mecca favored by Wall Street executives, sold for a median of $825,000 in the third quarter, down 13 percent from a year earlier, according to a report Thursday by appraiser Miller Samuel Inc. and brokerage Douglas Elliman Real Estate. It was the biggest annual decline since the fourth quarter of 2013.”

“Buyers in the towns and hamlets on Long Island’s South Fork are setting their sights lower as yearly bonuses for New York City’s financial employees — the lifeblood of the Hamptons market — are poised to disappoint in 2016. Incentive pay at hedge funds may fall 5 percent to 15 percent this year because of lackluster returns, while bonuses for fixed-income sales and trading may fall 10 to 15 percent, according to an August report by compensation consultant Johnson Associates Inc.”

“‘Wall Street is not having a banner year and I don’t think there’s an expectation that compensation for this year will be higher than last year,’ Jonathan Miller, president of Miller Samuel, said in an interview. ‘I do think there’s just a little bit more caution.’”

The Village Voice. “On the heels of new legislation that will penalize anyone who advertises entire apartments on the home-sharing service Airbnb for less than thirty days at a time, the company valued at $30 billion summoned a few of its hosts and held a small protest outside of Governor Cuomo’s New York City office Wednesday morning, claiming that the governor and New York state legislators were helping to make the city’s affordable housing crisis even worse.”

“Michelle Yates, a Bed-Stuy resident for eighteen years, who has previously worked in the construction and real estate industries, is encouraged about the changes she’s seen in her neighborhood — which has seen its white population increase sevenfold. ‘People are losing their homes because they pulled money out of their homes thinking it was an ATM while sitting on a high-interest mortgage. It has nothing to do with Airbnb. Nothing to do with real estate prices. I don’t believe any of that,’ Yates told the Voice, in response to the counterprotesters chants that Airbnb was hurting minority communities.”

“Assemblywoman Linda Rosenthal, who championed the new legislation, was on hand to shout against Airbnb. ‘More than 50 percent of the units rented out on Airbnb are illegal — that’s why Airbnb is freaking out,’ Rosenthal told reporters. ‘Not because they care about New Yorkers, because this has been illegal since 2010. They’re freaking out because their bottom line has been challenged.’”

From DNA Info. “The management company taking over the Red Square rental building on East Houston Street slashed the salaries of doormen and maintenance workers by roughly 30 percent — and several staffers said they were given ultimatum to either accept the lower pay on the spot or not come back.”

“Residents at the 250 E. Houston St. apartment complex received letters on Oct. 20 announcing the purchase by 250 Houston Investors, LP under the management of Dermot Realty Management Co., along with a host of upgrades coming to the building, such as apartment renovations and added amenities pledging to ‘[elevate] your living experience.’”

“But the change comes at a price for longtime workers at the residence. A maintenance worker who did sign the new contract said he felt he had no choice. He accepted the impromptu demotion, from the position of super to sweeping and mopping floors as a porter, which cut his $18 hourly pay down to $11. ‘They threw us in a room and said, ‘Sign this or you’re fired,’ the employee recounted. ‘They said, ‘You don’t do maintenance no more.’ They took the keys off my key chain. They said, ‘You just sweep and mop.’”

“Two longtime doormen said they received similarly steep pay cuts — from between $17 and $19 per hour down to $12 per hour — which they accepted due to a lack of other options. One doorman said he felt ’stuck,’ explaining he and his colleagues ‘had no choice.’ ‘We have families,’ he said. ‘How can we take care of them?’”

From Bisnow. “NYC’s always been a city of cranes, but never has this been more apparent than today. Development remains strong, and construction spending and employment are hitting record levels. Can developers finance record levels of construction? Is there anything they can do to slow rising costs? GFI Development president Steven Hurwitz says he’s already seen prices begin to cool as the loss of the 421-a has slowed residential development and the frozen land market slows the pipeline.”

“‘Contractors are starting to see that and are growing hungry,’ Steven says. Unskilled labor is much easier to find, and companies have ’staffed up so much that they now have a lot of mouths to feed.’”

October 26, 2016

The Market Is Just Saturated

A report from the Dallas Morning News in Texas. “Prospects for the 2017 U.S. commercial property still market look good, to hear the majority of real estate folks tell it. Certainly Dallas is in the biggest building boom it’s seen in almost three decades. But a lot of the industry’s executives are looking over their shoulders, fretting about everything from rising interest rates to a flood of capital coming into the U.S. property sector. ‘There is maybe a little more caution in the market,’ Andrew Warren, head of research for Pricewaterhouse Coopers, said Wednesday at a Dallas meeting of the Urban Land Institute, the country’s largest commercial real estate organization.”

“Some of the worries for the development business Warren red-flagged included rising construction costs, the potential for higher finance costs and affordability concerns for the housing markets in many U.S. cities, including Dallas. The increase in players in the business and the flood of money coming into the markets are also causing some heartburn for commercial builders and investors.”

“Commercial property transaction totals, which were the highest since the Great Recession in 2015, are expected to decline slightly this year and more in 2017 and 2018, according to a ULI forecast. ‘Transactions are down this year so far — still at a very strong level but not as great as we had last year,’ said Dr. Ken Rosen of the University of California at Berkley. ‘The consensus is the rate of increase in prices is going to slow dramatically.’”

The Miami Herald in Florida. “First came Porsche. Then Armani, Fendi and Missoni. Now Aston Martin is the latest luxury brand to gun for a piece of South Florida’s condo market. The British car maker announced Wednesday that it will partner with wealthy Argentine developers on a 66-story condo tower called the Aston Martin Residences at the mouth of the Miami River in downtown Miami. The licensing deal marks the auto company’s first venture into real estate.”

“In today’s struggling luxury market, Miami developers are more likely to cancel condo projects than unveil them. A strong dollar and weak global economy have starved the region of foreign buyers. But Argentina’s Coto family, which paid a record $125 million two years ago for the vacant waterfront land next to the Epic Hotel, says it has enough horsepower to get the 390-unit project going.”

“The big question: Will Miami’s luxury market have come back to life by the time the Cotos start selling units? ‘The market is in great turmoil right now,’ said Jack McCabe, a South Florida real estate analyst. ‘Many countries that have been feeder markets for South Florida are in recession, especially in Latin America. The developers are starting a sales campaign at a very difficult time for global economies.’”

“In mainland Miami, average sales prices for luxury condos plummeted 29 percent year-over-year in the third quarter of 2016, according to a report from brokerage Douglas Elliman. The number of luxury condo sales fell by a quarter. And units languished on the market for an average of 129 days, compared to 52 days last year. Banks and other lenders have taken note.”

“‘There’s been a slowdown in construction financing, not just in Miami, but in other major markets,’ said Jonathan Miller, a housing analyst who authored the report. ‘This has been a four- or five-year development boom that’s occurred across the United States. I think some lenders are realizing that and taking a breath.’”

The Wall Street Journal on New York. “A three-bedroom unit on the 62nd floor of One57, a newly built condominium towering over New York City’s Central Park, has sold for $23.5 million, or 25% under its original sale price of $31.7 million.”

“According to Noble Black of Douglas Elliman Real Estate, who had the listing with colleague Emily Sertic, the apartment was first listed for roughly $41 million with another firm in 2014, almost immediately after the seller closed on the purchase from builder Extell Development. It has since seen several price reductions, and was most recently asking $25 million. The seller’s identity is shielded by the entity Escape From New York LLC.”

“The buyer is Chinese billionaire Liu Yiqian, according to Jeremy Hu of Compass, who represented him in the transaction. An investor who lives primarily in Shanghai, Mr. Liu is known for his large art purchases. The sellers never officially moved in to the apartment, deciding to put it on the market instead, Mr. Black said. They had planned to move in, he said, but their circumstances changed during the lengthy period between contract signing and closing, and the apartment was too small.”

“Mr. Liu feels he got ‘a good price’” on the condo, Mr. Hu added, noting that the high-end real estate market has faltered in recent months. At 1,004-feet high, One57 made headlines when a penthouse closed for $100.5 million in late 2014, setting a new record for New York City apartment sales. But with the high-end Manhattan market now much softer, a number of the 94 original units are still for sale, and Extell in March reduced its projected sellout value of the tower to $2.56 billion, a markdown of $162 million from its 2013 projections.”

The Union Tribune in California. “Prices grew modestly in San Diego County’s housing market in August, capping a slow summer, said the S&P CoreLogic Case-Shiller Indices. Adjusted for seasonal variation, the regional index of home prices was 5.8 percent higher in August compared to a year ago. However, compared to July, the market appreciated by .21 percent, or an annual rate of just 2.5 percent, continuing a pattern that began in June. Most of the year’s price increases came early in the year, beginning with an annual rate of growth of 12.9 percent in January. The housing markets of Los Angeles and Orange counties followed a similar path.”

“Chris Thornberg, economist and founding partner of Beacon Economics, said the Southern California market was being dragged down by high-end homes. ‘That market is just saturated. There’s too much coming online and not enough well-heeled people to grab all of them,’ he said. ‘Everything suggest these units are sitting on the market longer and longer.’”

Compared To The Peak Of The Madness

A report from Global News in Canada. “Some sellers are cashing out of Canada’s hot housing markets as property values soar to new heights — while others may have already missed their chance. There are a few factors at play. First, there was the introduction of B.C.’s new 15 per cent tax on foreign buyers, which prompted a rapid slowdown in sales. Then in October, new federal mortgage rules were announced and quickly implemented, intended to stabilize the country’s housing market. The changes are leaving some homeowners on edge in Vancouver. ‘Some (sellers) are fearful,’ said James Garbutt, a realtor in the Vancouver area. ‘When you compare it to the peak of the madness in April, we’re off — for certain products — by about 20 per cent.’”

The Evening Standard in the UK. “Homeowners looking to sell up in the most expensive areas of central London are cutting record six-figure sums off asking prices in the wake of the Brexit vote, according to figures. In the ‘golden triangle’ of postcodes around Kensington, Knightsbridge and Mayfair an average of £171,321 is now being slashed from asking prices, up from £150,120 in the three months before the June 23 poll.”

“One three-bedroom, ground-floor flat on Belgravia’s Eaton Square went on the market in January with Hamptons International for £6.35 million. This month, it was repriced at £5.995 million. Similarly, a two-bedroom flat at Hanway Gardens, a new building in Fitzrovia, was on the market for £1.7 million at the time of the Brexit vote with Fraser & Co. Its price was cut in July to £1.6 million and again this month to £1.55 million.”

The Property Report on Dubai. “Dubai’s apartment market continues to make quarterly slides alongside the global oil price slump, data from UAE-based property portal Bayut.com recently showed. One-bed apartment rents suffered the greatest drop among all bed categories, with average prices decreasing 8 percent from AED100,000 (USD27,200) in the second quarter to AED92,000 (USD25,000) in the third quarter. The first seven months of 2016 saw a 30-percent slash on real estate sales values in Dubai, according to the Dubai Land Department.”

“To some local property developers however, the emirate’s property market is in its bottoming-out phase. ‘I think the worst is over,’ Nakheel PJSC Chairman Ali Rashid Lootah told Bloomberg recently. ‘Dubai is growing, we are seeing signs of more inquiries – serious inquiries – and I think that’s a sign of recovery. The market is maturing, we are seeing more serious, cautious investors, not speculators.’”

The News Minute on India. “Infrastructure company Marg ProperTies, wholly owned and subsidiary of MARG Ltd is in the news for the wrong reasons. Around 4000 customers who had invested in their properties are yet to receive apartments promised to them. ‘We filed a complaint -along with documentary proof- with the Central Bureau of Investigation, the Chennai Crime Branch, the Chief Minister’s Complaint Cell and the Commissioner’s Office, but we are yet to hear from them,’ says Ravishankar -an investor- while speaking to The News Minute.”

“Ravishankar invested in an apartment costing Rs. 42 lakhs and has already paid an amount of Rs. 35 lakhs, by availing a home loan from Axis Bank. He blames the bank too for not verifying the construction/sale agreement before transferring the said amount to the builders. According to him, only 30% of the project is complete, with only the exteriors in place.”

“‘Does this mean they don’t have funds to complete the project? Who will buy the rest of the apartments now?’ asked a customer who did not want to be identified.”

“The Brindavan Project in Sriperumbudur in Kancheepuram district on the other hand, has not even started. It was supposed to have been completed by 2013. The company website boasts of 1848 apartments (with 2 & 3 BHK) spread over 16.5 acres. ‘I invested in this project back in 2010 and have already paid about Rs. 10 lakhs for the apartment. No environmental clearance has been obtained the company has taken loans. If I had known then, I would never have invested in this project,’ shares advocate Hari.”

“Just like Hari, almost 600 people have bought apartments and paid 50-60% of the sale cost. ‘Only the Navratna project has been completed till date, while only the foundation has been laid for Aayush. Construction has not even begun for Four Seasons. At Maha Utsav, you are greeted by the sight of pillars,’ fumes Rajesh, an investor in the Maha Utsav and Ayush projects.”

“He paid Rs 3.5 lakhs for the Maha Utsav project and Rs. 2 lakhs for Ayush. ‘I paid the money in 2010. Around 3000 people have invested money in the Swarnabhoomi project, but only 450 have got their apartments,’ he adds. Even after filing a police complaint at the Thoraipakkam police station in July 2015 -he says- the police have not taken any action against the builders. A protest too was organized in Chennai by enraged customers and a case was also filed in the Consumer Court last year. ‘There are no judges appointed to the Consumer Court and our case has not come up for hearing till now,’ Rajesh sounds frustrated.”

“Rajesh alleged that he was being threatened by the Marg Group for repeatedly asking them to return the money he had paid for the apartments.”

October 25, 2016

We Are Having A Major Correction

A report from the Journal News in New York. “Developers who are currently building thousands of new luxury apartments in Westchester say they remain confident that their units will be quickly leased once completed, even if the rental market to the south in New York City is showing signs of cooling down. ‘We are not concerned about overbuilding,’ said Arthur Collins, president of Collins Enterprises. His firm is currently developing its third luxury rental building, to be known as Hudson Park River Club, on Yonkers’ waterfront. ‘Basically, there’s a shortage of housing in New York City. So our theory is it will take an awful lot to actually build out (here) to meet what the market demands.’”

“More than three-dozen rental projects — totaling nearly 7,000 units — are currently being built or proposed in Westchester. Rents soared in major cities across the country in recent years, including New York City, making Westchester more attractive as a less-costly alternative. But a glut of rental buildings in New York City now appears to be causing some market slowdown there.”

WTOP in Virginia. “Monthly numbers on residential real estate sales can be volatile, and median prices based on just a few hundred sales aren’t necessarily indicative of the market, but year-over-year prices have declined for two consecutive months in Arlington County and were relatively flat earlier this summer. Arlington County remains the most expensive county for housing in Northern Virginia, but Long & Foster Real Estate Inc. says the median price of a house or condo that sold in Arlington County in September was $515,000, down 10 percent from a year ago.”

‘The median price was based on 219 sales. By that metric, the number of sales in Arlington County was also 15 percent lower than last year. The 196 sales in Alexandria City last month yielded a median price of $447,500, down 2 percent from September 2015. Sales had fallen 12 percent. ‘Conservative appraisals and buyers have kept things tempered,’ said Gary Lange, managing broker at Weichert Reality in Vienna.”

The Naples Daily News in Florida. “Single-family homes in the Naples area had the slowest price growth in the state in September, a new report on existing homes says. Bonita Springs broker real estate agent Michael Burke said Collier County buyers are often out-of-towners looking for second homes, while those buying in Lee County tend to be workers looking for something affordable and practical. ‘The ‘need to buy’ market is increasing, but the ‘want to buy’ market is slacking off,’ he said.”

“Statewide, overall inventory levels and days on the market continued to creep up, while the number of cash buyers declined, Florida Realtors said. A similar trend held true for Southwest Florida. Naples appraiser Cindy Carroll said that’s good news for buyers, who can expect more selection and less competition from investors and others. And it’s also a sign that sellers need to take a hard look at their direct competition in the market when pricing their properties. But she added: ‘We should not interpret these statistics as negative. We’re exactly where we’re supposed to be in the cycle at this time.’”

The Atlanta Journal-Constitution in Georgia. “Atlanta’s price hike beat the 5.1 percent average increase for the top 20 metropolitan areas, according to the S&P/Case-Shiller House Price Index, a calculation based on a three-month average. Of course, averages can be misleading and the gains in Atlanta have been uneven. There are neighborhoods that have barely come back from the crash that followed the burst he housing bubble and the vicious recession. Some larger areas too remain burdened, especially on the south side of metro Atlanta: About 58 percent of Clayton County’s homes are underwater, according to Zillow.”

“Experts said the market had split – with a scarcity of sale listings among modestly priced homes and a surplus of homes for sale at the top end of the market. So average prices are up solidly from a year ago, the pace of that rise was already slowing and in many parts of metro Atlanta there has been a turn south. said Nancy Keenan, a Realtor with Keller Williams who handles mostly listings on the north side of town. ‘I would say that 90 percent of the homes on the market have had some price reduction,’ she said.”

“While first-time homebuyers have worried about rising prices among starter homes, the recent change has hit harder at the high end, she said. ‘For a couple months, we have seen very few sales at the higher prices,’ Keenan said. ‘A couple months ago, there were falling sales over $800,000. Now that is happening at $600,000 and above.’”

“The shift will have a larger impact in coming month – and the impact could be disappointing to sellers, she said. The ‘comps’ that are used to appraise the next round of homes for sale will be the sales this fall of these lower-priced houses. That will make it tougher for next year’s sellers to raise prices significantly – or at all. ‘We are having a major correction and it is going to hurt people come spring,’ she said.”

From Silicon Beat in California. “The message is becoming increasingly clear: Rents indeed are falling around the Bay Area. New data from the Axiometrics research firm show rents dropping in San Jose, San Francisco and Oakland. The Oakland piece is a new twist; according to other surveys, Oakland rents have remained on the rise, though at a far slower rate than over the past year or two.”

“Here’s what Axiometrics has to say about average rents falling into ‘negative-rent-growth territory’: In September 2016, San Jose rents fell year over year by 3.4 percent from $2,814 in September 2015 to $2,718. During the same time period, San Francisco rents fell year over year by 3.3 percent from $3,336 to $3,226. And Oakland rents fell year over year by 0.6 percent from $2,392 to $2,378. The Axiometrics study follows one by Abodo, the apartment search website. It showed rents dropping 7 percent between September and October in San Jose (from $2,455 to $2,293) for a one-bedroom apartment, and falling 6 percent in San Francisco (from $3,698 to $3,483). However, it showed rents still climbing in Oakland — by 5 percent, from $2,256 to $2,358 for a one-bedroom.”

“One last thought: Even though the runaway market is finally starting to cool off, most middle class folks still struggle to afford an apartment here.”

October 24, 2016

As A Construction Boom Plays Out, Appetite Has Dimmed

A report from the Guardian in the UK. “A surge in the supply of rental properties on the books of letting agents is forcing landlords to peg back rent rises, according to an industry body. The proportion of landlords implementing increases fell to 24%, its lowest level this year, said the Association of Residential Letting Agents, while the number of unlet flats on agency books rose to the highest level for 18 months. David Cox, managing director of Arla, said: ‘This month’s findings paint a really positive picture for renters. The supply of rental stock has risen astronomically.’”

From Reuters. “High-end property developers in London are restricting the supply of homes to prevent further price falls by selling entire apartment blocks to funds for rental, according to agents and investment managers. Growing numbers of flats will come up for sale in coming years as a construction boom plays out, but appetite from individual buyers for British real estate has dimmed. Sales of unbuilt and completed projects are being struck at a 10-15 percent discount to their expected market values, industry consultants said, as housebuilders strip out the cost of marketing to individual buyers and taking debt to build the projects.”

“APG Asset Management, Europe’s largest pension fund manager, is in talks with developers who seem more open to deals as they contend with the risk of not being able to sell everything in the current climate,’ said Martijn Vos, APG’s senior real estate portfolio manager. ‘If the market remains as it currently is, I feel there will be more such deals to come,’ he said.”

The International Business Times. “The number of homes sold for £1m or more in England and Wales has collapsed by 62.5% in just two years as the property market feels the effects of tax hikes, global economic turmoil, and uncertainty surrounding the Brexit referendum. ‘There will be few tears shed for estate agents or their millionaire clients struggling to sell their homes but don’t put away the man-size too fast,’ said Henry Pryor, a buying agent. ‘In fact the problems affecting the top rungs of the housing ladder could and probably will infect the lower priced properties.’”

The Evening Standard. “Some of London’s luxury house developers are showering homebuyers with drastically more extravagant gifts in the wake of the Brexit vote. Amazon Property partner Chris Lanitis says: ‘If a purchaser bought an apartment from us and liked a particular piece of art which is bespoke to the apartment, then — depending on price — the piece would either be gifted as a moving-in present or, if the art work was one of the rarer and more valuable pieces, we would liaise with the art gallery to help arrange a preferential price for our purchaser.’”

“But methods to boost sales are not limited to art, says Michael Ferris, a director at JR Capital, which buys properties for Middle Eastern investors. He reveals that one of his Saudi Arabian clients was told that £200,000 of furniture from a showroom apartment would be thrown in if he bought one of the £2.5 million-plus flats in a new zone one scheme on the river. ‘This is because the development has a large supply of high-value unsold flats and is nearing practical completion,’ he explains.”

This Sense That’s Something’s About To Flip

A report from the Register Guard in Oregon. “The city of Eugene is reporting a 1,600-unit deficit in multifamily housing and is identifying policy changes that would create more capacity. Based on an analysis of actual development in Eugene, however, it appears that there is no deficit — instead, a surplus of capacity exists. I have been working with Lloyd Helikson, who has collected data on all the multifamily developments that have occurred since July 1, 2012 — the official start date of the 20-year planning time-frame for the Envision Eugene process. The remarkable findings show that actual development is greatly exceeding projections.”

“Five thousand, two hundred and five units of multifamily housing are already built or planned for the five-year period for which we have data (2012-17). Envision Eugene forecasts a need for a total of 6,797 units of multifamily housing in the entire 20-year planning period. Thus, we have already achieved 77 percent of the needed development, with 15 years left to go! Oddly, the city does not collect and report information on multifamily development in Eugene. In fact, the city’s permit reporting system is underreporting the number of dwelling units, with some large projects reporting zero dwelling units. During the past five years, it appears that the city may have reported 1,857 fewer multifamily dwelling units than have actually been built.”

The Daily Camera in Colorado. “The tide might be turning in Boulder’s crazy rental market, as vacancy rates hit highs not seen since the Great Recession and property managers say apartments are sitting empty through several price drops. Boulder’s vacancy rate (not including the university area) rose to 7.2 percent in the past three months in the city, according to the Apartment Association of Metro Denver. The last time it was that high was 2009. In fact it’s only been over 7 percent twice in the past decade: third quarter ’09 and today.”

“‘We’ve started noticing properties sitting longer than usual, and actually needing some lower rental rates in order to attract tenants,’ said Simon Heart, owner of All County Boulder Property Management. ‘We target to lease properties within 30 days, but within the last month or two, there are properties that have been sitting for 30-60 days that we’ve had to lower the rent several times’ to fill.”

“‘None of my clients have had more than a couple-day vacancy,” said Chrissy Smiley, who owns rental agency Smiley & Associates. But, like others in her industry, she did note having a ‘harder time’ renting properties that, in the past few years, would have been snapped up immediately. ‘I just feel there is some kind of sea change happening with the rental market,’ she said. ‘Part of it is that rents are going up and people’s incomes aren’t going up at the same rate. I get this sense that’s something’s about to flip.’”

The Crookston Times in Minnesota. “When the City of Crookston and CHEDA agreed to invest some dollars a bit more than two years ago on a comprehensive housing study of the community, more than one person around the city council and CHEDA board of directors table said it would be critical to not let the study, once completed, sit on a shelf and gather dust. Board member Lee Meier, who runs the Northwest Minnesota Multi-County Housing and Redevelopment Authority in Mentor, endorsed the strategy of not going immediately all-in on meeting the exact recommendation in the housing study for market rate rental units.”

“‘It’s not an exact science; just because it says 89 units doesn’t mean we need 90 actual units,’ Meier said. ‘Other communities around us have overbuilt recently due to perceived demand and now have some vacancies.’”

“‘We want to make sure landlords see good returns on their investment,’ added CHEDA Executive Director Craig Hoiseth. ‘We don’t want to push rents down too much.’”

WWNYTV on New York. “Three houses in the city of Watertown are set to be demolished. The former apartment buildings on the corner of Washington Street and East Flower Avenue will be torn down. The owner of the buildings, Hedy Cirrincione, says the over-saturated rental market in the city and the location of the buildings is why she is having them taken down.”

October 23, 2016

The Boom-Bust Cycle Has Expanded Across The Globe

A two part series from Farm Futures. “About every year, Ron Pierson tries to trade one of his larger Case IH tractors for a new one. He did not this year because the dealer was reluctant to add another expensive piece of used equipment to the big supply already on the lot. Shorty Kulhanek, a custom harvester based in Colby, Kan., had the same problem with his combines. Each year he typically trades his three Gleaners for new ones, but this year the dealer still had the ones he traded the previous two years. ‘I normally had a one-year turnover in the combines, but I didn’t this year because the dealer had too many used combines,’ he says. ‘I am glad I waited. I’ll trade for the 2017 models when they will be eager to deal.’”

“The glut of machinery came about after several years of farmers upgrading fleets with new equipment when the farm economy was strong and crop prices were high. Manufacturers responded by ramping up production. Now, farmers have not been in a rush to upgrade because of their newer fleets and the downturn in crop prices. That slowed demand for new equipment. Meanwhile, the used pieces they traded remain on the lots. In addition, the weak farm economy has farmers selling used equipment to raise capital.”

“Another reason to move slowly is dealers expect a lot of leased equipment will come onto the market and will need to be sold. ‘We have to remarket those to our dealers as used machines, and they will have to sell some of those instead of selling new machines,’ says Jim Walker, vice president of Case IH North America. ‘Lease returns have hurt both John Deere and us in the high-horsepower tractor business.’”

The Journal Star. “Cash rent prices for Peoria County farmland have generally followed property sale and commodity prices downward in 2016 in a market highly dependent on broader economic conditions and individual relationships. A recent University of Illinois report indicated the average cost of rent per acre in Peoria County was $221 this year, down from $238 in 2014, the last year for which data was available. The 2016 price still represents a significantly higher premium than several years earlier, when rent prices began climbing along with commodity rates.”

“Cash rent prices tend to increase at a slower pace than commodity prices and similarly decline at a rate just behind that of grain, said Patrick Kirchhofer, manager of the Peoria County Farm Bureau. ‘Cash rents will continue to come down if crop prices remain where they’re at,’ Kirchhofer said.”

The Erie Times-News. “Dean and Suzanne Curtis paid a price in sweat, 14- and 16-hour workdays, scraped knuckles and vacations they never took. But together, the Venango Township couple built something. They own 515 acres, a herd of 150 dairy cows and the buildings and equipment needed to produce thousands of gallon of milk each year. In 2009, they were just months from having all of it paid off. Then came the recession and a historic tumble in the price of milk.”

“Today, two refinanced mortgages and seven years of unreliable milk prices later, the idea of being debt-free seems like a distant memory, said Dean Curtis, who has been farming for 50 of his 64 years. Curtis said he and his wife have far less debt than many dairy farmers, but worry that some fellow farmers might not survive a pattern of low prices that has persisted through 2015 and most of this year.”

“Some of those who remain appear to be in trouble. Curtis, president of the Erie Crawford Cooperative, a farmer-owned feed mill, sees it in the growing list of farmers who are delinquent in paying their feed bills. ‘It’s ridiculous,’ he said. ‘I’m not angry at the farmers at all. It’s the whole farm economy that is ridiculous and what farmers are expected to live on.’”

“As recently as 2014, dairy farmers were collecting some of the highest prices in history, said James Dunn, professor of agricultural economics at Pennsylvania State University. Farmers, who sell milk not in gallons, but in 100-pound increments, were collecting an average of $25.64 per hundred pounds or the equivalent of about $2.98 a gallon in 2014, Dunn said. In 2015, that fell to $18.48 per hundred pounds or $2.14 a gallon. For the first six months of this year, he said, the price fell to $16.45 per hundred pounds, about $1.91 a gallon.”

“There’s little agreement about how much farmers need to break even. ‘There are people who have all different costs of production,’ Dunn said. ‘It has a lot to do with when they bought things, how well their crops worked out and the decisions they made over time.’ What Dunn can say is this: ‘Somebody who expanded in 2014 thinking that (price) was the new normal has been severely disappointed.’”

From Grub Street. “It’s never easy being a farmer, but it’s particularly tough right now. Supermarket prices fell for the tenth straight month in September, down 2.2 percent from last year. This makes the 2016 decline in food prices, as analysts predicted would happen, the worst since 1960. A number of factors have contributed to the price plummet. After years of high prices and insufficient resources, there’s now an oversupply of meat and grains, including a record corn crop of 15 billion bushels forecasted. Demand from China has declined, and the global economy isn’t exactly running on all cylinders. Meanwhile, farmers are expected to produce 212 pounds per capita of beef, poultry, and pork.”

“The price declines are significant. Last month, a pound of ground beef was down to $3.66 from $4.13 last year; bacon fell to $5.48 a pound from $5.73; and the cost of a dozen eggs fell more than 100 percent to $1.47 from $2.97. Some of the worst-hit by the decline have been pig farmers: The National Pork Board says that pigs are selling for $97 each, down from an all-time high of $280, in 2014.”

“While pig farmers can reduce their herds, there’s little crop farmers who are paying rent on the land they farm can. Supermarkets, too, are suffering: Grocery chain Supervalu says second-quarter revenue fell 4.8 percent, while Kroger lowered expectations and plans to cut capital investments by $500 million this year and next.”

From Bloomberg. “It was advertised as Brazil’s ‘new frontier,’ the vast savanna running alongside the Amazon jungle that would help meet China’s insatiable demand for food. The farmers of Brazil heeded that call, razing trees, plowing virgin land and planting soybeans at a frenetic pace for much of the past decade. Now, soybean demand from China has slowed and the world supply has increased amid a record U.S. crop, denting international prices. In parts of northeastern Brazil, so little rain has fallen in the last four years that farmers find themselves stuck in what is the worst agriculture crisis to hit the country in a decade.”

“Vanguarda Agro SA, Brazil’s second-largest farming group, has been gradually moving out of Matopiba since 2014 and won’t plant a single hectare in the region this year, said CEO Arlindo Moura. Moura said the investment needed to transform scrubland into farmland is no longer feasible following the decline in soybean prices over the past few years. ‘When the soybean price was at $15 a bushel, every piece of land was good for planting,’ Moura said. ‘With soybeans under $10, you have to produce more than 50 bags per hectare (44.6 bushels per acre).’”

The Wall Street Journal. “Harvests are under way of what are projected to be the largest corn and soybean crops in U.S. history, which soon will hit a global market already sitting on the largest-ever grain stockpiles. Indeed, some farmers are hoping for a weather hiccup somewhere in the world to curb yields and breathe life into crop prices that recently hit multiyear lows. They may be waiting a long time.”

“It is a dramatic turnaround from four years ago, when prices for many commodities were soaring to the highest levels U.S. producers had seen in their lives. The boom-bust cycle of commodity production in America has expanded across the globe in recent years, as crop and livestock farmers in South America, China and the Black Sea region have adopted farming practices that largely mirror those in the U.S. breadbasket. That has raised the potential risks and rewards for producers looking to sell, as weather, currency swings and policy changes in far-off countries have a greater impact on U.S. food prices than ever before.”

“‘The world is still expanding production area, and because of that, this cycle could go on awhile,’ says Dan Basse, president of Chicago-based commodities firm AgResource Co., who notes that farmers world-wide have added nearly 180 million acres to cultivation in the past decade, about as much as the combined acreage of the entire U.S. Grain Belt.”

“The barnyard-wide glut stems from decisions made globally to plant more row-crop acres and to raise bigger herds in response to new demand and high prices during the most recent shortage. ‘There’s an old industry adage that money makes milk, and more money makes more milk,’ says Chuck Nicholson, a professor of supply chain and information systems at Pennsylvania State University, who focuses on agricultural markets. The current glut has ‘a lot to do with the decisions that farmers make in aggregate—producers can turn on the milk spigot relatively quickly and tend to be more reluctant to turn it off.’”

“To make space for crops like corn after a massive wheat harvest last summer, Frank Riedl, general manager at Great Bend Co-op, a Kansas grain elevator and farm supplier, bought and leased extra land on which to build bunkers the size of football fields where he can heap millions of bushels of overflow grain. ‘There’s an abundance of corn out here in the country and we don’t have the storage base for it,’ he says. ‘Farmers are trying to find any place they can to dump their crops.’”

The Carnival Is Over

A report from the Sydney Morning Herald in Australia. “Wayne Byres, chair of the Australian Prudential Regulation Authority, was on Thursday asked by Greens senator Peter Whish-Wilson about a report from UBS that last month ranked Sydney fourth in a global ‘bubble index’ that sought to measure the risk of a real estate bubble. Mr Byres, who oversees a banking sector with almost $1.5 trillion in mortgages, stressed the risks in the property market but said the ‘B word’ was not helpful. ‘I deliberately avoid using the B word. I think it sort of simplifies the debate somewhat,’ Mr Byres said. ‘It leads people to either, we are, in which case we’re all ruined, or we’re not, in which case, she’ll be right. And in fact the situation is far more nuanced than that.’”

“Sydney prices have risen by about half since 2012, the UBS index said, and APRA has in recent years clamped down on poor lending by banks in the housing market, and curbed lending to investors.”

From Domain News. “National Australia Bank has compiled a confidential borrowers’ blacklist of more than 600 towns and suburbs where it has capped lending to property buyers because of growing risks in the housing market. Buyers in any of the 120 postcodes across the nation will need a deposit of as much as 30 per cent to be eligible for a loan ‘to ensure that we are lending responsibly and sustainably,’ according to internal documents used by the bank to explain its change in strategy to mortgage brokers.”

“Lenders have also responded to pressure from the Reserve Bank of Australia, ASIC and APRA to reduce lending to higher risk investment borrowers, particularly for apartment markets in central Melbourne and Sydney, by cutting back on interest-only loans and increasing deposits to about 40 per cent of the asking price. For example, earlier this year AMP placed apartments in 140 suburbs on a blacklist because of growing concerns about oversupply, off-the-plan sales, and, in some areas, falling prices. Lenders also slammed the brakes on foreign borrowers.”

The Australian. “Australia’s residential market is set to split in two, with first home buyers finally getting a shot at owning inner city apartments, while relatively strong rental yields mean that seasoned investors will look towards investments in houses. Discounting is expected to be most common among high-rise ‘clusters’ where there have ­already been rising levels of ’settlement difficulties.’ But the outstanding opportunity in the market will be for first-home buyers, especially in 2017-18 when a flood of new apartments are expected to hit the market.”

“‘We are looking at a market where you will see pressure on prices, and you may also see some rental yield decline … I think both markets are vulnerable,’ said Nigel Stapledon, a research fellow at UNSW Business School. ‘On the upside, it becomes a buyer’s market and also a renter’s market.’”

From Smart Property Investment. “The six regions across the country worst affected by the mining downturn have been uncovered by a new report. The report, ‘The carnival is over: house prices in mining towns now the boom is gone,’ compiled by Propell National Valuers, said recent figures and stories of investors’ suffering ‘beg the question of why anyone would take the risk’ of buying into these regions. ‘Price increases of 10 per cent per annum, 20 per cent per annum or more have been replaced by falls in the past two years of up to 38 per cent per annum.’”

The Brisbane Times. “Dozens of expectant Perth homeowners have been left in limbo after the collapse of national building company, Collier Homes. Nearly 30 homes across Perth sit unfinished and subcontractors are owed thousands after liquidators moved in on parent company, Homes Australia, owned by Family First Senator, Bob Day. The multi-million dollar collapse has also left around 20 staff members at Collier Homes’ Osborne Park office out of a job, without any notice. Mr Day resigned from Federal Parliament after announcing the the collapse.”

“Sub-contractor, Ron Van Zoelen and wife, Tracey, fronted the politician’s South Australian electorate office shortly after learning of the closure, claiming they were owed more than $25,000. ‘We’re just shocked and devastated, this is our livelihood, this is our income, and we’ve got family to support, bills to pay, mortgage to pay, it’s really quite upsetting,’ Ms Van Zoelen told Nine News.”

From News.com.au. “A ruling by the tax office could offer a glimmer of hope to locals wanting to buy an off-the plan apartment by putting them off-limits to overseas investors. Under Australian law, foreign investors can purchase only new properties. If an off-the-plan sale falls through, the property will be considered second-hand, The Australian reports. This means thousands of potential foreign buyers will be stopped from buying the properties and potentially lowering the resale price.”

“Confirmation on the ruling comes amid reports of a growing number of Chinese buyers walking away from off-the-plan apartment sales, forcing them to sell. ‘Under subsections 15(4) and (5) of the Foreign Acquisitions and Takeovers Act 1975, a dwelling is considered to be sold when an agreement becomes binding,’ a spokeswoman for the Australian Taxation Office said. ‘If the property is onsold after the date upon which the contract becomes binding, and prior to settlement, then this is considered to be an established dwelling.’”

“LJ Hooker chief executive Grant Harrod told The Australian the real estate agency was starting to see apartments coming onto the secondary market, particularly in Brisbane and Melbourne. ‘We have seen some developers come to us with buildings that have been completed but the owners have been unable to close,’ Mr Harrod said. ‘The original owners who bought off the plan are finding it challenging to raise capital because the banks have raised the loan-to-valuation requirements. There is going to be a real issue if we start to see construction projects not being completed and developers getting into trouble.’”

“Last month, billionaire property developer Harry Triguboff, founder of Australia’s largest apartment builder Meriton, said a ‘very significant’ number of Chinese buyers were failing to settle their purchases.”

October 22, 2016

Sellers Now Realize Word Is Out

A report from The Independent in California. “Livermore is on track to meet the goals and objectives of its housing element. Staff noted that at the current rate of development, Livermore would exceed the projected housing need under the current Regional Housing Need Allocation (RHNA), for years 2015-2022, by approximately 28 percent. In 2015, the city issued building permits for 436 units. The number was well above the average of 128 building permits issued annually during the previous eight years.”

“The maximum home price that a moderate income-household of four could afford is about $394,000. The starting prices for the new townhouse/condo units in Livermore range from the mid-500’s to the low-600’s. For the single family detached houses, starting prices range from the mid-600’s to about one million. While the townhouse/condo units are priced about $100,000 less than the new single family-detached units, all of these units are considered affordable only to above moderate-income households.”

“City Manager Marc Roberts stated that extremely low and low income housing requires outside funding. The affordability piece is challenging. ‘We are in compliance.’ In response to a comment that low income in Livermore for a family of four would be $72,000, Roberts said, ‘You have to be very rich to be poor in Livermore.’”

The Washingtonian. “It’s been almost two years since Washington got word that a $10.5-million condo had hit the market. The unprecedented price was all the more surprising because of where the building was going up—not somewhere predictably luxe like the West End or Georgetown’s waterfront, but downtown Bethesda. The listing was the ultimate symbol of a trend that real-estate watchers had been nearly uniformly predicting: Increasing numbers of wealthy baby boomers would trade their 10,000-square-foot Potomac spreads for a downsized lifestyle in walkable, urbanized (but not too urbanized) Bethesda. But making the swap for upscale condos hasn’t been so easy.”

“‘I have a new listing coming on this week in the $2-million range, in Potomac, and that’s where the owners want to go: to a condo in Bethesda,’ says Washington Fine Properties agent Lori Leasure. The catch? ‘They tried to sell the house this spring with a different Realtor, and it didn’t work, so I’m the second one in. Potomac is just so quiet right now.’”

“Other Montgomery County agents tell versions of the same story. ‘The whole ‘live urban’ trend means buyers for Potomac have all but disappeared, unless the deal is really, really good,’ says Coldwell Banker’s Jane Fairweather.”

“And that’s a problem for Bethesda’s supply of new multimillion-dollar condos. The median sold price of condos in downtown Bethesda’s 20814 Zip code has dropped by more than 9 percent this year, according to RealEstate Business Intelligence, the authority on local data. Meanwhile, homes in Potomac are sitting on the market for an average of 75 days, a 19-percent increase. The most expensive tend to linger much longer—such as an $11-million, ten-acre estate listed for nine months or a 25,000-square-footer for $9.25 million, on the market nearly two years.”

“The Darcy began selling in 2013 while the building was under construction. Agents say that two or three years ago, sellers in Potomac were more willing to risk putting contracts on condos without first offloading their houses. ‘Now they realize word is out and their home is not going to be an easy sell,’ says Compass agent Gretchen Koitz.”

The Sun Sentinel in Florida. “South Florida home sales sputtered in September, but that didn’t hurt prices, data from local Realtor boards show. Larry Revier, a real estate agent in east Fort Lauderdale, said he’s seeing a ‘massive difference’ in the number of buyers this year compared to last year. ‘We just don’t have buyers lining up and saying, ‘I’ll take it,’ Revier said. ‘Every transaction is very difficult because buyers are less motivated than they were before.’”

From Tulsa World in Oklahoma. “According to data released this month by the Greater Tulsa Association of Realtors, home sales in September grew by close to 9 percent over the same month last year. Pete Galbraith urges sellers to consult with their real estate professional for correct market trends. ‘The market is very, very time-sensitive,’ said Galbraith, president-elect of the Oklahoma Association of Realtors. ‘Although there may have been a great comp four months ago that justified a certain price for a listing, there subsequently may have been two or three sales close by that have shown a decline.’”

“Sellers this time of year also usually have to sell, be it for work or family. So buyers shouldn’t be shy about haggling. ‘The whole goal of every home seller is not necessarily money-driven,’ Galbraith said. ‘In a lot of cases, it’s time-driven: ‘I’ve already bought a house and I need to sell my house in 30 days.’ A lot of people will price their house accordingly.’”

The Houston Chronicle in Texas. “Sales of Houston’s most expensive homes fell 7.9 percent during the first eight months of 2016 compared with the same time last year, a new report shows. The decline corresponds with a significant loss in high-paying energy jobs. In fact, Houston was the only major metro area in the state with a decline in so-called luxury housing — homes that sold for at least $1 million, according to the Texas Association of Realtors’ Texas Luxury Home Sales report.”

“Buyers closed on 974 luxury homes in the Houston area at a median price of about $1.4 million. The median was down 2.9 percent from a year earlier, according to the report. ‘New construction in the luxury housing market can easily reach $500 or $600 per square foot, particularly among high-rise condominiums in urban centers,’ Leslie Rouda Smith, the association’s chair, said in a report, noting higher overall home prices and steeper development costs.”

“The report noted the slowdown in other ways: The number of luxury homes on the market as of August was 1,449, a 29 percent spike from a year earlier. Luxury homes spent an average of 85 days on the market, an increase of 11.8 percent over last year. Bill Baldwin, of Boulevard Realty in the Heights, said the first six months of 2015 were record-setting in Houston real estate, so ‘comparing this year is difficult.’ ‘Overall, I think we’re doing fine,’ he said.”

October 21, 2016

The Beginning Stages Of Being Oversaturated

A report from the News Tribune in Washington. “Tacoma apartment rents have increased for the 11th straight month, according to Axiometrics, a research firm that tracks apartment rentals. Seattle-Bellevue-Everett’s average rent prices in September dropped to $1,777 from August’s $1,799, possibly fueled by an increase in the number of apartments available, said Axiometrics’ senior vice president of analytics Jay Denton. ‘Seattle is still among the top-performing metros in the nation, but deliveries of new units accelerated in the third quarter and the pace is expected to quicken through the second quarter of 2017,’ Denton said in a news release.”

The Boston Globe in Massachusetts. “Rents in Boston are climbing at their slowest rate in more than two years as a surge of new apartments hits the market. A new report out Wednesday from data firm Axiometrics found that the average rent in Greater Boston fell slightly from August to September. It’s the latest sign that the wave of building in the region is having an impact on rents.”

“‘The Boston apartment market may be seeing the effects of the new supply delivered in the past six months,’ said Stephanie McCleskey, vice president of research for Axiometrics. ‘Job growth picked up in the third quarter, but the low rates earlier this year combined with the new construction provide a foundation for lower rent growth.’”

“There are signs that may continue. More than 3,000 new apartments have come on the market in the last six months, Axiometrics said, with another 1,344 slated by year’s end, and about 6,000 expected to open in 2017.”

The DA Online in West Virginia. “The term ’student housing’ at WVU has been redefined. The phrase now refers to more than standard, quiet dorm units and extends to University Apartments, like Vandalia, College Park, University Place and University Park—the latter two being the brightly lit residence/shopping complexes that sprouted up in Sunnyside and Evansdale over the past two years. These apartments combined hold 2,205 beds students can rent (not including the dorm units in University Park), but 35 percent of these remain unfilled as of Fall 2016, according to FOIA documents obtained by The DA.”

“‘A lot of people just can’t afford them,’ said David Kelly, owner and operator of Kelly Rentals in Morgantown. The biggest problem, Kelly said, is that with all the University operated apartments, corporate housing complexes (Campus Evolution, The Ridge, Copper Beech, etc) and private housing in Morgantown, there are more beds available throughout town than there are students to fill them.”

The Duluth News Tribune in Minnesota. “According to a study done by the City of Duluth in March 2012 called the Higher Education Small Area Plan, the estimated student population in Duluth is about 20,000 between UMD, CSS and Lake Superior College, with 16,000 of those students seeking off-campus housing. The problem for many students is the available housing close to campus may not be overly affordable for them, said Mike Peller, owner of Gables & Ivy Real Estate in Duluth.”

“Peller said he rents about 40 properties near UMD and CSS. The price of real estate increases the closer the property is to campus, he said, making monthly rent more expensive. Mark Lambert, owner of Campus Park Townhomes and Villas, Boulder Ridge Luxury Apartments, Summit Ridge Luxury Apartments and BlueStone Lofts and Flats, said he thinks the housing market is in the beginning stages of being oversaturated.”

“While there may have been student-housing issues in the past, Lambert said, there is a delicate balance between providing enough housing and too much. ‘This year is the first year we’ve had some vacancy issues,’ Lambert said, adding that Campus Park is 20 percent vacant.”

The Silicon Valley Business Journal in California. “Believe it or not, rents can go down in Silicon Valley. In Santa Clara County, the average asking rent in Q3 for all unit types was $2,619, a 1.3 percent decrease from the prior quarter and 0.2 percent drop from Q3 2015, according to data from Novato-based Real Answers. The slight decline in rents over the last 12 months stands in sharp contrast the nearly 11 percent year-over-year increases seen in the third quarters of 2015 and 2014.”

“A quick note on the data used: Real Answers uses average asking rents from complexes with 50 or more units, meaning smaller complexes are not represented.”

DNA Info on NewYork. “Temporary walls are this season’s hottest luxury rental amenity. Developers know that many renters need roommates to afford New York City living, and — with a glut of rentals hitting Manhattan’s market and pushing prices down — they understand that squeezing roommates in is one of the best ways to keep prices up and vacancy rates down. That means more landlords are letting renters know, whether explicitly or tacitly, that they can indeed carve out extra bedrooms with temporary walls.”

“At the Grayson, a 17-story rental on East 28th Street, a unit is listed on Streeteasy for $5,500 a month as a three-bedroom though its floor plan shows it as a two-bedroom. The description states, ‘This apt easily converts to a 3 bedroom. Full walls allowed.’ A $4,100 a month one-bedroom in the same building, states, ‘This apt easily converts to a 2 bedroom.’”

“‘We’re seeing walls and dividers in a lot of new development. There are a lot of buildings showing them in their marketing materials,’ said Karla Saladino, of Mirador, the exclusive rental agent for more than 100 buildings across the city. ‘A lot of the stuff in Murray Hill has to be convertible or people can’t afford to be there,’ she added. ‘There are only so many people who want to live in one-bedrooms in the neighborhood.’”

“Donny Zanger, founder of All Week Walls, said his business installing temporary walls dipped after the 2010 Times article about illegal walls, but recently things have been on the upswing again. Developers need the walls since they ‘put a lot of money into their buildings’ and have to command high enough rents and low enough vacancies to see returns on their investment, Zanger said.”

“Since landlords typically require a renter earn 40 times the monthly rent, that means renters for half of the one-bedrooms on the market would need to earn more than $135,800 a year. ‘You can have someone working at Morgan Stanley, and if their rent increases 10 percent and wages increase 2 percent,’ Zanger said, ‘the only way you can balance it out is by the walls.’”

October 20, 2016

Spending Money Like They’re Printing It

It’s Friday desk clearing time for this blogger. “Earlier this year, Mr. and Mrs. Cai, a couple from Shanghai, decided to end their marriage. The rationale wasn’t irreconcilable differences or even mild disagreements; rather, it was a property market bubble in China’s financial hub. The pair, who operate a clothing shop, wanted to buy an apartment for 3.5 million yuan ($519,000), adding to a couple of places they already owned. But the local government had begun, among other bubble-fighting measures, to limit purchases by existing property holders. So, in February, the couple divorced. ‘Why would we worry about divorce? We’ve been married for so long,’ says Mr. Cai. (He requested that the couple’s full names be withheld to avoid potential legal difficulties.) ‘If we don’t buy this apartment, we’ll miss the chance to get rich.’”

“‘The only thing I know is that buying property won’t turn out to be a loss,’ says Mr. Cai. ‘Just take a look at the past two decades. … From several thousand yuan a square meter to more than a hundred thousand yuan. Did it ever fall? Nope.’”

“Finding tenants for her four investment properties never used to be much of an issue for Singapore investor Jenny Yang, but those days of easy money are long gone. Two of her units - a studio apartment in Novena and a two-bedroom unit near Lavender MRT station - remain vacant after the tenants, both foreigners, returned home in recent months. ‘In the past, before one tenant moved out, I would get another offer, especially for the Lavender unit… now it’s slower. The offers are too low as well,’ she told The Straits Times.”

“Landlords like accountant Eunice Lim have been more flexible in view of the weaker demand. Ms Lim recently rented out a one-bedder in Balestier for $1,700 a month. ‘That’s a 30 per cent drop in rent… I was prepared to offer a discount. High rents in this market will not materialise. We have to be realistic,’ she said.”

“From giving discounts of Rs 2 to Rs 5 lakh to sops such as gold coins, cars, scooties and even white goods, developers are going all out to woo customers this season, especially in areas where the unsold inventory is huge. In Delhi NCR, Prateek Group is giving away Hyundai Grand i10 cars, scooties and refrigerators. A real estate group active in Kundli, Sonepat region, is offering discounts of around 15% on the basic sales price for their project in TDI City, Kundli. ‘The current unsold inventory across India today stands at 10 lakh units. The unsold inventory in Mumbai is around 2.56 lakh units and Delhi NCR it is around 3 lakh units,’ says Pankaj Kapoor, managing director of Liases Foras, a consultancy firm.”

“A realtor is offering a free Mercedes with purchase of apartments on Auckland’s North Shore. James Law Realty, which is marketing Chelsea Bay Residences in Birkenhead, is including a Mercedes-Benz A-Class A180 - valued at around $51,000 on the road - to buyers of its ‘premium’ apartments.’ Premium residences at the 56-apartment development on Rawene Rd are priced upwards of $900,000. Massey University Chinese marketing specialist Henry Chung said the promotion was an ‘innovative and bold move’ by the agency, where seven out of 10 of its clients are Asian, mainly Chinese.”

“‘Mercedes is traditionally seen as the most luxurious car brand among the Chinese, and this brand is associated with prestige,’ Chung said.”

“The number of Australians falling behind on their mortgage repayments has hit the highest level in three years and is expected to rise, despite record low interest rates. Suburban areas such as Kingston, south of Brisbane, Moorina, north of that city, and Paralowie in northern Adelaide are high on the list of postcodes showing mortgage stress. But ratings agency Moody’s found Western Australia has the most home loans that are at least 30 days in arrears, blaming the end of the mining boom and a slowing state economy.”

“The levels of delinquencies in Western Australia, Tasmania and the Northern Territory are at the highest rates since Moody’s began collecting home-loan data in 2005. ‘The increase (in delinquencies) raises the risk of mortgage defaults,’ said Moody’s vice-president Alena Chen. ‘The regions and postcodes exposed to the resource and mining sectors dominates the list of areas with the highest mortgage delinquencies.’”

“Billionaires are shunning the London luxury property market, with sales of ’super prime’ £10m-plus homes in the capital collapsing by 86% over the past year. The average price paid also fell steeply, from £22m to £16.3m, said property group London Central Portfolio, which carried out the analysis. Newbuild sales have slumped in particular, said LCP. No super-prime newbuild units were sold over the three-month period, compared with last year where they made up 23% of sales.”

“Naomi Heaton of LCP said: ‘A price correction was inevitable and is widely reflected in reports of price discounting. Whilst the long term outlook remains compelling, the luxury market is likely to experience continued instability especially in the face of the forthcoming ‘look through’ non-dom inheritance tax … it may take some years before growth returns.’”

“British investors may have disappeared from the New York City real estate market, but Chinese buyers are stepping in to fill the gap, according to real estate heavyweight Barbara Corcoran. Corcoran said there is huge interest from Chinese buyers across the United States. ‘We’ve totally lost all of our buyers from England,’ Corcoran told Bloomberg Radio. ‘We don’t see any more buyers at all. It was a real black eye for us in the New York City market.’”

“Corcoran said Chinese buyers are ‘coming in droves,’ and are ’spending money like they’re printing it.’”

“As the luxury market struggles, condo projects are dropping like flies. Argentine developer Alan Faena confirmed Tuesday he was ‘pausing’ a planned two-tower condo complex in Miami Beach. Developers across South Florida have pumped the brakes on condo high-rises as a strong dollar and weak economies abroad cripple the buying power of foreign investors. ‘In all of my business dealings, from Buenos Aires to Miami, I have always trusted my sense of the market and successfully read its cycles,’ Faena said in a statement. ‘The best business decision at this time is to pause Faena Mar as we evaluate various options.’”

“Unless central bankers stop sowing discord by inflating a bubble with make-believe money, the world’s top central banks will find their independence challenged, former Conservative Party leader William Hague was quoted as saying. ‘Central banks collectively have now indeed lost the plot,’ Hague, a former foreign minister, said in an article in the Daily Telegraph newspaper. ‘They are blowing up a bubble of make-believe money to avoid immediate pain, except for penalising the poor and the prudent.’”

“‘Like doctors keeping their patients on a drip many years after an operation, they are losing credibility and producing very dangerous side effects,’ Hague said in an article titled ‘Central bankers have collectively lost the plot. They must raise interest rates or face their doom.’”

“Hague said the impact of current central bank policies was that savers found it hard to earn any return on their money, asset prices inflated the wealth of the rich, pension funds had poor returns and ‘zombie companies’ stayed in business because they could borrow cheaply. Unless central bankers - including at the Bank of England - stopped, then their independence will be challenged, Hague said.”