Wednesday, February 24, 2016

Suing yourself to get around Chinese currency export controls

Chinese millionaire sues himself through an offshore shell company to beat currency export controls
But there's a better way: for a small sum, you can just set up an offshore shell company, direct it to sue a Chinese company you own, throw the lawsuit, and then, oh well, I guess there's nothing for it but to send a bunch of cash to your shell company, exempted from export controls, in the form of court-ordered damages.

Wednesday, February 10, 2016

Mailing in the keys in non-recourse Alberta

Jingle mail rears its ugly head in Alberta again Why is this ugly? The banks entered willing into a contract that said, hey you don't feel like paying that mortgage, fine, we'll take the house in lieu of further payment. This is the way it is supposed to work. The banks (presumably, one hopes) have much better information than the consumer. If the handful of large banks' army of accountants and actuaries can't do their jobs and assess risk properly, then that isn't the fault of the consumer.
If you walk away, you lose your home, but otherwise have no personal liability. Elsewhere in Canada, your lender can take you to court and seize other assets, such as RRSPs, vehicles, and even garnishee your wages.
You know what really destroys an economy where employment is driven by services? Killing consumer spending. What a great idea in the teeth of a downturn.

Tuesday, January 19, 2016

How Australian households the most indebted in the world

How Australian households became the most indebted in the world
One of the faults of real estate analysis is the failure to distinctly define an asset bubble, so debate on the matter is kept necessarily vague. Only a couple of housing market metrics is needed to identify a bubble, and are now considered commonplace: nominal price to inflation, price to income and price to rent. On all three, Australia is both historically and internationally at or near the top.

Since the advent of the GFC, it has become commonly accepted that the global real estate booms originated from rapidly expanding bank credit or private mortgage debt. It is not merely the growth of mortgage debt (the first derivative) but the acceleration (the second derivative), also known as the change in the rate of growth. Nevertheless, the simple growth of mortgage debt provides a strong indicator for housing price growth.

Tuesday, June 16, 2015

Dubai suffers 6.1% decline year on year

Dubai: Where house prices are falling fastest in the Middle East
Between March 2014 and March 2015, prices in Dubai registered a 6.1 decline, higher than the price falls recorded in other major property markets like France, Singapore, Italy or Spain, according to the Knight Frank Global House Price Index, which tracks the performance of major residential markets across the world. Out of the 56 markets monitored by Knight Frank, only 14 locations registered price declines. The worst performing is Ukraine, showing a 15.5 percent drop in rates, followed by Cyprus, where values fell by 8.2 percent and China, falling by 6.4 percent.

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.”