Friday, May 8, 2015

Australia to use fines and jail time to address illegal foreign purchases

Sydney property prices are rising 5x faster than wages. Government finally takes notice. Australia to tackle high housing prices with fines, jail for illegal foreign home purchases
Sentences may stretch to three years and fines to A$637,500 ($607,000) for illicit buyers, with penalties also on third parties knowingly complicit in violations, Prime Minister Tony Abbott said Saturday in Sydney. The steps are needed to give the public confidence that foreign-investment rules on property purchases are being enforced, he said.

Sunday, March 29, 2015

The Dollar Debt Shell Game

Feeling green
Yet there are still two reasons to worry. First, the outlook for China is a puzzle. The country holds $1.2 trillion in Treasury bills, many of which are sitting in its sovereign-wealth fund. When the dollar rises, the fund gets richer. But even in a dollar-rich country, there can be pockets of pain. China’s firms have built up a nasty currency mismatch. Almost 25% of corporate debt is dollar-denominated, but only 8.5% of corporate earnings are. Worse, this debt is concentrated, according to Morgan Stanley, with 5% of firms holding 50% of it.

Chinese property developers are the most obviously vulnerable. Companies like Evergrande, China Vanke and Wanda build and sell offices and houses, so most of their earnings are in yuan. Banned from borrowing directly from banks, they have been active issuers of dollar bonds. They have also borrowed from trust companies, according to Fitch, a rating agency. The trusts are themselves highly leveraged and have borrowed dollars via subsidiaries in Hong Kong. This arrangement will amplify the economic pain if property prices in China continue to decline, as they have been doing for several months.
When the post mortem on this next cycle is done, it will look a lot more like one long cycle than it does now.

Thursday, January 22, 2015

French house prices down 1.5% for 2014

House prices fell in most regions in France in 2014
Picardy led the way with price rises of 3.5%, Lower Normandy saw prices rise by 1.2%, Poitou-Charentes by 1%, Languedoc-Roussillon by 0.9%, Auvergne by 0.8% and Brittany by 0.4%. Elsewhere prices fell, most notably by 5.3% in Nord pas de Calais, by 5.1% in Limousin, by 4.9% in Upper Normandy, by 4.8% in Franche Comte, and by 4.3% in Champagne Ardennes.
Century 21’s annual review put the average fall in property prices at 2.8%. The data shows only one region with rising prices, Limousin with growth of 3.7%. Everywhere else show falling prices, most notably a decline of 7.4% in Languedoc Roussillon, a fall of 7% in Lorraine and 6.7% in Poitou Charentes.

Sunday, November 23, 2014

Australian Banks Hold Insufficient Capital

Fears Australian banks ill-prepared for housing-induced crisis

"Murray is suggesting, as others are, that you need enough capital to be able to deal with adverse situations without having to rely on the government. That's clear but what is not clear is the amount of capital, the length of time and the types of risks banks can continue to take on their balance sheets," he said.
APRA and other regulators have allowed some banks to use internal models to set risk levels, resulting in further downward revisions in the size of their assets and the amount of capital they hold. Because mortgages have historically had low levels of defaults banks have been allowed to hold only thin slivers of capital against large mortgage portfolios, making home loans very profitable.

Mr Brunton said AMP's white paper, which was published initially in November last year and updated recently to factor in the potential impact of the Murray inquiry, explored one bank and found that because of risk-weights it held just $4 billion of capital against $400 billion of mortgage loans – a leverage ratio of about 100 times.

Sunday, September 14, 2014

Mortgage Debt Relative to Economy Size : Australia, Canada, U.S.

Australia
1.6 trillion (AUS) GDP
1.3 trillion (AUS) residential mortgage debt
81%

Canada
1.55 trillion (CAN) GDP
1.2 trillion (CAN) residential mortgage debt (http://www.statcan.gc.ca/tables-tableaux/sum-som/l01/cst01/fin21-eng.htm)
77%

U.S.A.
16 trillion (US) GDP
11 trillion (US) residential mortgage debt (http://www.federalreserve.gov/econresdata/releases/mortoutstand/current.htm)
69%

Russians buying in South Africa

Foreign purchases estimated at 4% of the market.
Russians boost South Africa's Luxury Real Estate
But after President Vladimir Putin began to tighten restrictions last year on the freedom of the Russian elite to move their capital, Russians may now be motivated to move their assets more permanently overseas.

“There is a sense that [Russian] people want to get their money out [of the country] because of Putin closing down the doors,” said Steward, of the Knight Frank property agency. “That could be a reason why they want to invest here. The Russian market has certainly found London, and I think Cape Town is now being discovered.”

Bubble update from China

China's property market represents 15% of GDP
China's money supply has increased 3x since 2008
July was the lowest for inflows in six years
China real estate: A bubble bursting?
"The exposure of China's banks (and now shadow banks) to real estate may look different than it did in the U.S., but it's very real. The main exposure is the reliance on property as collateral to support virtually all forms of lending throughout the economy, a situation that is very similar to Japan in the 1980s," he added, referring to a collapse in Japan's property market after a boom.
In recent weeks, mid-sized developers such as Hong-Kong listed Greentown China Holdings and Shui On Land issued profit warnings amid a downturn in the housing market.

Friday, September 12, 2014

France's house prices flat last quarter

Prices down 1.2% on a yearly value after a 1.9% drop the previous quarter. 0.0% for the country as a whole on the quarter vs. 0.5% fall for the Paris region. The fall was halted by stimulus measures, it seems. Has France’s property market turned a corner?
Faced with a newbuild shortfall and the failure of its "Target 500K" initiative to build half a million new houses every year to 2017, the government unveiled a slew of measures in early July to boost the sector. These include the simplification of construction rules and regulations as well as the extension of the "0 percent interest loan" to boost middle and low-income first-time buying.

RBA says high prices not a crisis

Australia's high house prices not a 'crisis', says RBA
Price growth in almost all capital cities in the three months to June has helped the median Australian house price soar almost 11 per cent in the past year.

But RBA board member John Edwards has tried to cool fears that the property market is becoming overheated, saying the rapid rise won't continue indefinitely.
The RBA has kept interest rates on hold. Australia's economy grew at its slowest pace in more than a year in the June quarter after a sharp fall in exports and weak business investment in the June quarter.

Thursday, September 4, 2014

The Economist: Canadian real estate among world's most overvalued

Canadian Real Estate Among World's Most Overvalued, The Economist Says
A chart provided by the publication showed that Canada's price-to-rent ratio sat at 175.9 per cent in the second quarter of 2014, right on top of the world alongside Hong Kong and New Zealand.

Charts from the Economist