Tuesday, April 22, 2014

Australia Survey: 1 in 5 home buyers getting help from parents

19% of all buyers, 42% of all first time buyers.

Mum and dad help one in five home buyers
The report found parental assistance is most pronounced in NSW and in Victoria, but is hitting other parts of the country as well. “Affordability is a growing issue in Queensland as well, but it’s a problem across the board,” she said. Of the about 1,200 people surveyed, the report found more than 30 per cent felt they could not afford the mortgage repayments required to get into the market, a similar amount (32.7 per cent) had been renting for five or more years and 50 per cent couldn’t afford a home deposit.
And how many of these parents are dipping into their own housing equity to provide help? Refinances are rising and how scary is it that the money could be just turned back around into housing again. Bubbles are pernicious like that.

Chart of Housing Finance from RP DATA Blog

These longer running bubbles are drawing more victims in. In the U.S. there was a bit of a generational wealth transfer due to the percent of downsizing retirees during the bubble. And banking shenanigans made asking parents for money less necessary. The dot com bubble that preceded the housing bubble had the advantage of smaller reach, hence a faster recovery from the resulting correction. The more players in the game at the time of the correction, the longer and harder that correction will be.

Globe and Mail's Canada House Price Correction Calculator

How badly would you be hurt in a housing market price correction?

Ottawa home prices are down 2.5 per cent on a year-to-date basis, according to the Teranet – National Bank National Composite House Price Index. Montreal is off 1.0 per cent, Quebec 1.2 per cent and Halifax 2.6 per cent. “The next markets that will crack are the Prairies outside of Alberta,” said Mr. Rabidoux, president of market research firm North Cove Advisors Inc.
link to the calculator

 As you play with the % downturn buttons, note that bubble corrections tend to be shark-fin shaped. Like this chart of the Dow Jones

Thursday, April 17, 2014

China's money supply rose 12% last year. That's low for them, and credit is scarce.

Reform is hard. As Credit Dries Up, Smaller Companies in China Feel the Pinch
At first glance, it seems extraordinary that anyone in China would have trouble finding credit, given how much money is already sloshing around the country. China’s broadly measured money supply passed that of the United States in August 2009, and it has been soaring ever since. China now has two-thirds more money than the United States, swirling through an economy that is a little over half the size of the United States’.
The central bank has been gradually pushing up open-market interest rates, in the hope that competition will start playing a greater role than political influence in deciding who can borrow money. That policy could help small and medium businesses obtain loans in the long term, but it has had the short-term effect of pushing up borrowing costs.

Friday, March 28, 2014

A guide to South Africa's economic bubble and coming crisis

A guide to South Africa's economic bubble and coming crisis
Unsecured loans, or consumer and small business loans that are not backed by assets, are the fastest growing segment of South Africa’s credit market and are essentially the country’s own version of subprime loans. Unsecured loans have grown at a 30 percent annual compounded rate since their introduction in 2007, when the National Credit Act was signed into law. Unsecured lending has become popular with banks because they are able to charge up to 31 annual interest rates, making these riskier loans far more profitable than mortgage and car loans in the low interest rate environment of the past half-decade. The unsecured credit bubble is estimated to have boosted South Africa’s GDP by 219 billion rand or U.S. $20.45 billion from 2009 to mid-2013.

Like U.S. subprime lenders from 2002 to 2006, South Africa’s unsecured lenders target working class borrowers who have limited financial literacy, which has contributed to the country’s growing household and personal debt problem. A 2012/2013 report from the National Credit Regulator showed that South Africa’s 20 million citizens carried an alarming 1.44 trillion rand or U.S. $140 billion worth of personal debt – equivalent to 36.4 percent of the GDP. In addition, household debt now accounts for three-quarters of South Africans’ disposable incomes.
Sadly, they seem to have stopped updating the data behind this widget, but for an illuminating chart, here is the old Clicks and Mortar from the Economist for South Africa.
Interestingly, house prices don't look alarming at relative to average incomes. Since this isn't a graph based on the median, it's possible that income disparity AND a credit bubble are making this chart look rational. South Africa's income disparity is among the highest in the world.

Sunday, March 23, 2014

Foreign buyers buying and demoing habitable homes in violation of rules

Outcry over house demolitions breaching Foreign Investment Review Board rules
But Mr Raimondo said: “There’s certainly heritage-featured homes that are quite habitable that are being bulldozed for huge French provincials selling for multi, multi-millions, three million.

“It may well be that some of that doesn’t comply with the FIRB rules.

“It’s been going on for some time now.’’

He said it was “obvious the majority of buyers in a certain area (are) doing this”.

Wednesday, March 5, 2014

Chinese, Canadians, U.S. and Singapore big buyers of Australian Real Estate

Locals priced out by $24b Chinese property splurge
Wealthy Chinese buyers have purchased $24 billion of Australia housing in the past seven years, and over the next seven years an additional $44 billion will be spent on residential property, Credit Suisse estimates.

Chinese top the list of foreign investors in Australian residential property. Chinese top the list of foreign investors in Australian residential property. There was $17.2 billion worth of approved residential property investment coming in from overseas in the year June 30 2013, down from $19.7 billion in the previous period, according to the Foreign Investment Review Board.

Foreign money is roughly 5% of the entire market. Deutsche Bank economist pins high costs on low interest rates and domestic buyers. But first time buyers appear to be feeling the squeeze.
First-time buyers in February comprised less than 10 per cent of all mortgages processed by mortgage broker AFG for the first time since June 2010.
The article goes on to list the ways foreign investment could be avoiding FIRB approval.

Tuesday, March 4, 2014

Moving money from Shenzhen to Hong Kong on the black market

Inside China's Underground Black Market Banks
“We have a relative in Hong Kong who does business in Mainland China,” one of the Zhous said. “Once a week, he visits us to pick up Renmenbi for his import business, and in return he maintains a pool of Hong Kong Dollars for us across the border. He is family, so we trust him. We all avoid the official exchange rates, and everyone is happy.” Unless a client makes an extraordinarily request, this exchange involves about $500,000 per week, though it could be up to fivefold that amount if it is a public holiday, like during Golden Week in October.

Friday, December 6, 2013

17 Countries with Housing Bubbles

According to Nouriel Roubini, cheap credit is driving up prices in some smaller (and not so small) markets. These 17 countries may have housing bubbles. If they pop, God help us all.
Roubini sees housing prices getting out of whack in quite a few small and mid-sized nations that are well-governed and managed to avoid the worst economic effects of the financial crisis: Switzerland, Sweden, Norway, Finland, France, Germany, Canada, Australia, New Zealand and the London metropolitan area in the U.K. He adds some key emerging markets that show the same dynamic: Hong Kong, Singapore, China and Israel, and major urban centers in Turkey, Indonesia, India and Brazil.
Hat Tip: 4SlicesofCheese at Vancouvercondo.info

Tuesday, October 22, 2013

London prices hit new highs on "frenzy"

Overseas investors are in a "frenzy". London house prices at new high
Asking prices in London saw an "unsustainable" 10 per cent month-on-month increase in October, pushing typical asking prices in the capital to STG544,232, leapfrogging a previous high set in July by more than STG28,000.
Prices across the country are 3.8 per cent higher than they were a year ago, although in London they have shot up by 13.8 per cent over this period, Rightmove said.

Monday, October 21, 2013

House prices in Netherlands down 4%, return to 2003 levels

September Data from Netherlands CBS

Prices for September are down over 4% year on year, a moderating of the fall that was -10% mid-summer.

Prices of existing owner-occupied dwellings were at the same level in September 2013 as in early 2003. They were 19.6 percent below the record level registered in August 2008. 

Rabobank thinks housing is undervalued
by 25 to 30 percent, and that prices will recover in another year. But admits that mortgage debt is already among the highest in Europe.

Worth noting that a gain of 30% would more than wipe out the entire decline since the change in world credit spurred by the crisis and would send prices to new highs.

Here are Dutch house prices against average income compared to Britain and US. You can decide if this looks undervalued and ripe for a rise.